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What changed in First Savings Financial Group, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of First Savings Financial Group, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+229 added−229 removedSource: 10-K (2023-12-20) vs 10-K (2022-12-14)

Top changes in First Savings Financial Group, Inc.'s 2023 10-K

229 paragraphs added · 229 removed · 197 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

53 edited+2 added−4 removed182 unchanged
Biggest changeIn addition, the Captive provides reinsurance to 11 other third-party insurance captives for which insurance may not be currently available or economically feasible in the insurance marketplace. Southern Indiana Financial Corporation is an independent insurance agency, offering various types of annuities and life insurance policies, but is currently inactive.
Biggest changeThe Captive, which is a wholly-owned insurance subsidiary of the Company, is a Nevada corporation that provided property and casualty insurance to the Company, the Bank and the Bank’s active subsidiaries. In addition, the Captive provided reinsurance to 11 other third-party insurance captives for which insurance may not be currently available or economically feasible in the insurance marketplace.
Beginning in 2019, the Bank began to augment its mortgage banking originations by purchasing whole loans from third party originators. The Bank’s Third Party Origination (“TPO”) program expanded significantly in 2020 and 2021 and accounted for the majority of the Bank’s activity in the mortgage banking division in 2021 and 2022.
Beginning in 2019, the Bank began to augment its mortgage banking originations by purchasing whole loans from third party originators. The Bank’s Third Party Origination (“TPO”) program expanded significantly in 2020 and 2021 and accounted for the majority of the Bank’s activity in the mortgage banking division in 2022 and 2023.
Loans resulting in aggregated lending relationships in excess of $8.0 million require approval by the Board of Directors. 8 Table of Contents Our SBA 7(a) program lending activities also follow underwriting standards and loan origination procedures established by our Board of Directors and management.
Loans resulting in aggregated lending relationships in excess of $14.0 million require approval by the Board of Directors. 8 Table of Contents Our SBA 7(a) program lending activities also follow underwriting standards and loan origination procedures established by our Board of Directors and management.
This description of statutes and regulations is not intended to be a complete explanation of such statutes and regulations and their effects on First Savings Bank and First Savings Financial Group. Regulation of First Savings Bank Business Activities. The activities of Indiana banks, such as First Savings Bank, are governed by Indiana and federal laws and regulations.
This description of statutes and regulations is not intended to be a complete explanation of such statutes and regulations and their effects on First Savings Bank and First Savings Financial Group. Regulation of First Savings Bank Business Activities. The activities of Indiana-chartered banks, such as First Savings Bank, are governed by Indiana and federal laws and regulations.
The operations of First Savings Bank also are subject to laws such as the: ● Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; ● Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; and ● Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check.
The operations of First Savings Bank also are subject to laws such as the: ● Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; 14 Table of Contents ● Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; and ● Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check.
Generally, our loan commitments expire after 30 days. See Note 17, “Commitments and Contingencies” of the Notes to Consolidated Financial Statements beginning on page F-1 of this annual report for additional information regarding our loan commitments at September 30, 2022. Investment Activities We have legal authority to invest in various types of liquid assets, including U.S.
Generally, our loan commitments expire after 30 days. See Note 17, “Commitments and Contingencies” of the Notes to Consolidated Financial Statements beginning on page F-1 of this annual report for additional information regarding our loan commitments at September 30, 2023. Investment Activities We have legal authority to invest in various types of liquid assets, including U.S.
Some of the principal activities that the FRB has determined by regulation to be so closely related to banking are: (i) making or servicing loans; (ii) performing certain data processing services; (iii) providing discount brokerage services; (iv) acting as fiduciary, investment or financial advisor; (v) leasing personal or real property; (vi) making investments in corporations or projects 15 Table of Contents designed primarily to promote community welfare; and (vii) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.
Some of the principal activities that the FRB has determined by regulation to be so closely related to banking are: (i) making or servicing loans; (ii) performing certain data processing services; (iii) providing discount brokerage services; (iv) acting as fiduciary, investment or financial advisor; (v) leasing personal or real property; (vi) making investments in corporations or projects designed primarily to promote community welfare; and (vii) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.
The FRB has authority to establish individual minimum capital requirements in appropriate cases upon a determination that an institution’s capital level is or may become inadequate in light of the particular risks or circumstances. As of September 30, 2022, First Savings Bank met all applicable capital adequacy requirements in effect at that date. Prompt Corrective Regulatory Action.
The FRB has authority to establish individual minimum capital requirements in appropriate cases upon a determination that an institution’s capital level is or may become inadequate in light of the particular risks or circumstances. As of September 30, 2023, First Savings Bank met all applicable capital adequacy requirements in effect at that date. Prompt Corrective Regulatory Action.
Federal Reserve Board System. The FRB regulations require banks to maintain reserves against their transaction accounts (primarily Negotiable Order of Withdrawal (NOW) and regular checking accounts). On March 26, 2020, in response to the COVID-19 pandemic, the FRB reduced the reserve requirement to zero, and the requirement remained at zero at September 30, 2022 and 2021.
Federal Reserve Board System. The FRB regulations require banks to maintain reserves against their transaction accounts (primarily Negotiable Order of Withdrawal (NOW) and regular checking accounts). On March 26, 2020, in response to the COVID-19 pandemic, the FRB reduced the reserve requirement to zero, and the requirement remained at zero at September 30, 2023 and 2022.
For the Company’s tax year ended September 30, 2022, Indiana imposed a 5.50% franchise tax based on a financial institution’s adjusted gross income as defined by statute. The Indiana franchise tax rate will be reduced to 5.00% and 4.90% for the Company’s tax years ending September 30, 2023 and 2024 and years thereafter, respectively.
For the Company’s tax year ended September 30, 2023, Indiana imposed a 5.00% franchise tax based on a financial institution’s adjusted gross income as defined by statute. The Indiana franchise tax rate will be reduced to 4.90% for the Company’s tax years ending September 30, 2024 and years thereafter, respectively.
As a member of the Federal Reserve System and Federal Home Loan Bank System, in particular a member of the Federal Home Loan Bank of Indianapolis (“FHLB”), First Savings Bank is also required to acquire and hold shares of capital stock in the Federal Reserve Bank and FHLB. At September 30, 2022, our investment portfolio consisted primarily of U.S.
As a member of the Federal Reserve System and Federal Home Loan Bank System, in particular a member of the Federal Home Loan Bank of Indianapolis (“FHLB”), First Savings Bank is also required to acquire and hold shares of capital stock in the Federal Reserve Bank and FHLB. At September 30, 2023, our investment portfolio consisted primarily of U.S.
Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.
Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity 11 Table of Contents securities with readily determinable fair market values.
An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%. 12 Table of Contents Subject to a narrow exception, a receiver or conservator is required to be appointed for an institution that is “critically undercapitalized” within specified time frames.
An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%. Subject to a narrow exception, a receiver or conservator is required to be appointed for an institution that is “critically undercapitalized” within specified time frames.
The assessment rates (inclusive of adjustments) currently range from two and one half to 45 basis points of total capital less tangible assets, depending upon the particular institution’s risk category. The rate schedules will automatically adjust in the future when the Deposit Insurance Fund reaches certain milestones.
The assessment rates (inclusive of adjustments) currently range from two and one half to 45 basis points of total capital less tangible assets, depending upon the particular institution’s risk category. The rate schedules will 12 Table of Contents automatically adjust in the future when the Deposit Insurance Fund reaches certain milestones.
There is an exception for loans made pursuant to a benefit or compensation program that is widely available to all employees of the institution and does not give preference to insiders over other employees. Loans to executive officers are subject to additional limitations based on the type of loan involved. Enforcement.
There is an exception for loans made pursuant to a 13 Table of Contents benefit or compensation program that is widely available to all employees of the institution and does not give preference to insiders over other employees. Loans to executive officers are subject to additional limitations based on the type of loan involved. Enforcement.
First Savings Bank does not intend to pay dividends that would result in a recapture of any portion of its bad debt reserves. 17 Table of Contents State Taxation Indiana. Effective July 1, 2013, Indiana amended its tax code to provide for reductions in the franchise tax rate.
First Savings Bank does not intend to pay dividends that would result in a recapture of any portion of its bad debt reserves. State Taxation Indiana. Effective July 1, 2013, Indiana amended its tax code to provide for reductions in the franchise tax rate.
Loans with loan-to-value ratios in excess of 80% generally require private mortgage insurance. However, the total balance of residential mortgage loans secured by one-to-four family residential properties with loan-to-value ratios exceeding 90% amounted to $58.1 million, of which some do not have private mortgage insurance or government guaranty.
Loans with loan-to-value ratios in excess of 80% generally require private mortgage insurance. However, the total balance of residential mortgage loans secured by one-to-four family residential properties with loan-to-value ratios exceeding 90% amounted to $18.4 million, of which some do not have private mortgage insurance or government guaranty.
Technological advances, for example, have lowered barriers to entry, allowing banks to expand their geographic reach by providing services over the Internet, and made it possible for non-depository institutions to offer products and services that traditionally have been provided by banks.
Technological advances, for example, have lowered barriers to entry, 3 Table of Contents allowing banks to expand their geographic reach by providing services over the Internet, and made it possible for non-depository institutions to offer products and services that traditionally have been provided by banks.
At that date, our largest lending relationship was for a commitment of $26.9 million, of which $21.0 million was outstanding, and was performing according to its original terms at that date. Loan Commitments. We issue commitments for commercial loans conditioned upon the occurrence of certain events. Commitments to originate loans are legally binding agreements to lend to our customers.
At that date, our largest lending relationship was for a commitment of $29.0 million, of which $20.0 million was outstanding, and was performing according to its original terms at that date. Loan Commitments. We issue commitments for commercial loans conditioned upon the occurrence of certain events. Commitments to originate loans are legally binding agreements to lend to our customers.
At September 30, 2022, acquired participation interests of loans totaled $23.6 million. 7 Table of Contents Beginning in April 2015, the Bank hired a management team, business development officers (loan officers), underwriters and supporting staff that are seasoned and experienced in SBA lending in order to enhance the Company’s proficiency in SBA 7(a) program loan originations and sales.
At September 30, 2023, acquired participation interests of loans totaled $25.5 million. 7 Table of Contents Beginning in April 2015, the Bank hired a management team, business development officers (loan officers), underwriters and supporting staff that are seasoned and experienced in SBA lending in order to enhance the Company’s proficiency in SBA 7(a) program loan originations and sales.
If the FRB determines that a state member bank fails to meet any standard prescribed by the guidelines, the FRB may require the institution to submit an acceptable plan to achieve compliance with the standard. 13 Table of Contents Community Reinvestment Act.
If the FRB determines that a state member bank fails to meet any standard prescribed by the guidelines, the FRB may require the institution to submit an acceptable plan to achieve compliance with the standard. Community Reinvestment Act.
The assessments paid to the INDFI by First Savings Bank for the year ended September 30, 2022 totaled $106,000. Federal Home Loan Bank System. First Savings Bank is a member of the Federal Home Loan Bank System, which consists of 11 regional Federal Home Loan Banks.
The assessments paid to the INDFI by First Savings Bank for the year ended September 30, 2023 totaled $96,000. Federal Home Loan Bank System. First Savings Bank is a member of the Federal Home Loan Bank System, which consists of 11 regional Federal Home Loan Banks.
This lending platform is also designed to diversify the Company’s geographic and interest rate risk profile with respect to the retained unguaranteed amounts given the geographic dispersion of the loans and collateral, and their floating rate structure. The Company originated SBA loans with a total commitment of $40.8 million during the year ended September 30, 2022.
This lending platform is also designed to diversify the Company’s geographic and interest rate risk profile with respect to the retained unguaranteed amounts given the geographic dispersion of the loans and collateral, and their floating rate structure. The Company originated SBA loans with a total commitment of $54.4 million during the year ended September 30, 2023.
The Federal Home Loan Bank System provides a central credit facility primarily for member institutions. First Savings Bank, as a member of the FHLB, is required to acquire and hold shares of capital stock in the FHLB. First Savings Bank was in compliance with this requirement with an investment in FHLB capital stock of $18.2 million at September 30, 2022.
The Federal Home Loan Bank System provides a central credit facility primarily for member institutions. First Savings Bank, as a member of the FHLB, is required to acquire and hold shares of capital stock in the FHLB. First Savings Bank was in compliance with this requirement with an investment in FHLB capital stock of $23.1 million at September 30, 2023.
We invest in learning and development including tuition reimbursement for courses, degree programs and fees paid for certifications. As of September 30, 2022, we had 422 full-time employees and 45 part-time employees, none of whom is represented by a collective bargaining unit. Subsidiaries The Company has two wholly-owned subsidiaries, First Savings Bank and First Savings Insurance Risk Management, Inc.
We invest in learning and development including tuition reimbursement for courses, degree programs and fees paid for certifications. As of September 30, 2023, we had 370 full-time employees and 52 part-time employees, none of whom is represented by a collective bargaining unit. Subsidiaries The Company has two wholly-owned subsidiaries, First Savings Bank and First Savings Risk Management, Inc. (the “Captive”).
The maximum amount that we may lend to one borrower and the borrower’s related entities is limited, by regulation, to generally 15% of our stated capital and reserves. At September 30, 2022, our regulatory limit on loans to one borrower was $31.4 million.
The maximum amount that we may lend to one borrower and the borrower’s related entities is limited, by regulation, to generally 15% of our stated capital and reserves. At September 30, 2023, our regulatory limit on loans to one borrower was $33.0 million.
As of September 30, 2022, the Bank would have been in compliance with this reserve requirement had it been in effect. 14 Table of Contents Other Regulations First Savings Bank’s operations are also subject to federal laws applicable to credit transactions, including the: ● Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; ● Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; ● Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; ● Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; ● Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and ● Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
Other Regulations First Savings Bank’s operations are also subject to federal laws applicable to credit transactions, including the: ● Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; ● Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; ● Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; ● Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; ● Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and ● Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
Loans resulting in aggregated lending relationships in excess of individual office lending limits but less than $4.0 million require approval by the Officer Loan Committee and loans resulting in aggregated lending relationships in excess of $4.0 million but less than $8.0 million require approval of the Board Credit Committee.
Loans resulting in aggregated lending relationships in excess of individual officer lending limits but less than $10.0 million require approval by the Officer Loan Committee and loans resulting in aggregated lending relationships in excess of $10.0 million but less than $14.0 million require approval of the Board Credit Committee.
The average size of these loans originated was $1.7 million and the portfolio balance was $636.6 million at September 30, 2022. Construction Loans. We originate construction loans for one to four family homes and commercial properties such as small industrial buildings, warehouses, retail shops and office units.
The average size of these loans originated was $1.8 million and the portfolio balance was $757.4 million at September 30, 2023. Construction Loans. We originate construction loans for one to four family homes and commercial properties such as small industrial buildings, warehouses, retail shops and office units.
Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and Additional Tier 1 capital. Additional Tier 1 capital generally includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries.
Tier 1 capital is generally defined as common equity Tier 1 and Additional Tier 1 capital. Additional Tier 1 capital generally includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus Additional Tier 1 capital) and Tier 2 capital.
Our Federal income tax returns have not been audited during the last five years. Bad Debt Reserves.
Our Federal income tax returns have not been audited during the last five years. 16 Table of Contents Bad Debt Reserves.
The Board Credit Committee consists of the President, Chief Lending Officer, Chief of Credit Administration and four independent Board members, and the Officer Loan Committee consists of members of senior management and certain other officers designated by the Board of Directors.
The Board Credit Committee consists of the President and three independent Board members, and the Officer Loan Committee consists of members of senior management and certain other officers designated by the Board of Directors.
See Note 26, “Segment Reporting,” and Note 28, “Mortgage Banking” of the Notes to Consolidated Financial Statements beginning on page F-1 of this annual report for additional information regarding the financial performance of the mortgage banking segment. Loan Approval Procedures and Authority.
See Note 25, “Segment Reporting,” and Note 27, “Mortgage Banking” of the Notes to Consolidated Financial Statements beginning on page F-1 of this annual report for additional information regarding the financial performance of the mortgage banking segment.
Total capital includes Tier 1 capital (common equity Tier 1 capital plus Additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt.
Tier 2 capital is comprised of capital instruments and related surplus meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt.
The Company originated $1.61 billion and sold $1.72 billion of one- to four-family residential real estate loans within this lending platform during the year ended September 30, 2022. The amount outstanding in the Bank’s portfolio at September 30, 2022 included $38.6 million in loans held for sale, recorded at fair market value.
The Company originated $587.7 million and sold $603.6 million of one- to four-family residential real estate loans within this lending platform during the year ended September 30, 2023. The amount outstanding in the Bank’s portfolio at September 30, 2023 included $24.7 million in loans held for sale, recorded at fair market value.
We also offer adjustable-rate commercial real estate loans, generally with terms up to five years and with interest rates typically equal to a margin above the prime lending rate or the London Interbank Offered Rate (LIBOR).
We also offer adjustable-rate commercial real estate loans, generally with terms up to five years and with interest rates typically equal to a margin above the prime lending rate or the Secured Overnight Financing Rate (SOFR).
Federal regulations require FDIC insured depository institutions, including state chartered Federal Reserve System member banks, to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets of 8% and a 4% Tier 1 capital to total assets leverage ratio. 11 Table of Contents As noted, the capital standards require the maintenance of common equity Tier 1 capital, Tier 1 capital and total capital to risk-weighted assets of at least 4.5%, 6% and 8%, respectively, and a leverage ratio of at least 4% Tier 1 capital.
Federal regulations require FDIC insured depository institutions, including state chartered Federal Reserve System member banks, to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets of 8% and a 4% Tier 1 capital to total assets leverage ratio.
The SBA Officer Loan Committee consists of the President, Chief Financial Officer, Chief Lending Officer, Chief of Credit Administration, Chief of SBA Lending, Senior SBA Lending Officer and a senior commercial lending officer.
The SBA Officer Loan Committee consists of the President, Chief Financial Officer, Chief Lending Officer, Chief of Credit Administration, Chief of SBA Lending.
At June 30, 2022, which is the most recent date for which data is available from the FDIC, we held approximately 23.33%, 20.39%, 3.55%, 29.13%, 100.00% and 25.68% of the FDIC-insured deposits in Clark, Daviess, Floyd, Harrison, Crawford and Washington Counties, Indiana, respectively. This data does not reflect deposits held by credit unions with which we also compete.
At June 30, 2023, which is the most recent date for which data is available from the FDIC, we held approximately 33.27%, 19.64%, 2.66%, 23.38%, 100.00% and 25.52% of the FDIC-insured deposits in Clark, Daviess, Floyd, Harrison, Crawford and Washington Counties, Indiana, respectively. This data does not reflect deposits held by credit unions with which we also compete.
At September 30, 2022, $345.8 million of SBA loans included sold guaranteed portions of $239.5 million, for a net position of $106.4 million outstanding in our portfolio. All SBA loans held for sale were carried at the lower of cost or fair market value at September 30, 2022 and 2021. Mortgage Banking.
At September 30, 2023, $301.6 million of SBA loans included sold guaranteed portions of $209.6 million, for a net position of $92.0 million outstanding in our portfolio. All SBA loans held for sale were carried at the lower of cost or fair market value at September 30, 2023 and 2022. Mortgage Banking.
At September 30, 2022, $173.2 million of loans included sold participation interests of $120.9 million, for a net position of $52.3 million outstanding in our portfolio.
At September 30, 2023, $163.3 million of loans included sold participation interests of $111.2 million, for a net position of $52.0 million outstanding in our portfolio.
The Company’s Indiana tax returns for the fiscal years ended September 30, 2020 and 2021 are currently being audited by the Indiana Department of Revenue. Our other state income tax returns have not been audited during the last five years. ​
The Company’s Indiana tax returns for the fiscal years ended September 30, 2020 and 2021 were audited by the Indiana Department of Revenue. These audits were closed during the fiscal year ended September 30, 2023. Our other state income tax returns have not been audited during the last five years. ​ 17 Table of Contents
Our competition for loans comes primarily from financial institutions in our primary market area and from other financial service providers, such as mortgage companies, mortgage brokers and credit unions.
Our competition for loans comes primarily from financial institutions in our primary market area and from other financial service providers, such as mortgage companies, mortgage brokers and credit unions. Competition for loans also comes from non-depository financial service companies entering the mortgage market, such as insurance companies, securities companies, and specialty and captive finance companies.
The FRB may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe and unsound practice, or violate any law, regulation, FRB order or directive, or any condition imposed by, or written agreement with, the FRB. There is an exception to this approval requirement for well-capitalized bank holding companies that meet certain other conditions.
The FRB may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe and unsound practice, or violate any law, regulation, FRB order or directive, or any condition imposed by, or written agreement with, the FRB.
During 2021, we also utilized the Federal Reserve Bank’s PPP Liquidity Facility (“PPPLF”) to fund certain PPP loans. We have three federal funds purchased line of credit facilities with other financial institutions that are subject to continued borrower eligibility and are intended to support short-term liquidity needs.
We have four federal funds purchased line of credit facilities with other financial institutions that are subject to continued borrower eligibility and are intended to support short-term liquidity needs.
Indiana law requires INDFI approval for changes in control of companies controlling Indiana banks, with “control” defined to mean power to direct the management or policies of the holding company or power to vote at least 25% of the company’s voting securities. 16 Table of Contents Federal Securities Laws First Savings Financial Group’s common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.
Indiana law requires INDFI approval for changes in control of companies controlling Indiana banks, with “control” defined to mean power to direct the management or policies of the holding company or power to vote at least 25% of the company’s voting securities.
First Savings Financial Group is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934, as amended. INCOME TAXATION Federal Taxation General. We report our income on a fiscal year basis using the accrual method of accounting.
Federal Securities Laws First Savings Financial Group’s common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. First Savings Financial Group is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934, as amended. INCOME TAXATION Federal Taxation General.
Competition for loans also comes from non-depository financial service companies entering the mortgage market, such as insurance companies, securities companies, and specialty and captive finance companies. 3 Table of Contents We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry.
We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry.
The federal income tax laws apply to us in the same manner as to other corporations with some exceptions, including particularly our reserve for bad debts discussed below. The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to us.
We report our income on a fiscal year basis using the accrual method of accounting. The federal income tax laws apply to us in the same manner as to other corporations with some exceptions, including particularly our reserve for bad debts discussed below.
The FRB has issued a policy statement regarding the payment of dividends and the repurchase of shares of common stock by bank holding companies.
There is an exception to this approval requirement for well-capitalized bank holding companies that meet certain other conditions. 15 Table of Contents The FRB has issued a policy statement regarding the payment of dividends and the repurchase of shares of common stock by bank holding companies.
(the “Captive”). The Bank has three subsidiaries, Southern Indiana Financial Corporation, Q2 Business Capital, LLC, and First Savings Investments, Inc. The Captive, an insurance subsidiary of the Company, is a Nevada corporation that provides property and casualty insurance to the Company, the Bank and the Bank’s active subsidiaries.
The Bank has three subsidiaries, Q2 Business Capital, LLC, an Indiana limited liability company specializing in the origination and servicing of SBA loans, First Savings Investments, Inc., a Nevada corporation that manages a securities portfolio, and Southern Indiana Financial Corporation, an independent insurance agency, offering various types of annuities and life insurance policies. Southern Indiana Financial Corporation is currently inactive.
The acquisition was accounted for as an equity transaction, and resulted in the reclassification of the noncontrolling interests of $695,000, the recognition of net deferred tax assets of $581,000 and a reduction of additional paid-in capital of $2.4 million. 10 Table of Contents REGULATION AND SUPERVISION General First Savings Bank, as an Indiana commercial bank, is subject to extensive regulation, examination and supervision by the Indiana Department of Financial Institutions (“INDFI”).
Effective September 30, 2023, the Captive was dissolved and is no longer active. ​ 10 Table of Contents REGULATION AND SUPERVISION General First Savings Bank, as an Indiana commercial bank, is subject to extensive regulation, examination and supervision by the Indiana Department of Financial Institutions (“INDFI”).
First Savings Financial Group and First Savings Bank have entered into a tax allocation agreement.
The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to us. First Savings Financial Group and First Savings Bank have entered into a tax allocation agreement.
Removed
On April 25, 2017, the Bank formed Q2 Business Capital, LLC (“Q2”), which is an Indiana limited liability company that specializes in the origination and servicing of SBA loans. The Bank originally owned 51% of Q2’s membership interests.
Added
In October 2023, the Company announced the Board of Directors' decision to exit the Bank's residential mortgage banking operations during the first fiscal quarter ending December 31, 2023. The Bank will continue to offer residential mortgage lending in its primary market areas, but will exit the national out-of-market business. Loan Approval Procedures and Authority.
Removed
On December 31, 2020, the Bank completed the acquisition of the minority interests in Q2, and Q2 became a wholly-owned subsidiary of the Bank. As part of the acquisition of the minority interests, the Bank paid or expects to pay total consideration of $3.7 million.
Added
As noted, the capital standards require the maintenance of common equity Tier 1 capital, Tier 1 capital and total capital to risk-weighted assets of at least 4.5%, 6% and 8%, respectively, and a leverage ratio of at least 4% Tier 1 capital. Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings.
Removed
Notwithstanding the zero reserve requirement, the reserve requirement at September 30, 2022 would have been as follows: for the portion of transaction accounts aggregating $640.6 million or less the reserve requirement would have been 3.0% and the amounts greater than $640.6 million would have required a 10.0% reserve.
Removed
The first $32.4 million of otherwise reservable balances would have been exempt from the reserve requirement.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

28 edited+1 added−6 removed96 unchanged
Biggest changeOur net interest income is the interest we earn on loans and investments less the interest we pay on our deposits and borrowings. Our net interest margin is the difference between the yield we earn on our assets and the interest rate we pay for deposits and our other sources of funding.
Biggest changeOur net interest margin is the difference between the yield we earn on our assets and the interest rate we pay for deposits and our other sources of funding. Changes in interest rates—up or down—could adversely affect our net interest margin and, as a result, our net interest income.
Also, interest rate decreases can lead to increased prepayments of loans and mortgage-backed securities as borrowers refinance their loans to reduce borrowing costs. Under these circumstances, we are subject to reinvestment risk as we may have to redeploy such repayment proceeds into lower yielding investments, which would likely hurt our income.
Also, interest rate decreases can lead to increased prepayments of loans and mortgage-backed securities as borrowers refinance their loans to reduce borrowing costs. Under these circumstances, we are subject to reinvestment risk as we may have to redeploy such repayment proceeds into lower yielding loans or investments, which would likely hurt our income.
Our ability to acquire deposits or borrow could also be impaired by factors that are not specific to us, such as a severe disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole. 22 Table of Contents Risks Related to Mergers and Acquisitions and Other Expansionary Activities Market expansion and acquisitions may not produce revenue enhancements or cost savings at levels or within timeframes originally anticipated and may result in unforeseen integration difficulties and dilution to existing shareholder value.
Our ability to acquire deposits or borrow could also be impaired by factors that are not specific to us, such as a severe disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole. 21 Table of Contents Risks Related to Mergers and Acquisitions and Other Expansionary Activities Market expansion and acquisitions may not produce revenue enhancements or cost savings at levels or within timeframes originally anticipated and may result in unforeseen integration difficulties and dilution to existing shareholder value.
While we have recorded no such impairment charges since we initially recorded the goodwill, there can be no assurance that our future evaluations of goodwill will not result in findings of impairment and related write-downs, which may have a material adverse effect on our financial condition and results of operations. 23 Table of Contents Risks Related to Our Investment Portfolio If an other-than-temporary-impairment is recorded in connection with our investment portfolio it could have a significant negative impact on our profitability.
While we have recorded no such impairment charges since we initially recorded the goodwill, there can be no assurance that our future evaluations of goodwill will not result in findings of impairment and related write-downs, which may have a material adverse effect on our financial condition and results of operations. 22 Table of Contents Risks Related to Our Investment Portfolio If an other-than-temporary-impairment is recorded in connection with our investment portfolio it could have a significant negative impact on our profitability.
Given the increasingly high volume of our transactions, certain errors may be repeated or compounded before they can be discovered and rectified. 24 Table of Contents We are inherently exposed to risks caused by the use of computer, internet and telecommunications systems, and susceptible to fraudulent activity that may be committed against us or our clients, which may result in financial losses to us or our clients, privacy breaches against our clients or damage to our reputation.
Given the increasingly high volume of our transactions, certain errors may be repeated or compounded before they can be discovered and rectified. 23 Table of Contents We are inherently exposed to risks caused by the use of computer, internet and telecommunications systems, and susceptible to fraudulent activity that may be committed against us or our clients, which may result in financial losses to us or our clients, privacy breaches against our clients or damage to our reputation.
Goodwill represents the amount of consideration exchanged over the fair value of net assets we acquired in the purchase of another financial institution. We review goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate the carrying value of the asset might be impaired. At September 30, 2022, our goodwill totaled $9.8 million.
Goodwill represents the amount of consideration exchanged over the fair value of net assets we acquired in the purchase of another financial institution. We review goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate the carrying value of the asset might be impaired. At September 30, 2023, our goodwill totaled $9.8 million.
For a further discussion, see “Item 1. Business – Regulation and Supervision.” 25 Table of Contents We rely heavily on our management team and the unexpected loss of any of those personnel could adversely affect our operations, and we depend on our ability to attract and retain key personnel. We are a customer-focused and relationship-driven organization.
For a further discussion, see “Item 1. Business – Regulation and Supervision.” 24 Table of Contents We rely heavily on our management team and the unexpected loss of any of those personnel could adversely affect our operations, and we depend on our ability to attract and retain key personnel. We are a customer-focused and relationship-driven organization.
Because government regulation greatly affects the business and financial results of all commercial banks and bank holding companies, changes in the laws, regulations and procedures applicable to SBA loans could adversely affect our business and earnings. 20 Table of Contents Decreased residential mortgage origination volume and pricing decisions of competitors may adversely affect our profitability.
Because government regulation greatly affects the business and financial results of all commercial banks and bank holding companies, changes in the laws, regulations and procedures applicable to SBA loans could adversely affect our business and earnings. 19 Table of Contents Decreased residential mortgage origination volume and pricing decisions of competitors may adversely affect our profitability.
Risks Related to an Investment in Our Common Stock Our ability to pay dividends is subject to certain limitations and restrictions, and there is no guarantee that we will be able to continue paying the same level of dividends in the future that we paid in 2021 or that we will be able to pay future dividends at all.
Risks Related to an Investment in Our Common Stock Our ability to pay dividends is subject to certain limitations and restrictions, and there is no guarantee that we will be able to continue paying the same level of dividends in the future that we paid in 2023 or that we will be able to pay future dividends at all.
For information regarding the ownership of our outstanding stock by our directors, executive officers, and their related entities and persons, see “Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters”. ​ Item 1B. UNRESOLVED STAFF COMMENTS None. ​ 26 Table of Contents
For information regarding the ownership of our outstanding stock by our directors, executive officers, and their related entities and persons, see “Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters”. ​ Item 1B. UNRESOLVED STAFF COMMENTS None. ​
Because our liabilities tend to be shorter in duration than our assets, when the yield curve flattens or even inverts, we could experience pressure on our net interest margin as our cost of funds increases relative to the yield we can earn on our assets.
Because our liabilities tend to be shorter in duration than our assets, when the yield curve flattens or even inverts, as it has in recent quarters, we could experience pressure on our net interest margin as our cost of funds increases relative to the yield we can earn on our assets.
Insiders have substantial control over us, and this control may limit our shareholders’ ability to influence corporate matters and may delay or prevent a third party from acquiring control over us. As of December 7, 2022, our directors, executive officers, and their related entities and persons currently beneficially own, in the aggregate, approximately 15.20% of our outstanding common stock.
Insiders have substantial control over us, and this control may limit our shareholders’ ability to influence corporate matters and may delay or prevent a third party from acquiring control over us. As of December 4, 2023, our directors, executive officers, and their related entities and persons currently beneficially own, in the aggregate, approximately 15.44% of our outstanding common stock.
New regulations, increased regulatory reviews, and/or changes in the structure of the secondary mortgage markets which we utilize to sell mortgage loans may increase costs and make it more difficult to operate a residential mortgage origination business. Our revenue from the mortgage banking business was $38.3 million in the year ended September 30, 2022.
New regulations, increased regulatory reviews, and/or changes in the structure of the secondary mortgage markets which we utilize to sell mortgage loans may increase costs and make it more difficult to operate a residential mortgage origination business. Our revenue from the mortgage banking business was $14.2 million in the year ended September 30, 2023.
At September 30, 2022, we had four non-owner occupied residential loan relationships, each having an outstanding balance over $500,000, with aggregate outstanding balances of $3.9 million. Consequently, an adverse development with respect to one credit relationship may expose us to a greater risk of loss compared to an adverse development with respect to an owner occupied residential mortgage loan.
At September 30, 2023, we had five non-owner occupied residential loan relationships, each having an outstanding balance over $500,000, with aggregate outstanding balances of $5.3 million. Consequently, an adverse development with respect to one credit relationship may expose us to a greater risk of loss compared to an adverse development with respect to an owner occupied residential mortgage loan.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management.” We may suffer losses in our loan portfolio despite our underwriting practices. Our results of operations are significantly affected by the ability of borrowers to repay their loans. Lending money is an essential part of the banking business. However, borrowers do not always repay their loans.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management.” 18 Table of Contents We may suffer losses in our loan portfolio despite our underwriting practices. Our results of operations are significantly affected by the ability of borrowers to repay their loans. Lending money is an essential part of the banking business.
At September 30, 2022, approximately $632.4 million, or 43.6% of the total loan portfolio, consisted of fixed-rate loans with maturity dates after September 30, 2023. This investment in fixed-rate loans exposes the Company to increased levels of interest rate risk. Changes in interest rates also affect the value of our interest-earning assets, and in particular our securities portfolio.
At September 30, 2023, approximately $770.2 million, or 43.1% of the total loan portfolio, consisted of fixed-rate loans with maturity dates after September 30, 2024. This investment in fixed-rate loans exposes the Company to increased levels of interest rate risk. Changes in interest rates also affect the value of our interest-earning assets, and in particular our securities portfolio.
At September 30, 2022, the Bank had one 19 Table of Contents nonperforming non-owner occupied residential loan totaling $17,000. At September 30, 2022, the Bank did not have any non-owner occupied residential properties held as real estate owned. For more information about the credit risk we face, see “Item 7.
At September 30, 2023, the Bank had one nonperforming non-owner occupied residential loan totaling $15,000. At September 30, 2023, the Bank did not have any non-owner occupied residential properties held as real estate owned. For more information about the credit risk we face, see “Item 7.
Consequently, an adverse development with respect to one loan or one credit relationship may expose us to a greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan. At September 30, 2022, nonperforming commercial real estate loans totaled $8.2 million. At September 30, 2022 nonperforming commercial business loans totaled $1.2 million.
Consequently, an adverse development with respect to one loan or one credit relationship may expose us to a greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan. At September 30, 2023, nonperforming commercial real estate loans totaled $7.9 million. At September 30, 2023 nonperforming commercial business loans totaled $3.0 million.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management.” Our concentration in non-owner occupied residential real estate loans may expose us to increased credit risk. At September 30, 2022, $22.8 million, or 6.2% of our residential mortgage loan portfolio and 1.6% of our total loan portfolio, consisted of loans secured by non-owner occupied residential properties.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management.” Our concentration in non-owner occupied residential real estate loans may expose us to increased credit risk. At September 30, 2023, $23.7 million, or 4.5% of our residential mortgage loan portfolio and 1.3% of our total loan portfolio, consisted of loans secured by non-owner occupied residential properties.
Commercial real estate loans generally expose a lender to greater risk of non-payment and loss than one- to four-family residential mortgage loans because repayment of the loans often depends on the successful operation of the property and the income stream of the borrowers.
Subject to market conditions, we intend to increase our origination of these loans. Commercial real estate loans generally expose a lender to greater risk of non-payment and loss than one- to four-family residential mortgage loans because repayment of the loans often depends on the successful operation of the property and the income stream of the borrowers.
At September 30, 2022, $36.1 million, or 2.5% of our loan portfolio consisted of construction loans, and land and land development loans, and $3.7 million, or 15.2% of the construction loan portfolio (excluding undisbursed commitments and portions participated to other financial institutions), consisted of speculative construction loans at that date.
At September 30, 2023, $56.7 million, or 3.18% of our loan portfolio consisted of construction loans, and land and land development loans, and $3.3 million, or 8.34% of the construction loan portfolio (excluding undisbursed commitments and portions participated to other financial institutions), consisted of speculative construction loans at that date.
At June 30, 2022, which is the most recent date for which data is available from the FDIC, we held approximately 23.33%, 20.39%, 3.55%, 29.13%, 100.00% and 25.68% of the FDIC-insured deposits in Clark, Daviess, Floyd, Harrison, Crawford and Washington Counties, Indiana, respectively.
At June 30, 2023, which is the most recent date for which data is available from the FDIC, we held approximately 33.27%, 19.64%, 2.66%, 23.38%, 100.00% and 25.52% of the FDIC-insured deposits in Clark, Daviess, Floyd, Harrison, Crawford and Washington Counties, Indiana, respectively.
This revenue could significantly decline in future periods if interest rates continue to rise and the other risks highlighted in this paragraph were realized, which may adversely affect our profitability. We may be required to repurchase mortgage loans or indemnify buyers against losses in some circumstances.
This revenue could significantly decline in future periods if interest rates continue to rise and the other risks highlighted in this paragraph were realized, which may adversely affect our profitability.
Loan losses can cause insolvency and failure of a financial institution and, in such an event, our stockholders could lose their entire investment. In addition, future provisions for loan losses could materially and adversely affect our earnings and financial condition.
No assurance can be given that our underwriting practices or monitoring procedures and policies will reduce certain lending risks. Loan losses can cause insolvency and failure of a financial institution and, in such an event, our stockholders could lose their entire investment. In addition, future provisions for loan losses could materially and adversely affect our earnings and financial condition.
Our profitability depends upon our continued ability to compete successfully in our primary market area. See “Item 1. Business — Market Area” and “Item 1.
Our profitability depends upon 20 Table of Contents our continued ability to compete successfully in our primary market area. See “Item 1. Business — Market Area” and “Item 1. Business — Competition” for more information about our primary market area and the competition we face.
The risk of non-payment is historically small, but if nonpayment levels are greater than anticipated, our earnings and overall financial condition, as well as the value of our common stock, could be adversely affected. No assurance can be given that our underwriting practices or monitoring procedures and policies will reduce certain lending risks.
However, borrowers do not always repay their loans. The risk of non-payment is historically small, but if nonpayment levels are greater than anticipated, our earnings and overall financial condition, as well as the value of our common stock, could be adversely affected.
Risks Related to Our Lending Activities Our emphasis on commercial real estate lending and commercial business lending may expose us to increased lending risks. At September 30, 2022, $976.1 million, or 67.3%, of our loan portfolio consisted of commercial real estate loans and commercial business loans. Subject to market conditions, we intend to increase our origination of these loans.
Item 1A. RISK FACTORS Risks Related to Our Lending Activities Our emphasis on commercial real estate lending and commercial business lending may expose us to increased lending risks. At September 30, 2023, $1.13 billion, or 63.1%, of our loan portfolio consisted of commercial real estate loans and commercial business loans.
Business — Competition” for more information about our primary market area and the competition we face. 21 Table of Contents Risks Related to Changes in Market Interest Rates Changing interest rates may hurt our earnings and asset value.
Risks Related to Changes in Market Interest Rates Changing interest rates may hurt our earnings and asset value. Our net interest income is the interest we earn on loans and investments less the interest we pay on our deposits and borrowings.
Removed
Item 1A. RISK FACTORS Risks Related to COVID-19 The economic impact of the COVID-19 pandemic could adversely affect our financial condition and results of operations. The COVID-19 pandemic caused significant economic dislocation in the United States.
Added
As is noted above under Loan Underwriting Risks, in October 2023, the Company announced the Board of Directors’ decision to exit the Bank’s residential mortgage banking operations during the first fiscal quarter ending December 31, 2023. We may be required to repurchase mortgage loans or indemnify buyers against losses in some circumstances.
Removed
Although the domestic and global economies have begun to recover from the COVID-19 pandemic as many health and safety restrictions have been lifted and vaccine distribution has increased, certain adverse consequences of the pandemic continue to impact the macroeconomic environment and may persist for some time, including labor shortages and disruptions of global supply chains.
Removed
The growth in economic activity and in the demand for goods and services, coupled with labor shortages and supply chain disruptions, has also contributed to rising inflationary pressures and the risk of recession.
Removed
As a result of the COVID-19 pandemic and the related adverse economic consequences, we could be subject to the following risks, among others, any of which individually or in combination with others could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: ● demand for our products and services may decline, making it difficult to grow assets and income; ● if we have high levels of unemployment for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; ● collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; ● limitations may be placed on our ability to foreclose on properties we hold as collateral; ● our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income; ● the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; ● our cybersecurity risks are increased if employees work remotely; ● we rely on third-party vendors for certain services and the unavailability of a critical service due to the COVID-19 pandemic could have an adverse effect on us; and ● Federal Deposit Insurance Corporation premiums may increase if the agency experiences additional resolution costs. 18 Table of Contents Moreover, our future success and profitability substantially depends on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years.
Removed
The unanticipated loss or unavailability of key employees due to the pandemic could harm our ability to operate our business or execute our business strategy. We may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability.
Removed
Changes in interest rates—up or down—could adversely affect our net interest margin and, as a result, our net interest income.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table sets forth certain information relating to these facilities as of September 30, 2022. ​ ​ ​ ​ ​ Year ​ Owned/ Location ​ Opened ​ Leased Main Office: ​ ​ ​ ​ ​ Jeffersonville Main Office 702 North Shore Drive, Suite 300 Jeffersonville, Indiana ​ 2019 ​ Owned ​ ​ ​ ​ ​ Branch Offices: ​ ​ ​ ​ ​ ​ ​ Clarksville Office 501 East Lewis & Clark Parkway Clarksville, Indiana ​ 1968 ​ Owned ​ ​ ​ ​ ​ Jeffersonville – 10 th Street Office 3538 E 10 th Street Jeffersonville, Indiana ​ 2020 ​ Owned ​ ​ ​ ​ ​ Charlestown Office 1100 Market Street Charlestown, Indiana ​ 1993 ​ Owned ​ ​ ​ ​ ​ Georgetown Office 1000 Copperfield Drive Georgetown, Indiana ​ 2003 ​ Owned ​ ​ ​ ​ ​ Jeffersonville - Court Avenue Office 202 East Court Avenue Jeffersonville, Indiana ​ 1986 ​ Owned ​ ​ ​ ​ ​ Sellersburg Office 125 Hunter Station Way Sellersburg, Indiana ​ 1995 ​ Owned ​ ​ ​ ​ ​ Corydon Office 900 Hwy 62 NW Corydon, Indiana ​ 1996 ​ Owned ​ ​ ​ ​ ​ Salem Office 1336 S Jackson Street Salem, Indiana ​ 1995 ​ Owned ​ ​ ​ ​ ​ English Office 200 Indiana Avenue English, Indiana ​ 1925 ​ Owned ​ ​ ​ ​ ​ Marengo Office 165 E State Rd 64 Marengo, Indiana ​ 1984 ​ Owned ​ ​ ​ ​ ​ Lanesville Office 7340 Main Street NE Lanesville, Indiana ​ 1948 ​ Owned ​ ​ ​ ​ ​ Elizabeth Office 8160 Beech Street SE Elizabeth, Indiana ​ 1975 ​ Owned ​ ​ ​ ​ ​ New Albany Office 2218 State Street New Albany, Indiana ​ 2013 ​ Leased ​ ​ ​ ​ ​ Odon Office 501 West Main Street Odon, Indiana ​ 1982 ​ Owned ​ ​ ​ ​ ​ Montgomery Office 478 West Meyers Street Montgomery, Indiana ​ 1992 ​ Owned ​ ​ 27 Table of Contents The Company purchased an 8.097 acre parcel of land in Jeffersonville, Indiana, in July 2013 upon which it intended to construct an office building, relocate its corporate headquarters, and subsequently divest of additional unused acreage in future years.
Biggest changeThe following table sets forth certain information relating to these facilities as of September 30, 2023. ​ ​ ​ ​ ​ Year ​ Owned/ Location ​ Opened ​ Leased Main Office: ​ ​ ​ ​ ​ Jeffersonville Main Office 702 North Shore Drive, Suite 300 Jeffersonville, Indiana ​ 2019 ​ Owned ​ ​ ​ ​ ​ Branch Offices: ​ ​ ​ ​ ​ ​ ​ Clarksville Office 501 East Lewis & Clark Parkway Clarksville, Indiana ​ 1968 ​ Owned ​ ​ ​ ​ ​ Jeffersonville – 10 th Street Office 3538 E 10 th Street Jeffersonville, Indiana ​ 2020 ​ Owned ​ ​ ​ ​ ​ Charlestown Office 1100 Market Street Charlestown, Indiana ​ 1993 ​ Owned ​ ​ ​ ​ ​ Georgetown Office 1000 Copperfield Drive Georgetown, Indiana ​ 2003 ​ Owned ​ ​ ​ ​ ​ Jeffersonville - Court Avenue Office 202 East Court Avenue Jeffersonville, Indiana ​ 1986 ​ Owned ​ ​ ​ ​ ​ Sellersburg Office 125 Hunter Station Way Sellersburg, Indiana ​ 1995 ​ Owned ​ ​ ​ ​ ​ Corydon Office 900 Hwy 62 NW Corydon, Indiana ​ 1996 ​ Owned ​ ​ ​ ​ ​ Salem Office 1336 S Jackson Street Salem, Indiana ​ 1995 ​ Owned ​ ​ ​ ​ ​ English Office 200 Indiana Avenue English, Indiana ​ 1925 ​ Owned ​ ​ ​ ​ ​ Marengo Office 165 E State Rd 64 Marengo, Indiana ​ 1984 ​ Owned ​ ​ ​ ​ ​ Lanesville Office 7340 Main Street NE Lanesville, Indiana ​ 1948 ​ Owned ​ ​ ​ ​ ​ Elizabeth Office 8160 Beech Street SE Elizabeth, Indiana ​ 1975 ​ Owned ​ ​ ​ ​ ​ New Albany Office 2218 State Street New Albany, Indiana ​ 2013 ​ Leased ​ ​ ​ ​ ​ Odon Office 501 West Main Street Odon, Indiana ​ 1982 ​ Owned ​ ​ ​ ​ ​ Montgomery Office 478 West Meyers Street Montgomery, Indiana ​ 1992 ​ Owned ​ ​ 26 Table of Contents The Company purchased an 8.097 acre parcel of land in Jeffersonville, Indiana, in July 2013 upon which it intended to construct an office building, relocate its corporate headquarters, and subsequently divest of additional unused acreage in future years.
As of September 30, 2022, the 3.907 acre parcel of land, which has a carrying value of approximately $203,000, is listed for sale and is included in other real estate owned, held for sale on the balance sheet of the Consolidated Financial Statements.
As of September 30, 2023, the 3.907 acre parcel of land, which has a carrying value of approximately $203,000, is listed for sale and is included in other real estate owned, held for sale on the balance sheet of the Consolidated Financial Statements.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows. At September 30, 2021, the Company had recorded a loss for restitution to be repaid to certain borrowers who originated loans through the Company’s mortgage banking division.
Biggest changeWe are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.
The Company has reached a verbal settlement agreement with the claimant, and the Company has accrued a loss contingency for this pending settlement at September 30, 2022, the amount of which had an immaterial effect on the consolidated financial statements. ​ Item 4. MINE SAFETY DISCLOSURES Not applicable. ​ 28 Table of Contents PART II
The Company has reached a verbal settlement agreement with the claimant, and the Company has accrued a loss contingency for this pending settlement at September 30, 2023, the amount of which had an immaterial effect on the consolidated financial statements.
A settlement agreement has been reached and restitution in the amount of $390,000 has been paid as of September 30, 2022. First Savings Bank received notice of a class action lawsuit on March 23, 2021 regarding its policy and practice of assessing customer fees related to items presented on accounts with insufficient funds (NSF items).
The Bank received notice of a class action lawsuit on March 23, 2021 regarding its policy and practice of assessing customer fees related to items presented on accounts with insufficient funds (NSF items).
Added
The Bank is in discussions with the Federal Reserve Board regarding an alleged violation of law or regulation occurring during 2019. These discussions with the Federal Reserve Board regarding the allegation began in March 2023. The Bank is cooperating with the Federal Reserve Board and continues to review this matter internally and with external legal counsel.
Added
The foregoing could result in enforcement action against the Bank including civil money penalties and remedial measures. The Company has accrued a loss contingency for this pending litigation at September 30, 2023, the amount of which had an immaterial effect on the Consolidated financial statements. ​ Item 4. MINE SAFETY DISCLOSURES Not applicable. ​ 27 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+1 added−1 removed8 unchanged
Biggest changeThe following table presents information regarding the Company’s stock repurchase activity during the quarter ended September 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (d) ​ ​ ​ ​ ​ ​ ​ (c) ​ Maximum number ​ ​ ​ ​ ​ ​ ​ Total number ​ (or appropriate ​ ​ ​ ​ ​ ​ ​ of shares (or ​ dollar value) of ​ ​ (a) ​ (b) ​ units) purchased ​ shares (or units) that ​ ​ Total number ​ Average price ​ as part of publicly ​ may yet be ​ ​ of shares (or ​ paid per share ​ announced plans ​ purchased under Period ​ units) purchased ​ (or unit) ​ or programs ​ the plans or programs July 1, 2022 through July 31, 2022 ​ 23,030 ​ $ 23.84 ​ 23,030 ​ 272,258 August 1, 2022 through August 31, 2022 ​ 3,680 ​ $ 23.33 ​ 3,680 ​ 268,578 September 1, 2022 through September 30, 2022 ​ 116,320 ​ $ 23.22 ​ 116,320 ​ 152,258 Total 143,030 ​ $ 23.32 143,030 152,258 ​ Equity Compensation Plan Information The following table sets forth information as of September 30, 2022 about Company common stock that may be issued under the Company’s equity compensation plans.
Biggest changeThe following table presents information regarding the Company’s stock repurchase activity during the quarter ended September 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (d) ​ ​ ​ ​ ​ ​ ​ (c) ​ Maximum number ​ ​ ​ ​ ​ ​ ​ Total number ​ (or appropriate ​ ​ ​ ​ ​ ​ ​ of shares (or ​ dollar value) of ​ ​ (a) ​ (b) ​ units) purchased ​ shares (or units) that ​ ​ Total number ​ Average price ​ as part of publicly ​ may yet be ​ ​ of shares (or ​ paid per share ​ announced plans ​ purchased under Period ​ units) purchased ​ (or unit) ​ or programs (1) ​ the plans or programs July 1, 2023 through July 31, 2023 ​ — ​ $ — ​ — ​ 27,548 August 1, 2023 through August 31, 2023 ​ — ​ $ — ​ — ​ 27,548 September 1, 2023 through September 30, 2023 ​ — ​ $ — ​ — ​ 27,548 Total — ​ $ — — 27,548 ​ Equity Compensation Plan Information The following table sets forth information as of September 30, 2023 about Company common stock that may be issued under the Company’s equity compensation plans.
See Item 1, “Business—Regulation and Supervision—Limitation on Capital Distributions” and Note 20 of the Notes to Consolidated Financial Statements beginning on page F-1 of this annual report for information regarding dividend restrictions applicable to the Company.
See Item 1, “Business—Regulation and Supervision—Limitation on Capital Distributions” and Note 21 of the Notes to Consolidated Financial Statements beginning on page F-1 of this annual report for information regarding dividend restrictions applicable to the Company.
As of September 30, 2022, grants outstanding under the 2010 Plan included 305,043 restricted shares, 562,521 incentive stock options and 203,091 non-statutory stock options to directors, officers and key employees.
As of September 30, 2023, grants outstanding under the 2010 Plan included 305,043 restricted shares, 559,521 incentive stock options and 203,091 non-statutory stock options to directors, officers and key employees.
As of December 7, 2022, the Company had approximately 226 holders of record and 6,991,313 shares of common stock outstanding. The figure of shareholders of record does not reflect the number of persons whose shares are in nominee or “street” name accounts through brokers.
As of December 7, 2022, the Company had approximately 225 holders of record and 6,883,960 shares of common stock outstanding. The figure of shareholders of record does not reflect the number of persons whose shares are in nominee or “street” name accounts through brokers.
The restricted shares and stock options granted vest ratably over one year or five years and, once vested, the stock options are exercisable in whole or in part for a period up to ten years from the date of the award.
The restricted shares and stock options granted vest ratably over one year or five years and, once vested, the stock options are exercisable in whole or in part for a period up to ten years from the date of the award. ​ Item 6. [RESERVED] ​ ​ 29 Table of Contents
All plans were approved by the Company’s stockholders. 29 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of securities ​ ​ ​ ​ Number of securities remaining ​ ​ to be issued upon ​ Weighted-average ​ available for future issuance under ​ ​ exercise of outstanding ​ exercise price of ​ equity compensation plans ​ ​ options, warrants and ​ outstanding options, ​ (excluding securities reflected in ​ ​ rights ​ warrants and rights ​ column (a)) Plan category (a) (b) (c) Equity compensation plans approved by security holders ​ 351,369 ​ $ 20.57 ​ 177,618 ​ ​ ​ ​ ​ Equity compensation plans not approved by security holders ​ N/A ​ ​ N/A ​ N/A ​ ​ Total 351,369 ​ $ 20.57 177,618 ​ In December 2009 the Company adopted the 2010 Equity Incentive Plan (“2010 Plan”), which the Company’s shareholders approved in February 2010.
All plans were approved by the Company’s stockholders. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of securities ​ ​ ​ ​ Number of securities remaining ​ ​ to be issued upon ​ Weighted-average ​ available for future issuance under ​ ​ exercise of outstanding ​ exercise price of ​ equity compensation plans ​ ​ options, warrants and ​ outstanding options, ​ (excluding securities reflected in ​ ​ rights ​ warrants and rights ​ column (a)) Plan category (a) (b) (c) Equity compensation plans approved by security holders ​ 408,669 ​ $ 20.79 ​ 99,118 ​ ​ ​ ​ ​ Equity compensation plans not approved by security holders ​ N/A ​ ​ N/A ​ N/A ​ ​ Total 408,669 ​ $ 20.79 99,118 ​ 28 Table of Contents In December 2009 the Company adopted the 2010 Equity Incentive Plan (“2010 Plan”), which the Company’s shareholders approved in February 2010.
As of September 30, 2022, grants outstanding under the 2021 Plan included 45,750 shares of restricted stock, 120,000 incentive stock options and 17,250 non-statutory stock options to directors, officers and key employees.
As of September 30, 2023, grants outstanding under the 2021 Plan included 65,750 shares of restricted stock, 171,000 incentive stock options and 24,750 non-statutory stock options to directors, officers and key employees.
As of September 30, 2022, grants outstanding under the 2016 Plan included 64,500 restricted shares, 154,140 incentive stock options and 40,800 non-statutory stock options to directors, officers and key employees.
As of September 30, 2023, grants outstanding under the 2016 Plan included 64,500 restricted shares, 167,019 incentive stock options and 45,900 non-statutory stock options to directors, officers and key employees.
Removed
In November 2022, the Company granted 66,000 stock options and 22,000 restricted shares to directors, officer and key employees, which will vest over a one-year or five-year period. ​ Item 6. [RESERVED] ​ ​ 30 Table of Contents
Added
There were no shares repurchased under either stock repurchase plan during the quarter ended September 30, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

103 edited+26 added−21 removed85 unchanged
Biggest changeTax exempt income on loans and investment securities has been adjusted to a tax equivalent basis using a federal marginal tax rate of 21.0%. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ ​ ​ ​ Interest ​ ​ ​ ​ ​ ​ Interest ​ ​ ​ ​ ​ ​ Interest ​ ​ ​ ​ Average ​ and ​ Yield/ ​ Average ​ and ​ Yield/ ​ Average ​ and ​ Yield/ ​ (Dollars in thousands) ​ Balance Dividends Cost Balance Dividends Cost Balance Dividends Cost ​ Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing deposits with banks ​ $ 30,605 ​ $ 161 0.53 % $ 45,847 ​ $ 73 0.16 % $ 44,883 ​ $ 417 0.93 % Loans, excluding PPP loans ​ 1,337,777 ​ ​ 60,968 4.56 ​ 1,193,197 ​ 52,500 4.40 ​ 1,038,638 ​ 48,547 4.67 ​ PPP loans ​ ​ 19,735 ​ ​ 1,047 ​ 5.31 ​ ​ 143,220 ​ ​ 5,682 ​ 3.97 ​ ​ 73,910 ​ ​ 1,690 ​ 2.29 ​ Investment securities - taxable ​ 74,239 ​ 2,334 3.14 ​ 44,325 ​ 1,771 4.00 ​ 47,806 ​ 2,075 4.34 ​ Investment securities - nontaxable ​ 187,408 ​ 7,419 3.96 ​ 147,385 ​ 5,973 4.05 ​ 141,659 ​ 5,599 3.95 ​ FRB and FHLB stock ​ 19,217 ​ 729 3.79 ​ 18,948 ​ 582 3.07 ​ 15,781 ​ 617 3.91 ​ Total interest-earning assets ​ 1,668,981 ​ 72,658 4.35 ​ 1,592,922 ​ 66,581 4.18 ​ 1,362,677 ​ 58,945 4.33 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-interest-earning assets ​ 177,283 ​ ​ 161,386 ​ ​ 103,544 ​ ​ Total assets ​ $ 1,846,264 ​ ​ $ 1,754,308 ​ ​ $ 1,466,221 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities and equity: ​ ​ ​ ​ ​ ​ ​ NOW accounts ​ $ 330,522 ​ $ 1,135 0.34 ​ $ 268,073 ​ $ 766 0.29 ​ $ 197,530 ​ $ 514 0.26 ​ Money market deposit accounts ​ 225,507 ​ 1,096 0.49 ​ 178,657 ​ 735 0.41 ​ 121,588 ​ 844 0.69 ​ Savings accounts ​ 169,731 ​ 107 0.06 ​ 156,421 ​ 96 0.06 ​ 128,004 ​ 93 0.07 ​ Time deposits ​ 264,578 ​ 2,564 0.97 ​ 245,686 ​ 1,598 0.65 ​ 312,048 ​ 4,208 1.35 ​ Total interest-bearing deposits ​ 990,338 ​ 4,902 0.49 ​ 848,837 ​ 3,195 0.38 ​ 759,170 ​ 5,659 0.75 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal funds purchased ​ — ​ — 0.00 ​ — ​ — 0.00 ​ 527 ​ 3 0.57 ​ Borrowings from FHLB ​ 292,803 ​ 3,333 1.14 ​ 282,001 ​ 3,199 1.13 ​ 260,222 ​ 3,345 1.29 ​ Federal Reserve PPPLF ​ ​ — ​ ​ — ​ 0.00 ​ ​ 114,372 ​ ​ 400 ​ 0.35 ​ ​ 62,401 ​ ​ 220 ​ 0.35 ​ Subordinated debt and other borrowings ​ 36,224 ​ 2,111 5.83 ​ 19,819 ​ 1,293 6.53 ​ 19,760 ​ 1,311 6.63 ​ Total interest-bearing liabilities ​ ​ 1,319,365 ​ ​ 10,346 ​ 0.78 ​ ​ 1,265,029 ​ ​ 8,087 ​ 0.64 ​ ​ 1,102,080 ​ ​ 10,538 ​ 0.96 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-interest-bearing deposits ​ 313,491 ​ ​ 274,129 ​ ​ 201,175 ​ ​ Other non-interest-bearing liabilities ​ 35,539 ​ ​ 44,782 ​ ​ 32,182 ​ ​ Total liabilities ​ ​ 1,668,395 ​ ​ ​ ​ ​ ​ ​ 1,583,940 ​ ​ ​ ​ ​ ​ ​ 1,335,437 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total stockholders’ equity ​ 177,869 ​ ​ 170,247 ​ ​ 130,986 ​ ​ Noncontrolling interests in subsidiary ​ — ​ ​ 121 ​ ​ (202) ​ ​ Total equity ​ ​ 177,869 ​ ​ ​ ​ ​ ​ ​ 170,368 ​ ​ ​ ​ ​ ​ ​ 130,784 ​ ​ ​ ​ ​ ​ Total liabilities and equity ​ $ 1,846,264 ​ ​ $ 1,754,308 ​ ​ $ 1,466,221 ​ ​ ​ Net interest income (taxable equivalent basis) ​ ​ 62,312 ​ ​ 58,494 ​ ​ 48,407 ​ Less: taxable equivalent adjustment ​ ​ ​ (1,660) ​ ​ ​ (1,322) ​ ​ ​ (1,246) ​ Net interest income ​ ​ $ 60,652 ​ ​ ​ $ 57,172 ​ ​ ​ $ 47,161 ​ ​ Interest rate spread (taxable equivalent basis) ​ ​ 3.57 % ​ 3.54 % ​ 3.37 % Net interest margin (taxable equivalent basis) ​ ​ 3.73 ​ ​ 3.67 ​ ​ 3.55 ​ Average interest-earning assets to average interest-bearing liabilities ​ ​ ​ ​ ​ ​ ​ 126.50 ​ ​ ​ ​ ​ ​ ​ 125.92 ​ ​ ​ ​ ​ ​ ​ 123.65 ​ ​ 42 Table of Contents Rate/Volume Analysis.
Biggest changeThere were no out-of-period items or adjustments required to be excluded from the following table. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ Interest ​ ​ ​ ​ ​ ​ Interest ​ ​ ​ ​ ​ ​ Interest ​ ​ ​ ​ Average ​ and ​ Yield/ ​ Average ​ and ​ Yield/ ​ Average ​ and ​ Yield/ ​ (Dollars in thousands) Balance Dividends Cost Balance Dividends Cost Balance Dividends Cost ​ Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing deposits with banks ​ $ 22,305 ​ $ 869 3.90 % $ 30,605 ​ $ 161 0.53 % $ 45,847 ​ $ 73 0.16 % Loans ​ 1,680,418 ​ ​ 90,014 5.36 ​ 1,362,382 ​ ​ 62,211 4.57 ​ 1,336,417 ​ 58,182 4.35 ​ Investment securities - taxable ​ 109,249 ​ 3,865 3.54 ​ 74,239 ​ 2,334 3.14 ​ 44,325 ​ 1,771 4.00 ​ Investment securities - nontaxable ​ 219,581 ​ 9,189 4.18 ​ 187,408 ​ 7,419 3.96 ​ 147,385 ​ 5,973 4.05 ​ FRB and FHLB stock ​ 23,196 ​ 1,435 6.19 ​ 19,217 ​ 729 3.79 ​ 18,948 ​ 582 3.07 ​ Total interest-earning assets ​ 2,054,749 ​ 105,372 5.13 ​ 1,673,851 ​ 72,854 4.35 ​ 1,592,922 ​ 66,581 4.18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-interest-earning assets ​ 161,446 ​ ​ ​ ​ 177,283 ​ ​ 161,386 ​ ​ Total assets ​ $ 2,216,195 ​ ​ ​ ​ $ 1,851,134 ​ ​ $ 1,754,308 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities and equity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NOW accounts ​ $ 313,212 ​ $ 1,960 0.63 ​ $ 330,522 ​ $ 1,135 0.34 ​ $ 268,073 ​ $ 766 0.29 ​ Money market deposit accounts ​ 259,506 ​ 6,295 2.43 ​ 225,507 ​ 1,096 0.49 ​ 178,657 ​ 735 0.41 ​ Savings accounts ​ 188,686 ​ 124 0.07 ​ 169,731 ​ 107 0.06 ​ 156,421 ​ 96 0.06 ​ Time deposits ​ 521,094 ​ 19,292 3.70 ​ 264,578 ​ 2,564 0.97 ​ 245,686 ​ 1,598 0.65 ​ Total interest-bearing deposits ​ 1,282,498 ​ 27,671 2.16 ​ 990,338 ​ 4,902 0.49 ​ 848,837 ​ 3,195 0.38 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal funds purchased ​ 21 ​ 1 4.76 ​ — ​ — 0.00 ​ — ​ — 0.00 ​ Borrowings from FHLB ​ 368,239 ​ 10,739 2.92 ​ 292,803 ​ 3,333 1.14 ​ 282,001 ​ 3,199 1.13 ​ Federal Reserve PPPLF ​ ​ — ​ ​ — ​ 0.00 ​ ​ — ​ ​ — ​ 0.00 ​ ​ 114,372 ​ ​ 400 ​ 0.35 ​ Subordinated debt and other borrowings ​ 59,161 ​ 3,244 5.48 ​ 41,094 ​ 2,307 5.61 ​ 19,819 ​ 1,293 6.53 ​ Total interest-bearing liabilities ​ ​ 1,709,919 ​ ​ 41,655 ​ 2.44 ​ ​ 1,324,235 ​ ​ 10,542 ​ 0.80 ​ ​ 1,265,029 ​ ​ 8,087 ​ 0.64 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-interest-bearing deposits ​ 307,356 ​ ​ ​ 313,491 ​ ​ 274,129 ​ ​ Other non-interest-bearing liabilities ​ 36,867 ​ ​ ​ 35,539 ​ ​ 44,782 ​ ​ Total liabilities ​ ​ 2,054,142 ​ ​ ​ ​ ​ ​ ​ 1,673,265 ​ ​ ​ ​ ​ ​ ​ 1,583,940 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total stockholders’ equity ​ 162,053 ​ ​ ​ 177,869 ​ ​ 170,247 ​ ​ Noncontrolling interests in subsidiary ​ — ​ ​ ​ — ​ ​ 121 ​ ​ Total equity ​ ​ 162,053 ​ ​ ​ ​ ​ ​ ​ 177,869 ​ ​ ​ ​ ​ ​ ​ 170,368 ​ ​ ​ ​ ​ ​ Total liabilities and equity ​ $ 2,216,195 ​ ​ ​ $ 1,851,134 ​ ​ $ 1,754,308 ​ ​ Net interest income (taxable equivalent basis) ​ ​ 63,717 ​ ​ 62,312 ​ ​ 58,494 ​ Less: taxable equivalent adjustment ​ ​ ​ (2,143) ​ ​ ​ (1,660) ​ ​ ​ (1,322) ​ Net interest income ​ ​ $ 61,574 ​ ​ ​ $ 60,652 ​ ​ ​ $ 57,172 ​ ​ Interest rate spread (taxable equivalent basis) ​ ​ ​ 2.69 % ​ 3.55 % ​ 3.54 % Net interest margin (taxable equivalent basis) ​ ​ ​ 3.10 ​ ​ 3.72 ​ ​ 3.67 ​ Average interest-earning assets to average interest-bearing liabilities ​ ​ ​ ​ ​ ​ ​ 120.17 ​ ​ ​ ​ ​ ​ ​ 126.40 ​ ​ ​ ​ ​ ​ ​ 125.92 ​ ​ 41 Table of Contents Rate/Volume Analysis.
Interest income on investment securities increased $1.7 million, or 26.3%, primarily due to an increase in the average balance of investment securities of $69.9 million, from $191.7 million for 2021 to $261.6 million for 2022 partially offset by a decrease in the average tax equivalent yield on investments from 4.04% for 2021 to 3.73% for 2022.
In 2022, interest income on investment securities increased $1.7 million, or 26.3%, primarily due to an increase in the average balance of investment securities of $69.9 million, from $191.7 million for 2021 to $261.6 million for 2022 partially offset by a decrease in the average tax equivalent yield on investments from 4.04% for 2021 to 3.73% for 2022.
Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit. For the year ended September 30, 2022, we did not engage in any off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.
Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit. For the year ended September 30, 2023, we did not engage in any off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.
(2) Includes farmland, land and land development loans. (3) Includes construction loans for which the Bank has committed to provide permanent financing. ​ Fixed vs. Adjustable Rate Loans The following table sets forth the dollar amount of all loans at September 30, 2022 that are due after September 30, 2023, and have either fixed interest rates or adjustable interest rates.
(2) Includes farmland, land and land development loans. (3) Includes construction loans for which the Bank has committed to provide permanent financing. ​ Fixed vs. Adjustable Rate Loans The following table sets forth the dollar amount of all loans at September 30, 2023 that are due after September 30, 2024, and have either fixed interest rates or adjustable interest rates.
See Note 15 of the Notes to Consolidated Financial Statements beginning on page F-1 of this annual report for additional information. 32 Table of Contents SELECTED FINANCIAL DATA The following tables contain certain information concerning our consolidated financial position and results of operations, which is derived in part from our audited consolidated financial statements.
See Note 15 of the Notes to Consolidated Financial Statements beginning on page F-1 of this annual report for additional information. 31 Table of Contents SELECTED FINANCIAL DATA The following tables contain certain information concerning our consolidated financial position and results of operations, which is derived in part from our audited consolidated financial statements.
If these maturing time deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit and borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the time deposits due on or before September 30, 2023.
If these maturing time deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit and borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the time deposits due on or before September 30, 2024.
Management’s Discussion and Analysis of Financial Condition and Results of Operation.” ​ Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Information required by this item is included herein beginning on page F-1. ​ Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ​ 52 Table of Contents
Management’s Discussion and Analysis of Financial Condition and Results of Operation.” ​ Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Information required by this item is included herein beginning on page F-1. ​ Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ​ 50 Table of Contents
In addition, we had the ability to borrow the lesser of $20 million or 25% of the Bank’s equity capital, excluding reserves, using a federal funds purchased line of credit facility with another financial institution at September 30, 2022.
In addition, we had the ability to borrow the lesser of $20 million or 25% of the Bank’s equity capital, excluding reserves, using a federal funds purchased line of credit facility with another financial institution at September 30, 2023.
At September 30, 2022, the Bank exceeded all of its regulatory capital requirements. The Bank is considered “well capitalized” under regulatory guidelines. See “Item 1. Business — Regulation and Supervision — Regulation of Federal Savings Associations — Capital Requirement.” Off-Balance Sheet Arrangements.
At September 30, 2023, the Bank exceeded all of its regulatory capital requirements. The Bank is considered “well capitalized” under regulatory guidelines. See “Item 1. Business — Regulation and Supervision — Regulation of Federal Savings Associations — Capital Requirement.” Off-Balance Sheet Arrangements.
Significant accounting policies, including the impact of recent accounting pronouncements, are discussed in Note 1 of the Notes to Consolidated Financial Statements. The policies considered to be the critical accounting policies are described below. 31 Table of Contents Allowance for Loan Losses.
Significant accounting policies, including the impact of recent accounting pronouncements, are discussed in Note 1 of the Notes to Consolidated Financial Statements. The policies considered to be the critical accounting policies are described below. 30 Table of Contents Allowance for Loan Losses.
Mortgage loans originated for sale were $1.61 billion in the year ended September 30, 2022 as compared to $4.09 billion in 2021. The decrease in net gain on sales of SBA loans was due primarily to decreases in production and sales volume from the SBA lending segment, as well as lower premiums in the secondary market.
Mortgage loans originated for sale were $1.61 billion in the year ended September 30, 2022 as compared to $4.09 billion in 2021. The decrease in net 42 Table of Contents gain on sales of SBA loans was due primarily to decreases in production and sales volume from the SBA lending segment, as well as lower premiums in the secondary market.
Our strategy for credit risk management focuses on having well-defined credit policies and uniform underwriting criteria and providing prompt attention to potential problem loans. 44 Table of Contents When a borrower fails to make a required loan payment, we take a number of steps to have the borrower cure the delinquency and restore the loan to current status.
Our strategy for credit risk management focuses on having well-defined credit policies and uniform underwriting criteria and providing prompt attention to potential problem loans. When a borrower fails to make a required loan payment, we take a number of steps to have the borrower cure the delinquency and restore the loan to current status.
Management informs the Board of Directors monthly of all loans in nonaccrual status, all loans in foreclosure and all repossessed property and assets that we own. Analysis of Nonperforming and Classified Assets. We consider nonaccrual loans, troubled debt restructurings (“TDRs”), repossessed assets and loans that are 90 days or more past due to be nonperforming assets.
Management informs the Board of Directors monthly of all loans in nonaccrual status, all loans in foreclosure and all repossessed property and assets that we own. 43 Table of Contents Analysis of Nonperforming and Classified Assets. We consider nonaccrual loans, troubled debt restructurings (“TDRs”), repossessed assets and loans that are 90 days or more past due to be nonperforming assets.
Any material increase in the allowance for loan losses may adversely affect our financial condition and results of operations. 47 Table of Contents Analysis of Loan Loss Experience.
Any material increase in the allowance for loan losses may adversely affect our financial condition and results of operations. 45 Table of Contents Analysis of Loan Loss Experience.
The increase in total interest income is due primarily to increases in the average balance of interest earning assets of $76.1 million, from $1.59 billion for 2021 to $1.67 billion for 2022, and an increase in the average tax-equivalent yield on interest-earning assets, from 4.18% for 2021 to 4.35% for 2022.
The increase in total interest income is due primarily to increases in the average balance of interest earning assets of $80.9 million, from $1.59 billion for 2021 to $1.67 billion for 2022, and an increase in the average tax-equivalent yield on interest-earning assets, from 4.18% for 2021 to 4.35% for 2022.
The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. Nonaccrual loans are included in average balances only. Loan fees are included in interest income on loans and totaled $1.5 million, $4.7 million and $1.8 million for 2022, 2021 and 2020, respectively.
The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. Nonaccrual loans are included in average balances only. Loan fees are included in interest income on loans and totaled $1.2 million, $1.5 million and $4.7 million for 2023, 2022 and 2021, respectively.
At September 30, 2022 and 2021, cash and cash equivalents totaled $41.7 million and $33.4 million, respectively. The Bank is at times required to maintain reserve balances on hand and with the Federal Reserve Bank, which are unavailable for investment but are interest-bearing. Loans Held for Sale.
At September 30, 2023 and 2022, cash and cash equivalents totaled $30.8 million and $41.7 million, respectively. The Bank is at times required to maintain reserve balances on hand and with the Federal Reserve Bank, which are unavailable for investment but are interest-bearing. Loans Held for Sale.
The Bank has entered into federal funds purchased line of credit facilities with three other financial institutions that established lines of credit not to exceed the lesser of $20 million or 25% of the Bank’s equity capital, excluding reserves, $22 million and $15 million, respectively.
The Bank has entered into federal funds purchased line of credit facilities with four other financial institutions that established lines of credit not to exceed the lesser of $20 million or 25% of the Bank’s equity capital, excluding reserves, the lesser of $5.0 million or 50% of the Bank’s equity capital, $22 million and $15 million, respectively.
The Company’s primary source of income is dividends received from the Bank. The amount of dividends that the Bank may declare and pay to the Company in any calendar year, without the receipt of prior approval from banking regulators, cannot exceed net income for that year to date plus retained net income (as defined) for the preceding two calendar years.
The amount of dividends that the Bank may declare and pay to the Company in any calendar year, without the receipt of prior approval from banking regulators, cannot exceed net income for that year to date plus retained net income (as defined) for the preceding two calendar years.
We believe the large percentage of time deposits that mature within one year reflects customers’ hesitancy to invest their funds for long periods due to the recent increasing interest rate environment and local competitive pressure. The balance also includes $292.5 million in brokered and reciprocal time deposits at September 30, 2022.
We believe the large percentage of time deposits that mature within one year reflects customers’ hesitancy to invest their funds for long periods due to the recent increasing interest rate environment and local competitive pressure. The balance also includes $438.3 million in brokered and reciprocal time deposits at September 30, 2023.
At September 30, 2022, the Company held seven privately-issued CMO and ABS securities with an aggregate amortized cost of $395,000 and fair value of $382,000 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 September 30, 2023, the Company held seven privately-issued CMO and ABS securities with an aggregate amortized cost of $289,000 and fair value of $291,000 that have been downgraded to a substandard regulatory classification due to a downgrade of the security’s credit quality rating by various rating agencies.
Tax exempt income is reported on a tax equivalent basis using a federal marginal tax rate of 21% for 2022, 2021, 2020 and 2019, and a blended federal tax rate of 24.5% for 2018. (3) Represents other expenses divided by the sum of net interest income and other income.
Tax exempt income is reported on a tax equivalent basis using a federal marginal tax rate of 21% for 2023, 2022, 2021, 2020 and 2019. (3) Represents other expenses divided by the sum of net interest income and other income.
Tax exempt income is reported on a tax equivalent basis using a federal marginal tax rate of 21% for 2022, 2021, 2020 and 2019, and a blended federal marginal tax rate of 24.5% for 2018. (2) Represents net interest income as a percent of average interest-earning assets.
Tax exempt income is reported on a tax equivalent basis using a federal marginal tax rate of 21% for 2023, 2022, 2021, 2020 and 2019. (2) Represents net interest income as a percent of average interest-earning assets.
The increase in the average balance of interest-earning assets is due primarily to increases in the average balance of investment securities and total loans of $69.9 million and $21.1 million, respectively.
The increase in the average balance of interest-earning assets is due primarily to increases in the average balance of investment securities and total loans of $69.9 million and $26.0 million, respectively.
At September 30, 2022, the Company had liquid assets of $16.9 million on a stand-alone, unconsolidated basis. Our primary investing activities are the origination of loans and the purchase of securities. Our primary financing activities consist of activity in deposit accounts and FHLB borrowings.
At September 30, 2023, the Company had liquid assets of $7.4 million on a stand-alone, unconsolidated basis. Our primary investing activities are the origination of loans and the purchase of securities. Our primary financing activities consist of activity in deposit accounts and FHLB borrowings.
Our held to maturity securities portfolio consists of mortgage-backed securities issued by government sponsored enterprises and municipal bonds. Held to maturity securities decreased by $279,000 from $1.8 million at September 30, 2021 to $1.6 million at September 30, 2022, due primarily to maturities and principal repayments.
Our held to maturity securities portfolio consists of mortgage-backed securities issued by government sponsored enterprises and municipal bonds. Held to maturity securities decreased by $258,000 from $1.6 million at September 30, 2022 to $1.3 million at September 30, 2023, due primarily to maturities and principal repayments.
The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At September 30, 2022, cash and cash equivalents totaled $41.7 million. Securities classified as available-for-sale, amounting to $316.5 million, at September 30, 2022, provide additional sources of liquidity.
The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At September 30, 2023, cash and cash equivalents totaled $30.8 million. Securities classified as available-for-sale, amounting to $227.7 million, at September 30, 2023, provide additional sources of liquidity.
Deposit accounts, generally obtained from individuals and businesses throughout our primary market area, are our primary source of funds for lending and investments. Our deposit accounts are comprised of noninterest-bearing accounts, interest-bearing savings, checking and money market accounts and time deposits. Deposits increased $288.3 million from $1.23 billion at September 30, 2021 to $1.52 billion at September 30, 2022.
Deposit accounts, generally obtained from individuals and businesses throughout our primary market area, are our primary source of funds for lending and investments. Our deposit accounts are comprised of noninterest-bearing accounts, interest-bearing savings, checking and money market accounts and time deposits. Deposits increased $172.5 million from $1.52 billion at September 30, 2022 to $1.69 billion at September 30, 2023.
Total interest expense increased $2.3 million, or 27.9%, due primarily to an increase in the average cost of funds from 0.64% for 2021 to 0.78% for 2022, and an increase in the average balance of interest-bearing liabilities of $54.3 million, from $1.27 billion for 2021 to $1.32 billion for 2022.
In 2022, total interest expense increased $2.5 million or 30.3%, due primarily to an increase in the average cost of funds from 0.64% for 2021 to 0.80% for 2022, and an increase in the average balance of interest-bearing liabilities of $59.2 million, from $1.27 billion for 2021 to $1.32 billion for 2022.
The scenarios include prepayment assumptions, changes in the level of interest rates, the shape of the yield curve, and spreads between market interest rates in order to capture the impact from re-pricing, yield curve, option, and basis risks. 49 Table of Contents Results of our simulation modeling, which assumes an immediate and sustained parallel shift in market interest rates, project that the Company’s net interest income could change as follows over a one-year horizon, relative to our base case scenario, based on September 30, 2022 and 2021 financial information. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, 2022 ​ At September 30, 2021 ​ Immediate Change One Year Horizon ​ One Year Horizon in the Level Dollar ​ Percent ​ Dollar Percent of Interest Rates Change Change ​ Change Change ​ (Dollars in thousands) ​ 300bp ​ $ (15,503) (27.12) % $ (3,593) (7.65) % 200bp ​ (8,858) (15.50) ​ (1,508) (3.21) ​ 100bp ​ (3,224) (5.64) ​ 387 0.82 ​ Static ​ ​ — ​ — ​ ​ — ​ — ​ (100)bp ​ 2,819 4.93 ​ (1,635) (3.48) ​ (200)bp ​ ​ 5,095 ​ 8.91 ​ (2,370) (5.05) ​ ​ At September 30, 2022, our simulated exposure to an increase in interest rates shows that an immediate and sustained increase in rates of 1.00% will decrease our net interest income by $3.2 million or 5.64% over a one year horizon compared to a flat interest rate scenario.
The scenarios include prepayment assumptions, changes in the level of interest rates, the shape of the yield curve, and spreads between market interest rates in order to capture the impact from re-pricing, yield curve, option, and basis risks. 47 Table of Contents Results of our simulation modeling, which assumes an immediate and sustained parallel shift in market interest rates, project that the Company’s net interest income could change as follows over a one-year horizon, relative to our base case scenario, based on September 30, 2023 and 2022 financial information. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, 2023 ​ At September 30, 2022 ​ Immediate Change One Year Horizon ​ One Year Horizon in the Level Dollar ​ Percent ​ Dollar Percent of Interest Rates Change Change ​ Change Change ​ (Dollars in thousands) ​ 300bp ​ $ (6,660) (11.71) % $ (15,503) (27.12) % 200bp ​ (4,349) (7.65) ​ (8,858) (15.50) ​ 100bp ​ (2,223) (3.91) ​ (3,224) (5.64) ​ Static ​ ​ — ​ — ​ ​ — ​ — ​ (100)bp ​ 2,214 3.89 ​ 2,819 4.93 ​ (200)bp ​ ​ 4,451 ​ 7.83 ​ 5,095 ​ 8.91 ​ ​ At September 30, 2023, our simulated exposure to an increase in interest rates shows that an immediate and sustained increase in rates of 1.00% will decrease our net interest income by $2.2 million or 3.91% over a one year horizon compared to a flat interest rate scenario.
Interest income on loans increased $3.8 million, or 6.5%, from $58.1 million for 2021 to $61.9 million for 2022, due primarily to an increase in the average balance of loans outstanding of $21.1 million, from $1.34 billion for 2021 to $1.36 billion for 2022, and an increase in the average tax-equivalent yield on loans from 4.35% for 2021 to 4.57% for 2022.
In 2022, interest income on loans increased $4.0 million, or 6.9%, from $58.1 million for 2021 to $62.1 million for 2022, due primarily to an increase in the average balance of loans outstanding of $26.0 million, from $1.34 billion for 2021 to $1.36 billion for 2022, and an increase in the average tax-equivalent yield on loans from 4.35% for 2021 to 4.57% for 2022.
This is a non-GAAP financial measure that management believes is useful to investors in understanding the Company’s performance. 34 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Year Ended September 30, ​ 2022 2021 2020 2019 2018 Asset Quality Ratios: ​ Allowance for loan losses as a percent of total loans 1.06 % 1.31 % 1.54 % 1.22 % 1.31 % ​ ​ ​ Allowance for loan losses as a percent of nonperforming loans 141.49 92.43 125.05 193.82 218.18 ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs to average outstanding loans during the period 0.06 0.07 0.09 0.09 0.02 ​ ​ ​ ​ ​ ​ ​ ​ Nonperforming loans as a percent of total loans 0.75 1.42 1.23 0.63 0.60 ​ ​ ​ ​ ​ ​ ​ ​ Nonperforming loans as a percent of total assets ​ 0.53 ​ 0.90 ​ 0.77 ​ 0.42 ​ 0.41 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonperforming assets as a percent of total assets 0.66 1.00 0.95 1.02 1.31 ​ ​ ​ ​ ​ ​ ​ ​ Other Data: ​ ​ ​ ​ ​ ​ Number of full service branch offices 15 15 15 15 16 ​ Number of deposit accounts 48,122 46,361 44,852 44,343 43,368 ​ Number of loans 7,401 7,041 8,074 7,759 7,228 ​ ​ Balance Sheet Analysis Cash and Cash Equivalents.
This is a non-GAAP financial measure that management believes is useful to investors in understanding the Company’s performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Year Ended September 30, ​ 2023 2022 2021 2020 2019 Asset Quality Ratios: ​ Allowance for loan losses as a percent of total loans 0.95 % 1.03 % 1.31 % 1.54 % 1.22 % ​ ​ ​ ​ Allowance for loan losses as a percent of nonperforming loans 121.16 141.49 92.43 125.05 193.82 ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs to average outstanding loans during the period 0.06 0.06 0.07 0.09 0.09 ​ ​ ​ ​ ​ ​ ​ ​ Nonperforming loans as a percent of total loans 0.78 0.73 1.42 1.23 0.63 ​ ​ ​ ​ ​ ​ ​ ​ Nonperforming loans as a percent of total assets ​ 0.61 ​ 0.52 ​ 0.90 ​ 0.77 ​ 0.42 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonperforming assets as a percent of total assets 0.69 0.65 1.00 0.95 1.02 ​ ​ ​ ​ ​ ​ ​ ​ Other Data: ​ ​ ​ ​ ​ ​ Number of full service branch offices 15 15 15 15 15 ​ Number of deposit accounts 49,226 48,122 46,361 44,852 44,343 ​ Number of loans 7,796 7,401 7,041 8,074 7,759 ​ ​ Balance Sheet Analysis Cash and Cash Equivalents.
The increase in commercial real estate loans is primarily due to an increase in single tenant net lease loans, which increased $232.9 million during the year ended September 30, 2022.
The increase in commercial real estate loans is primarily due to an increase in single tenant net lease loans, which increased $82.8 million during the year ended September 30, 2023.
The Company recognized a provision for loan losses of $1.9 million for the year ended September 30, 2022 compared to a credit for loan losses of $1.8 million for 2021. Net charge-offs in 2022 were $849,000 compared to $958,000 for 2021 and nonperforming loans decreased $4.6 million to $10.9 million at September 30, 2022.
In 2022, the Company recognized a provision for loan losses of $1.9 million compared to a credit for loan losses of $1.8 million for 2021. Net charge-offs in 2022 were $849,000 compared to $958,000 for 2021 and nonperforming loans decreased $4.6 million to $10.9 million at September 30, 2022. See “ Analysis of Nonperforming and Classified Assets ” included herein.
At September 30, 2021, the Company held ten privately-issued CMO and ABS securities with an aggregate carrying value of $512,000 and fair value of $526,000 that had been downgraded to a substandard regulatory classification due to a downgrade of the security’s credit quality rating by various rating agencies. Analysis and Determination of the Allowance for Loan Losses.
At September 30, 2022, the Company held seven privately-issued CMO and ABS securities with an aggregate carrying value of $395,000 and fair value of 44 Table of Contents $382,000 that had been downgraded to a substandard regulatory classification due to a downgrade of the security’s credit quality rating by various rating agencies Analysis and Determination of the Allowance for Loan Losses.
At September 30, 2022, the Bank had $327.8 million in commitments to extend credit outstanding, excluding interest rate lock commitments for residential mortgage loans intended for sale in the secondary market that meet the definition of a derivative. Time deposits due within one year of September 30, 2022 totaled $368.1 million, or 87.1% of time deposits.
At September 30, 2023, the Bank had $354.3 million in commitments to extend credit outstanding, excluding interest rate lock commitments for residential mortgage loans intended for sale in the secondary market that meet the definition of a derivative. Time deposits due within one year of September 30, 2023 totaled $573.1 million, or 94.1% of time deposits.
The following is only a summary and should be read in conjunction with the audited consolidated financial statements and notes thereto beginning on page F-1 of this annual report. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, (In thousands) 2022 2021 2020 2019 2018 Financial Condition Data: ​ ​ ​ ​ ​ Total assets ​ $ 2,057,662 ​ $ 1,721,394 ​ $ 1,764,625 ​ $ 1,222,579 ​ $ 1,034,406 Cash and cash equivalents ​ 41,665 ​ 33,428 ​ 33,726 ​ 41,432 ​ 42,274 Securities available-for-sale ​ 316,517 ​ 206,681 ​ 201,965 ​ 177,302 ​ 184,373 Securities held-to-maturity ​ 1,558 ​ 1,837 ​ 2,102 ​ 2,336 ​ 2,607 Loans held for sale ​ 60,462 ​ 214,940 ​ 285,525 ​ 96,070 ​ 32,125 Loans, net ​ 1,436,555 ​ 1,075,936 ​ 1,090,063 ​ 810,658 ​ 704,271 Deposits ​ 1,515,834 ​ 1,227,580 ​ ​ 1,048,076 ​ ​ 834,384 ​ ​ 811,112 Borrowings from FHLB ​ 307,303 ​ 250,000 ​ 310,858 ​ 222,544 ​ 90,000 Other borrowings ​ 50,217 ​ 19,865 ​ 194,631 ​ 23,729 ​ 21,013 Stockholders’ equity ​ 152,623 ​ 180,377 ​ 157,272 ​ 121,053 ​ 98,813 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended September 30, (In thousands) 2022 2021 2020 2019 2018 Operating Data: ​ ​ ​ ​ ​ ​ Interest income ​ $ 70,998 ​ $ 65,259 ​ $ 57,699 ​ $ 50,995 ​ $ 42,159 Interest expense ​ 10,346 ​ 8,087 ​ 10,538 ​ 10,906 ​ 6,337 Net interest income ​ 60,652 ​ 57,172 ​ 47,161 ​ 40,089 ​ 35,822 Provision (credit) for loan losses ​ 1,908 ​ (1,767) ​ 7,962 ​ 1,463 ​ 1,353 Net interest income after provision (credit) for loan losses ​ 58,744 ​ 58,939 ​ 39,199 ​ 38,626 ​ 34,469 Noninterest income ​ 51,227 ​ 120,436 ​ 133,351 ​ 43,854 ​ 13,295 Noninterest expense ​ 91,149 ​ 139,409 ​ 125,808 ​ 62,390 ​ 33,006 Income before income taxes ​ 18,822 ​ 39,966 ​ 46,742 ​ 20,090 ​ 14,758 Income tax expense ​ 2,378 ​ 9,997 ​ 12,661 ​ 3,095 ​ 2,422 Net income ​ ​ 16,444 ​ ​ 29,969 ​ ​ 34,081 ​ ​ 16,995 ​ ​ 12,336 Less: net income attributable to noncontrolling interests ​ — ​ 402 ​ 727 ​ 818 ​ 1,434 Net income attributable to First Savings Financial Group ​ $ 16,444 ​ $ 29,567 ​ $ 33,354 ​ $ 16,177 ​ $ 10,902 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended September 30, ​ 2022 2021 2020 2019 2018 Per Share Data (1): ​ ​ ​ ​ ​ Net income per common share, basic ​ $ 2.33 ​ $ 4.16 ​ $ 4.72 ​ $ 2.33 ​ $ 1.61 Net income per common share, diluted ​ 2.30 ​ 4.12 ​ 4.68 ​ 2.27 ​ 1.54 Dividends per common share ​ 0.51 ​ 0.36 ​ 0.22 ​ 0.21 ​ 0.20 ​ (1) Per share amounts have been adjusted to reflect the three-for-one stock split effective September 15, 2021. ​ 33 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Year Ended September 30, ​ 2022 2021 2020 2019 2018 Performance Ratios: ​ Return on average assets 0.89 % 1.69 % 2.27 % 1.42 % 1.11 % ​ ​ ​ ​ ​ ​ ​ Return on average equity 9.25 17.59 26.06 15.65 12.80 ​ ​ ​ ​ ​ ​ ​ ​ Return on average common stockholders’ equity 9.25 17.37 25.46 15.00 11.37 ​ ​ ​ ​ ​ ​ ​ ​ Interest rate spread (1) 3.57 3.54 3.37 3.63 3.82 ​ ​ ​ ​ ​ ​ ​ ​ Net interest margin (2) 3.73 3.67 3.55 3.88 3.99 ​ ​ ​ ​ ​ ​ ​ ​ Other expenses to average assets 4.94 7.95 8.58 5.48 3.35 ​ ​ ​ ​ ​ ​ ​ ​ Efficiency ratio (3) 81.47 78.49 69.70 74.32 67.20 ​ ​ ​ ​ ​ ​ ​ ​ Efficiency ratio (excluding nonrecurring items) (4) 81.48 78.51 69.86 74.51 63.96 ​ ​ ​ ​ ​ ​ ​ ​ Average interest-earning assets to average interest-bearing liabilities 126.50 125.92 123.65 124.96 125.02 ​ ​ ​ ​ ​ ​ ​ ​ Dividend payout ratio 22.16 8.59 4.77 9.10 12.32 ​ ​ ​ ​ ​ ​ ​ ​ Average equity to average assets 9.63 9.71 8.92 9.54 9.77 ​ ​ ​ ​ ​ ​ ​ ​ Capital Ratios: ​ ​ ​ ​ ​ ​ Total capital (to risk-weighted assets): ​ ​ ​ ​ ​ ​ Consolidated 12.65 % 14.28 % 13.37 % 13.85 % 14.50 % Bank 11.74 13.60 12.75 12.88 12.92 ​ ​ ​ ​ ​ ​ ​ ​ Tier 1 capital (to risk-weighted assets): ​ ​ ​ ​ ​ ​ Consolidated 8.99 11.76 10.58 10.70 10.84 ​ Bank 10.88 12.54 11.53 11.81 11.75 ​ ​ ​ ​ ​ ​ ​ ​ Common equity Tier 1 capital (to risk-weighted assets): ​ ​ ​ ​ ​ ​ Consolidated 8.99 11.76 10.58 10.70 10.84 ​ Bank 10.88 12.54 11.53 11.81 11.75 ​ ​ ​ ​ ​ ​ ​ ​ Tier 1 capital (to average adjusted total assets): ​ ​ ​ ​ ​ ​ Consolidated 8.03 9.73 8.53 8.39 8.39 ​ Bank 9.64 10.07 9.37 9.34 9.10 ​ ​ (1) Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost on average interest-bearing liabilities.
The following is only a summary and should be read in conjunction with the audited consolidated financial statements and notes thereto beginning on page F-1 of this annual report. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, (In thousands) 2023 2022 2021 2020 2019 Financial Condition Data: ​ ​ ​ ​ ​ Total assets ​ $ 2,288,854 ​ $ 2,093,725 ​ $ 1,721,394 ​ $ 1,764,625 ​ $ 1,222,579 Cash and cash equivalents ​ 30,845 ​ 41,665 ​ 33,428 ​ 33,726 ​ 41,432 Securities available-for-sale ​ 227,739 ​ 316,517 ​ 206,681 ​ 201,965 ​ 177,302 Securities held-to-maturity ​ 1,300 ​ 1,558 ​ 1,837 ​ 2,102 ​ 2,336 Loans held for sale ​ 45,855 ​ 60,462 ​ 214,940 ​ 285,525 ​ 96,070 Loans, net ​ 1,770,243 ​ 1,474,544 ​ 1,075,936 ​ 1,090,063 ​ 810,658 Deposits ​ 1,688,316 ​ 1,515,834 ​ ​ 1,227,580 ​ ​ 1,048,076 ​ ​ 834,384 Borrowings from FHLB ​ 363,183 ​ 307,303 ​ 250,000 ​ 310,858 ​ 222,544 Other borrowings ​ 48,444 ​ 88,206 ​ 19,865 ​ 194,631 ​ 23,729 Stockholders’ equity ​ 150,981 ​ 151,565 ​ 180,377 ​ 157,272 ​ 121,053 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended September 30, (In thousands) 2023 2022 2021 2020 2019 Operating Data: ​ ​ ​ ​ ​ ​ Interest income ​ $ 103,229 ​ $ 71,194 ​ $ 65,259 ​ $ 57,699 ​ $ 50,995 Interest expense ​ 41,655 ​ 10,542 ​ 8,087 ​ 10,538 ​ 10,906 Net interest income ​ 61,574 ​ 60,652 ​ 57,172 ​ 47,161 ​ 40,089 Provision (credit) for loan losses ​ 2,612 ​ 1,908 ​ (1,767) ​ 7,962 ​ 1,463 Net interest income after provision (credit) for loan losses ​ 58,962 ​ 58,744 ​ 58,939 ​ 39,199 ​ 38,626 Noninterest income ​ 25,342 ​ 51,227 ​ 120,436 ​ 133,351 ​ 43,854 Noninterest expense ​ 76,122 ​ 92,662 ​ 139,409 ​ 125,808 ​ 62,390 Income before income taxes ​ 8,182 ​ 17,309 ​ 39,966 ​ 46,742 ​ 20,090 Income tax expense ​ 10 ​ 1,923 ​ 9,997 ​ 12,661 ​ 3,095 Net income ​ ​ 8,172 ​ ​ 15,386 ​ ​ 29,969 ​ ​ 34,081 ​ ​ 16,995 Less: net income attributable to noncontrolling interests ​ — ​ — ​ 402 ​ 727 ​ 818 Net income attributable to First Savings Financial Group ​ ​ 8,172 ​ ​ 15,386 ​ ​ 29,567 ​ ​ 33,354 ​ ​ 16,177 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended September 30, ​ 2023 2022 2021 2020 2019 Per Share Data (1): ​ ​ ​ ​ ​ Net income per common share, basic ​ $ 1.19 ​ $ 2.18 ​ $ 4.16 ​ $ 4.72 ​ $ 2.33 Net income per common share, diluted ​ 1.19 ​ 2.15 ​ 4.12 ​ 4.68 ​ 2.27 Dividends per common share ​ 0.55 ​ 0.51 ​ 0.36 ​ 0.22 ​ 0.21 ​ (1) Per share amounts have been adjusted to reflect the three-for-one stock split effective September 15, 2021. 32 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Year Ended September 30, ​ 2023 2022 2021 2020 2019 Performance Ratios: ​ Return on average assets 0.37 % 0.83 % 1.69 % 2.27 % 1.42 % ​ ​ ​ ​ ​ ​ ​ Return on average equity 5.04 8.65 17.59 26.06 15.65 ​ ​ ​ ​ ​ ​ ​ ​ Return on average common stockholders’ equity 5.04 8.65 17.37 25.46 15.00 ​ ​ ​ ​ ​ ​ ​ ​ Interest rate spread (1) 2.69 3.55 3.54 3.37 3.63 ​ ​ ​ ​ ​ ​ ​ ​ Net interest margin (2) 3.10 3.72 3.67 3.55 3.88 ​ ​ ​ ​ ​ ​ ​ ​ Other expenses to average assets 3.43 5.01 7.95 8.58 5.48 ​ ​ ​ ​ ​ ​ ​ ​ Efficiency ratio (3) 87.58 82.82 78.49 69.70 74.32 ​ ​ ​ ​ ​ ​ ​ ​ Efficiency ratio (excluding nonrecurring items) (4) 80.61 81.03 78.51 69.86 74.51 ​ ​ ​ ​ ​ ​ ​ ​ Average interest-earning assets to average interest-bearing liabilities 120.17 126.40 125.92 123.65 124.96 ​ ​ ​ ​ ​ ​ ​ ​ Dividend payout ratio 46.41 23.68 8.59 4.77 9.10 ​ ​ ​ ​ ​ ​ ​ ​ Average equity to average assets 7.31 9.61 9.71 8.92 9.54 ​ ​ ​ ​ ​ ​ ​ ​ Capital Ratios: ​ ​ ​ ​ ​ ​ Total capital (to risk-weighted assets): ​ ​ ​ ​ ​ ​ Consolidated 11.47 % 12.33 % 14.28 % 13.37 % 13.85 % Bank 11.27 11.44 13.60 12.75 12.88 ​ ​ ​ ​ ​ ​ ​ ​ Tier 1 capital (to risk-weighted assets): ​ ​ ​ ​ ​ ​ Consolidated 8.22 8.73 11.76 10.58 10.70 ​ Bank 10.42 10.59 12.54 11.53 11.81 ​ ​ ​ ​ ​ ​ ​ ​ Common equity Tier 1 capital (to risk-weighted assets): ​ ​ ​ ​ ​ ​ Consolidated 8.22 8.73 11.76 10.58 10.70 ​ Bank 10.42 10.59 12.54 11.53 11.81 ​ ​ ​ ​ ​ ​ ​ ​ Tier 1 capital (to average adjusted total assets): ​ ​ ​ ​ ​ ​ Consolidated 7.24 7.96 9.73 8.53 8.39 ​ Bank 9.17 9.58 10.07 9.37 9.34 ​ ​ (1) Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost on average interest-bearing liabilities.
Net income was $29.6 million ($4.12 per common share diluted) for the year ended September 30, 2021 compared to net income of $33.4 million ($4.68 per common share diluted) for the year ended September 30, 2020.
Net income was $15.4 million ($2.15 per common share diluted) for the year ended September 30, 2022 compared to net income of $29.6 million ($4.12 per common share diluted) for the year ended September 30, 2021.
The Bank had 23 TDRs, totaling $2.7 million, which were performing according to their terms and on accrual status as of September 30, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, (Dollars in thousands) 2022 2021 2020 2019 2018 ​ Nonaccrual loans ​ $ 10,856 ​ $ 15,000 ​ $ 13,615 ​ $ 5,168 ​ $ 4,182 ​ Accruing loans past due 90 days or more ​ — ​ 472 ​ — ​ 12 ​ 91 ​ Total nonperforming loans: ​ 10,856 ​ 15,472 ​ 13,615 ​ 5,180 ​ 4,273 ​ Performing TDRs ​ 2,714 ​ 1,743 ​ 3,069 ​ 7,265 ​ 9,145 ​ Foreclosed real estate ​ — ​ — ​ — ​ — ​ 103 ​ Total nonperforming assets ​ $ 13,570 ​ $ 17,215 ​ $ 16,684 ​ $ 12,445 ​ $ 13,521 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonaccrual loans to total loans ​ ​ 0.75 % 1.38 % 1.23 % 0.63 % 0.59 % Total nonperforming loans to total loans ​ 0.75 ​ 1.42 ​ 1.23 ​ 0.63 ​ 0.60 ​ Total nonperforming loans to total assets ​ 0.53 ​ 0.90 ​ 0.77 ​ 0.42 ​ 0.41 ​ Total nonperforming assets to total assets ​ 0.66 ​ 1.00 ​ 0.95 ​ 1.02 ​ 1.31 ​ ​ Federal and state banking regulations require us to review and classify our assets on a regular basis.
The Bank had 16 TDRs, totaling $1.3 million, which were performing according to their terms and on accrual status as of September 30, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, (Dollars in thousands) 2023 2022 2021 2020 2019 ​ Nonaccrual loans ​ $ 13,948 ​ $ 10,856 ​ $ 15,000 ​ $ 13,615 ​ $ 5,168 ​ Accruing loans past due 90 days or more ​ — ​ — ​ 472 ​ — ​ 12 ​ Total nonperforming loans ​ 13,948 ​ 10,856 ​ 15,472 ​ 13,615 ​ 5,180 ​ Performing TDRs ​ 1,266 ​ 2,714 ​ 1,743 ​ 3,069 ​ 7,265 ​ Foreclosed real estate ​ 474 ​ — ​ — ​ — ​ — ​ Total nonperforming assets ​ $ 15,688 ​ $ 13,570 ​ $ 17,215 ​ $ 16,684 ​ $ 12,445 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonaccrual loans to total loans ​ ​ 0.78 % 0.73 % 1.38 % 1.23 % 0.63 % Total nonperforming loans to total loans ​ 0.78 ​ 0.73 ​ 1.42 ​ 1.23 ​ 0.63 ​ Total nonperforming loans to total assets ​ 0.61 ​ 0.52 ​ 0.90 ​ 0.77 ​ 0.42 ​ Total nonperforming assets to total assets ​ 0.69 ​ 0.65 ​ 1.00 ​ 0.95 ​ 1.02 ​ ​ Federal and state banking regulations require us to review and classify our assets on a regular basis.
For the year ended September 30, 2022, net interest income increased $3.5 million or 6.1%, as compared to 2021, primarily due to balance sheet growth.
For the year ended September 30, 2023, net interest income increased $922,000 or 1.5%, as compared to 2022, primarily due to balance sheet growth.
The decrease in net income was due to a decrease in noninterest income of $69.2 million and a $3.7 million increase in the provision for loan losses, partially offset by a $3.5 million increase in net increase income and a $48.3 million decrease in noninterest expense.
The decrease in net income for 2022 compared to 2021 was due to a decrease in noninterest income of $69.2 million and a $3.7 million increase in the provision for loan losses, partially offset by a $3.5 million increase in net interest income and a $46.7 million decrease in noninterest expense. 39 Table of Contents Net Interest Income.
Furthermore, rate increases of 2.00% and 3.00% would cause net interest income to decrease by 15.50% and 27.12%, respectively. An immediate and sustained decrease in rates of 1.00% and 2.00% will increase our net interest income by $2.8 million and $5.1 million or 4.93% and 8.91%, respectively, over a one year horizon compared to a flat interest rate scenario.
Furthermore, rate increases of 2.00% and 3.00% would cause net interest income to decrease by 7.65% and 11.71%, respectively. An immediate and sustained decrease in rates of 1.00% and 2.00% will increase our net interest income by $2.2 million and $4.5 million, or 3.89% and 7.83%, respectively, over a one year horizon compared to a flat interest rate scenario.
The following table sets forth an analysis of the allowance for loan losses for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (Dollars in thousands) 2022 2021 2020 ​ Allowance for loan losses at beginning of period ​ $ 14,301 ​ $ 17,026 ​ $ 10,040 ​ Provision (credit) for loan losses ​ 1,908 ​ (1,767) ​ 7,962 ​ Charge offs: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ 23 ​ 11 ​ 36 ​ Commercial real estate ​ — ​ — ​ 102 ​ Single tenant net lease ​ ​ — ​ ​ — ​ ​ — ​ SBA commercial real estate ​ ​ 110 ​ ​ 936 ​ ​ 360 ​ Multi-family ​ — ​ — ​ — ​ Residential construction ​ — ​ — ​ — ​ Commercial construction ​ ​ — ​ ​ — ​ ​ — ​ Land and land development ​ — ​ — ​ — ​ Commercial business ​ 91 ​ — ​ 38 ​ SBA commercial business ​ ​ 698 ​ ​ 21 ​ ​ 396 ​ Consumer ​ 175 ​ 156 ​ 238 ​ Total charge-offs ​ 1,097 ​ 1,124 ​ 1,170 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Recoveries: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ 14 ​ 24 ​ 29 ​ Commercial real estate ​ — ​ — ​ 6 ​ Single tenant net lease ​ ​ — ​ ​ — ​ ​ — ​ SBA commercial real estate ​ ​ 15 ​ ​ 23 ​ ​ 46 ​ Multi-family ​ — ​ — ​ — ​ Residential construction ​ ​ — ​ ​ — ​ ​ — ​ Commercial construction ​ ​ — ​ ​ — ​ ​ — ​ Land and land development ​ — ​ — ​ 6 ​ Commercial business ​ 119 ​ 5 ​ 31 ​ SBA commercial business ​ 61 ​ 39 ​ 76 ​ Consumer ​ 39 ​ 75 ​ — ​ Total recoveries ​ 248 ​ 166 ​ 194 ​ Net charge-offs ​ 849 ​ 958 ​ 976 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses at end of period ​ $ 15,360 ​ $ 14,301 ​ $ 17,026 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses to nonaccrual loans ​ 141.49 % 95.34 % ​ 125.05 % Allowance for loan losses to nonperforming loans ​ 141.49 % 92.43 % 125.05 % Allowance for loan losses to total loans outstanding at the end of the period ​ 1.06 ​ 1.31 ​ 1.54 ​ Allowance for loan losses to total loans, excluding PPP loans at the end of the period ​ ​ 1.06 ​ ​ 1.38 ​ ​ 1.84 ​ Net charge-offs during the period to average loans outstanding during the period ​ 0.06 ​ 0.07 ​ 0.09 ​ ​ 48 Table of Contents The following table sets forth the ratio of net charge offs to average loans outstanding for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended September 30, Loan category 2022 2021 2020 Residential real estate (0.00) % (0.01) % 0.00 % Commercial real estate 0.00 0.00 0.06 ​ Single tenant net lease 0.00 0.00 0.00 ​ SBA commercial real estate 0.15 1.52 0.58 ​ Multi-family 0.00 0.00 0.00 ​ Residential construction 0.00 0.00 0.00 ​ Commercial construction 0.00 0.00 0.00 ​ Land and land development 0.00 0.00 (0.06) ​ Commercial business (0.04) (0.01) 0.01 ​ SBA commercial business 1.38 (0.01) 0.34 ​ Consumer 0.41 0.18 0.47 ​ Total loans 0.06 % 0.09 % 0.09 % ​ Interest Rate Risk Management.
The following table sets forth an analysis of the allowance for loan losses for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (Dollars in thousands) 2023 2022 2021 ​ Allowance for loan losses at beginning of period ​ $ 15,360 ​ $ 14,301 ​ $ 17,026 ​ Provision (credit) for loan losses ​ 2,612 ​ 1,908 ​ (1,767) ​ Charge offs: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ 71 ​ 23 ​ 11 ​ Commercial real estate ​ — ​ — ​ — ​ Single tenant net lease ​ ​ — ​ ​ — ​ ​ — ​ SBA commercial real estate ​ ​ 357 ​ ​ 110 ​ ​ 936 ​ Multi-family ​ — ​ — ​ — ​ Residential construction ​ — ​ — ​ — ​ Commercial construction ​ ​ — ​ ​ — ​ ​ — ​ Land and land development ​ — ​ — ​ — ​ Commercial business ​ — ​ 91 ​ — ​ SBA commercial business ​ ​ 569 ​ ​ 698 ​ ​ 21 ​ Consumer ​ 250 ​ 175 ​ 156 ​ Total charge-offs ​ 1,247 ​ 1,097 ​ 1,124 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Recoveries: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ 16 ​ 14 ​ 24 ​ Commercial real estate ​ — ​ — ​ — ​ Single tenant net lease ​ ​ — ​ ​ — ​ ​ — ​ SBA commercial real estate ​ ​ 3 ​ ​ 15 ​ ​ 23 ​ Multi-family ​ — ​ — ​ — ​ Residential construction ​ ​ — ​ ​ — ​ ​ — ​ Commercial construction ​ ​ — ​ ​ — ​ ​ — ​ Land and land development ​ — ​ — ​ — ​ Commercial business ​ 69 ​ 119 ​ 5 ​ SBA commercial business ​ 51 ​ 61 ​ 39 ​ Consumer ​ 36 ​ 39 ​ 75 ​ Total recoveries ​ 175 ​ 248 ​ 166 ​ Net charge-offs ​ 1,072 ​ 849 ​ 958 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses at end of period ​ $ 16,900 ​ $ 15,360 ​ $ 14,301 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses to nonaccrual loans ​ 121.16 % 141.49 % 95.34 % Allowance for loan losses to nonperforming loans ​ 121.16 % 141.49 % 92.43 % Allowance for loan losses to total loans outstanding at the end of the period ​ 0.95 ​ 1.03 ​ 1.31 ​ Net charge-offs during the period to average loans outstanding during the period ​ 0.06 ​ 0.06 ​ 0.09 ​ ​ ​ 46 Table of Contents The following table sets forth the ratio of net charge-offs (recoveries) to average loans outstanding for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended September 30, Loan category 2023 2022 2021 Residential real estate 0.01 % 0.00 % (0.01) % Commercial real estate 0.00 0.00 0.00 ​ Single tenant net lease 0.00 0.00 0.00 ​ SBA commercial real estate 0.69 0.15 1.52 ​ Multi-family 0.00 0.00 0.00 ​ Residential construction 0.00 0.00 0.00 ​ Commercial construction 0.00 0.00 0.00 ​ Land and land development 0.00 0.00 0.00 ​ Commercial business (0.07) (0.04) (0.01) ​ SBA commercial business 2.73 1.38 (0.01) ​ Consumer 0.55 0.41 0.18 ​ Total loans 0.06 % 0.06 % 0.09 % ​ Interest Rate Risk Management.
At September 30, 2022, we had the ability to borrow a total of approximately $553.2 million from the FHLB, of which $307.3 million was borrowed and outstanding.
At September 30, 2023, we had the ability to borrow a total of approximately $600.0 million from the FHLB, of which $363.2 million was borrowed and outstanding.
The interest rate spread increased from 3.37% for 2020 to 3.54% for 2021 due primarily to a decrease in the average cost of interest-bearing liabilities from 0.96% for 2020 to 0.64% for 2021. This was partially offset by a decrease in the average yield on interest earning assets from 4.33% for 2020 to 4.18% for 2021.
The interest rate spread increased from 3.54% for 2021 to 3.55% for 2022 due primarily to an increase in the average yield on interest earning assets from 4.18% for 2021 to 4.35% for 2022. This was partially offset by an increase in the average cost of interest-bearing liabilities from 0.64% for 2021 to 0.80% for 2022.
Commercial real estate loans, including in-market commercial real estate loans, single tenant net lease loans, and SBA commercial real estate loans, totaled $865.8 million, or 59.7% of total loans at September 30, 2022, compared to $616.1 million, or 56.5% of total loans at September 30, 2021.
Commercial real estate loans, including in-market commercial real estate loans, single tenant net lease loans, and SBA real commercial real estate loans, totaled $991.7 million, or 55.5% of total loans at September 30, 2023, compared to $903.8 million, or 60.7% of total loans at September 30, 2022.
We also had two other federal funds line of credit facilities with other financial institutions from which we had the ability to borrow an additional $22 and $15 million, respectively. The Bank did not have any outstanding federal funds purchased at September 30, 2022.
We also had three other federal funds line of credit facilities with other financial institutions from which we had the ability to borrow the lesser of $5.0 million or 50% of the Bank’s equity capital, $22 million and $15 million, respectively. The Bank did not have any outstanding federal funds purchased at September 30, 2023.
At September 30, 2022, the Bank did not have any outstanding federal funds purchased under these lines of credit. Stockholders’ Equity . Stockholders’ equity decreased $27.8 million, from $180.4 million at September 30, 2021 to $152.6 million at September 30, 2022.
At September 30, 2023, the Bank did not have any outstanding federal funds purchased under these lines of credit. Stockholders’ Equity . Stockholders’ equity decreased $584,000, from $151.6 million at September 30, 2022 to $151.0 million at September 30, 2023.
The decrease in compensation and benefits expense was due primarily to a reduction in staff and incentive compensation for the Company’s mortgage banking segment as a result of decreased mortgage banking income. The decrease in advertising expense was related to the reduced loan origination volume of the mortgage banking segment.
The decrease was due primarily to decreases in compensation and benefits and advertising expense of $41.7 million and $3.4 million, respectively. The decrease in compensation and benefits expense was due primarily to a reduction in staff and incentive compensation for the Company’s mortgage banking segment as a result of decreased mortgage banking income.
At September 30, 2021, residential construction loans totaled $8.3 million, or 0.8% of total loans, of which $3.1 million were speculative loans. Commercial construction loans totaled $5.9 million, or 0.4% of total loans, at September 30, 2022 compared to $2.7 million, or 0.3% of total loans at September 30, 2021.
Residential construction loans totaled $24.9 million, or 1.4% of total loans at September 30, 2023, of which $3.3 million were speculative construction loans. At September 30, 2022, residential construction loans totaled $18.3 million, or 1.2% of total loans, of which $3.7 million were speculative construction loans.
For the year ended September 30, 2022, total interest income increased $5.7 million, or 8.8%, as compared to 2021.
For the year ended September 30, 2023, total interest income increased $32.0 million, or 45.0%, as compared to 2022.
If we classify an asset as loss, we charge off an amount equal to 100% of the portion of the asset classified loss. 45 Table of Contents Classified assets include loans that are classified due to factors other than payment delinquencies, such as lack of current financial statements and other required documentation, insufficient cash flows or other deficiencies, and, therefore, are not included as nonperforming assets.
Classified assets include loans that are classified due to factors other than payment delinquencies, such as lack of current financial statements and other required documentation, insufficient cash flows or other deficiencies, and, therefore, are not included as nonperforming assets.
The interest rate spread, the difference between the average tax-equivalent yield on interest-earning assets and the average cost of interest-bearing liabilities, increased from 3.54% for 2021 to 3.57% for 2022 due primarily to an increase in the average yield on interest earning assets from 4.18% for 2021 to 4.35% for 2022.
The interest rate spread, the difference between the average tax-equivalent yield on interest-earning assets and the average cost of interest-bearing liabilities, decreased from 3.55% for 2022 to 2.69% for 2023 due primarily to an increase in the average cost of interest-bearing liabilities from 0.80% for 2022 to 2.44% for 2023.
The following table sets forth the amortized costs and fair values of our investment securities at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, ​ ​ 2022 ​ 2021 ​ 2020 ​ Amortized Fair Amortized Fair Amortized Fair (In thousands) ​ Cost ​ Value ​ Cost ​ Value ​ Cost ​ Value Securities available for sale: ​ ​ ​ ​ ​ ​ US Treasury notes and bills ​ $ 30,809 ​ $ 27,295 ​ $ 250 ​ $ 250 ​ $ — ​ $ — Agency mortgage-backed ​ ​ 30,786 ​ ​ 27,500 ​ ​ 8,143 ​ ​ 8,384 ​ ​ 7,499 ​ ​ 7,952 Agency CMO ​ 15,562 ​ 14,821 ​ 13,315 ​ 13,530 ​ 9,398 ​ 9,805 Privately-issued CMO ​ 495 ​ 470 ​ 729 ​ 803 ​ 886 ​ 958 Privately-issued asset-backed ​ 561 ​ 569 ​ 721 ​ 772 ​ 884 ​ 960 SBA certificates ​ 12,255 ​ 12,012 ​ 2,157 ​ 2,138 ​ 639 ​ 694 Municipal ​ 260,326 ​ 233,850 ​ 170,102 ​ 180,804 ​ 168,472 ​ 181,596 Total ​ $ 350,794 ​ $ 316,517 ​ $ 195,417 ​ $ 206,681 ​ $ 187,778 ​ $ 201,965 ​ ​ ​ ​ ​ ​ ​ Securities held to maturity: ​ ​ ​ ​ ​ ​ Agency mortgage-backed ​ $ 45 ​ $ 45 ​ $ 64 ​ $ 69 ​ $ 82 ​ $ 89 Municipal ​ 1,513 ​ 1,548 ​ 1,773 ​ 1,985 ​ 2,020 ​ 2,296 Total ​ $ 1,558 ​ $ 1,593 ​ $ 1,837 ​ $ 2,054 ​ $ 2,102 ​ $ 2,385 ​ The following table sets forth the stated maturities and weighted average yields of debt securities at September 30, 2022.
The following table sets forth the amortized costs and fair values of our investment securities at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, ​ ​ 2023 ​ 2022 ​ 2021 ​ Amortized Fair Amortized Fair Amortized Fair (In thousands) ​ Cost ​ Value ​ Cost ​ Value ​ Cost ​ Value Securities available for sale: ​ ​ ​ ​ ​ ​ US Treasury notes and bills ​ $ 30,598 ​ $ 25,949 ​ $ 30,809 ​ $ 27,295 ​ $ 250 ​ $ 250 Agency mortgage-backed ​ ​ 28,542 ​ ​ 24,268 ​ ​ 30,786 ​ ​ 27,500 ​ ​ 8,143 ​ ​ 8,384 Agency CMO ​ 14,064 ​ 12,742 ​ 15,562 ​ 14,821 ​ 13,315 ​ 13,530 Privately-issued CMO ​ 424 ​ 396 ​ 495 ​ 470 ​ 729 ​ 803 Privately-issued asset-backed ​ 433 ​ 443 ​ 561 ​ 569 ​ 721 ​ 772 SBA certificates ​ 11,587 ​ 10,745 ​ 12,255 ​ 12,012 ​ 2,157 ​ 2,138 Municipal ​ 177,561 ​ 151,484 ​ 260,326 ​ 233,850 ​ 170,102 ​ 180,804 Other ​ ​ 2,000 ​ ​ 1,712 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total ​ $ 265,209 ​ $ 227,739 ​ $ 350,794 ​ $ 316,517 ​ $ 195,417 ​ $ 206,681 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Securities held to maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Agency mortgage-backed ​ $ 36 ​ $ 35 ​ $ 45 ​ $ 45 ​ $ 64 ​ $ 69 Municipal ​ 1,264 ​ 1,268 ​ 1,513 ​ 1,548 ​ 1,773 ​ 1,985 Total ​ $ 1,300 ​ $ 1,303 ​ $ 1,558 ​ $ 1,593 ​ $ 1,837 ​ $ 2,054 ​ The following table sets forth the stated maturities and weighted average yields of debt securities at September 30, 2023.
The following table sets forth the breakdown of the allowance for loan losses by loan category at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, ​ ​ 2022 2021 ​ ​ ​ ​ ​ ​ ​ ​ % of ​ ​ ​ ​ ​ ​ % of ​ ​ ​ ​ ​ % of Loans in ​ ​ ​ % of Loans in ​ ​ ​ ​ ​ Allowance Category ​ ​ ​ Allowance Category ​ ​ ​ ​ ​ to Total to Total ​ ​ ​ to Total to Total ​ (Dollars in thousands) Amount Allowance Loans Amount Allowance Loans ​ Residential real estate ​ $ 2,716 17.68 % 25.38 % $ 1,438 10.06 % 22.15 % Commercial real estate ​ 1,590 10.35 11.71 ​ 2,806 19.62 13.73 ​ Single tenant net lease ​ ​ 3,838 ​ 24.99 ​ 43.88 ​ ​ 2,422 ​ 16.94 ​ 37.04 ​ SBA commercial real estate ​ ​ 2,578 ​ 16.78 ​ 4.09 ​ ​ 3,475 ​ 24.30 ​ 5.76 ​ Multi-family ​ 251 1.63 2.23 ​ 518 3.62 3.70 ​ Residential construction ​ 305 1.99 1.26 ​ 191 1.34 0.76 ​ Commercial construction ​ ​ 107 ​ 0.70 ​ 0.41 ​ ​ 63 ​ 0.44 ​ 0.25 ​ Land and land development ​ 212 1.38 0.82 ​ 235 1.64 0.94 ​ Commercial business ​ 1,193 7.77 6.20 ​ 1,284 8.98 5.49 ​ SBA commercial business ​ ​ 2,122 ​ 13.82 ​ 1.40 ​ ​ 1,346 ​ 9.41 ​ 7.38 ​ Consumer ​ 448 2.91 2.62 ​ 523 3.65 2.80 ​ Total allowance for loan losses ​ $ 15,360 100.00 % 100.00 % $ 14,301 100.00 % 100.00 % ​ 46 Table of Contents Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and our results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations.
The following table sets forth the breakdown of the allowance for loan losses by loan category at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, ​ ​ 2023 2022 ​ ​ ​ ​ ​ ​ ​ ​ % of ​ ​ ​ ​ ​ ​ % of ​ ​ ​ ​ ​ % of Loans in ​ ​ ​ % of Loans in ​ ​ ​ ​ ​ Allowance Category ​ ​ ​ Allowance Category ​ ​ ​ ​ ​ to Total to Total ​ ​ ​ to Total to Total ​ (Dollars in thousands) Amount Allowance Loans Amount Allowance Loans ​ Residential real estate ​ $ 4,641 27.46 % 29.59 % $ 2,716 17.68 % 24.73 % Commercial real estate ​ 1,777 10.51 10.48 ​ 1,590 10.35 11.41 ​ Single tenant net lease ​ ​ 3,810 ​ 22.54 ​ 42.40 ​ ​ 3,838 ​ 24.99 ​ 45.31 ​ SBA commercial real estate ​ ​ 1,922 ​ 11.37 ​ 2.64 ​ ​ 2,578 ​ 16.78 ​ 3.99 ​ Multi-family ​ 268 1.59 1.95 ​ 251 1.63 2.18 ​ Residential construction ​ 434 2.57 1.40 ​ 305 1.99 1.23 ​ Commercial construction ​ ​ 282 ​ 1.67 ​ 0.82 ​ ​ 107 ​ 0.70 ​ 0.40 ​ Land and land development ​ 307 1.82 0.96 ​ 212 1.38 0.80 ​ Commercial business ​ 1,714 10.14 6.58 ​ 1,193 7.77 6.05 ​ SBA commercial business ​ ​ 1,247 ​ 7.38 ​ 0.95 ​ ​ 2,122 ​ 13.82 ​ 1.36 ​ Consumer ​ 498 2.95 2.23 ​ 448 2.91 2.56 ​ Total allowance for loan losses ​ $ 16,900 100.00 % 100.00 % $ 15,360 100.00 % 100.00 % ​ Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and our results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations.
The increase in residential mortgage loans is primarily due a $96.2 million increase in first-lien home equity line of credit loans. The Company launched a national first-lien home equity line of credit product in fiscal 2021, the balance of which was $178.2 million and $82.0 million at September 30, 2022 and 2021, respectively.
The Company launched a national first-lien home equity line of credit product in fiscal 2021, the balance of which was $307.9 million and $178.4 million at September 30, 2023 and 2022, respectively.
The following table sets forth the balances of our deposit accounts at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, (In thousands) 2022 2021 Non-interest-bearing demand deposits ​ $ 340,172 ​ $ 291,039 NOW accounts ​ 343,296 ​ 315,169 Money market accounts ​ 238,219 ​ 222,972 Savings accounts ​ 171,779 ​ 162,033 Retail time deposits ​ 129,853 ​ 136,309 Brokered & reciprocal time deposits ​ 292,515 ​ 100,058 Total ​ $ 1,515,834 ​ $ 1,227,580 ​ The following table indicates the amount of time deposits, by account, that are in excess of the FDIC insurance limit (currently $250,000) by time remaining until maturity as of September 30, 2022. ​ ​ ​ ​ ​ (In thousands) Amount Three months or less ​ $ 11,533 Over three through six months ​ 4,915 Over six through twelve months ​ 5,624 Over twelve months ​ 10,500 Total ​ $ 32,572 ​ Our uninsured deposits, which consist solely of the portion of deposit accounts that exceed the FDIC insurance limit (currently $250,000), were approximately $494.7 million and $446.8 million at September 30, 2022 and 2021, respectively.
The following table sets forth the balances of our deposit accounts at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, (In thousands) 2023 2022 Non-interest-bearing demand deposits ​ $ 242,237 ​ $ 340,172 NOW accounts ​ 336,446 ​ 343,296 Money market accounts ​ 323,739 ​ 238,219 Savings accounts ​ 170,073 ​ 171,779 Retail time deposits ​ 170,980 ​ 129,864 Brokered & reciprocal time deposits ​ 438,319 ​ 292,504 Total ​ $ 1,681,794 ​ $ 1,515,834 ​ The following table indicates the amount of time deposits, by account, that are in excess of the FDIC insurance limit (currently $250,000) by time remaining until maturity as of September 30, 2023. ​ ​ ​ ​ ​ (In thousands) Amount Three months or less ​ $ 21,190 Over three through six months ​ 7,155 Over six through twelve months ​ 20,495 Over twelve months ​ 8,926 Total ​ $ 57,766 ​ Our uninsured deposits, which consist solely of the portion of deposit accounts that exceed the FDIC insurance limit (currently $250,000), were approximately $463.5 million and $494.7 million at September 30, 2023 and 2022, respectively.
(4) Represents other expenses, excluding nonrecurring items as discussed below, divided by the sum of net interest income and other income, excluding income (loss) from tax credit investments discussed below. The efficiency ratio for 2022, 2021, 2020 and 2019 excludes the income from tax credit investments of $12,000, $32,000, $426,000 and $210,000, respectively.
(4) Represents other expenses, excluding nonrecurring items as discussed below, divided by the sum of net interest income and other income, excluding income (loss) from tax credit investments discussed below.
Based on an independent third party analysis, the Bank expects to collect the contractual principal and interest cash flows for these securities and, as a result, no other-than-temporary impairment has been recognized on the privately-issued CMO or ABS portfolios.
Based on an independent third party analysis, the Bank expects to collect the contractual principal and interest cash flows for all but one of these securities and, as a result, the Bank recognized $28,000 of other-than-temporary impairment on the privately-issued CMO portfolio during the year ended September 30, 2023.
Management intends to continue to focus on pursuing commercial real estate loan opportunities, both within our primary market area as well as through the single tenant net lease and SBA loan programs, to further diversify the loan portfolio. 35 Table of Contents Multi-family real estate loans totaled $32.4 million, or 2.2% of total loans at September 30, 2022, compared to $40.3 million, or 3.7% of total loans at September 30, 2021.
Management 34 Table of Contents intends to continue to focus on pursuing commercial real estate loan opportunities, both within our primary market area as well as through the single tenant net lease and SBA loan programs, to further diversify the loan portfolio.
We have the ability to attract and retain deposits by adjusting the interest rates offered. 51 Table of Contents The Company is a separate legal entity from the Bank and must provide for its own liquidity to pay its operating expenses and other financial obligations, to pay any dividends and to repurchase any of its outstanding common stock.
The Company is a separate legal entity from the Bank and must provide for its own liquidity to pay its operating expenses and other financial obligations, to pay any dividends and to repurchase any of its outstanding common stock. The Company’s primary source of income is dividends received from the Bank.
Average other borrowings, which are comprised of subordinated debt, was $19.8 million for both 2020 and 2021. The average cost of other borrowings decreased from 6.63% for 2020, net of amortization of debt issuance costs, to 6.53% for 2021, net of amortization of debt issuance costs. 41 Table of Contents Average Balances and Yields.
The average cost of other borrowings decreased from 6.53% for 2021, net of amortization of debt issuance costs, to 5.61% for 2022, net of amortization of debt issuance costs. 40 Table of Contents Average Balances and Yields.
It is management’s assessment that the allowance for loan losses at September 30, 2022 was adequate and appropriately reflected the probable incurred losses in the Bank’s loan portfolio at that date. 43 Table of Contents Noninterest Income.
It is management’s assessment that the allowance for loan losses at September 30, 2023 was adequate and appropriately reflected the probable incurred losses in the Bank’s loan portfolio at that date. Noninterest Income. Noninterest income decreased $25.9 million, or 50.5%, from $51.2 million for the year ended September 30, 2022 to $25.3 million for the year ended September 30, 2023.
Noninterest income decreased $69.2 million, or 57.5%, from $120.4 million for the year ended September 30, 2021 to $51.2 million for the year ended September 30, 2022. The decrease was due primarily to decreases in mortgage banking income and net gain on sale of SBA loans of $66.2 million and $5.0 million, respectively.
The decrease was due primarily to decreases in mortgage banking income and net gain on sale of SBA loans of $66.2 million and $5.0 million, respectively. The decrease in mortgage banking income was primarily due to lower origination and sales volume in 2022 compared to 2021.
The decrease in net income for 2021 compared to 2020 was due to a decrease in noninterest income of $12.9 million and an increase in noninterest expense of $13.6 million, partially offset by a $10.0 million increase in net interest income and a $9.7 million reduction in the provision for loan losses. Net Interest Income.
The decrease in net income was due to a decrease in noninterest income of $25.9 million and a $704,000 increase in the provision for loan losses, partially offset by a $922,000 increase in net interest income and a $16.5 million decrease in noninterest expense.
The subordinated note initially bears a fixed interest rate of 4.50% per year through March 30, 2027, and thereafter a floating rate, reset quarterly, equal to the three-month SOFR plus 276 basis points. All interest is payable semi-annually and the subordinated note is scheduled to mature on March 30, 2032.
On March 18, 2022, the Company entered into subordinated note purchase agreements in the aggregate principal amount of $31 million. The subordinated notes initially bear a fixed interest rate of 4.50% per year through March 30, 2027, and thereafter a floating rate, reset quarterly, equal to the three-month SOFR rate plus 276 basis points.
Results of Operations for the Years Ended September 30, 2022, 2021 and 2020 Overview. The Company reported net income of $16.4 million ($2.30 per common share diluted) for the year ended September 30, 2022, compared to net income of $29.6 million ($4.12 per common share diluted) for the year ended September 30, 2021.
The Company reported net income of $8.2 million ($1.19 per common share diluted) for the year ended September 30, 2023, compared to net income of $15.4 million ($2.15 per common share diluted) for the year ended September 30, 2022.
Management intends to continue to focus on pursuing commercial business loan opportunities, both within our primary market area as well as through various SBA loan programs, to further diversify the loan portfolio . Consumer loans totaled $38.1 million, or 2.6% of total loans, at September 30, 2022 compared to $30.6 million, or 2.8% of total loans, at September 30, 2021.
In-market commercial business loans increased $27.6 million during the year due primarily to increased commercial business lending opportunities in our primary market area. Management intends to continue to focus on pursuing commercial business loan opportunities, both within our primary market area as well as through various SBA loan programs, to further diversify the loan portfolio.
Market risk arises from fluctuations in interest rates that may result in changes in the values of financial instruments, such as available-for-sale securities that are accounted for on a mark-to-market basis. Other risks that we face are operational risks, liquidity risks and reputation risk. Operational risks include risks related to fraud, regulatory compliance, processing errors, technology and disaster recovery.
Interest rate risk is the potential reduction of interest income as a result of changes in interest rates. Market risk arises from fluctuations in interest rates that may result in changes in the values of financial instruments, such as available-for-sale securities that are accounted for on a mark-to-market basis.
Available for sale securities increased by $109.8 million, from $206.7 million at September 30, 2021 to $316.5 million at September 30, 2022, due primarily to purchases of $211.1 million, partially offset by a decrease in unrealized gains of $45.5 million, principal repayments of $8.2 million, sales of $33.5 million and maturities and calls of $13.6 million. 37 Table of Contents Securities Held to Maturity.
Available for sale securities decreased by $88.8 million, from $316.5 million at September 30, 2022 to $227.7 million at September 30, 2023, due primarily to sales of $79.2 million, maturities and calls of $12.2 million, principal repayments of $4.7 million and an increase in unrealized losses of $2.9 million, partially offset by purchases of $11.7 million. 36 Table of Contents Securities Held to Maturity.
These loans are primarily secured by apartment buildings and other multi-tenant developments in our primary market area . Residential construction loans totaled $18.3 million, or 1.3% of total loans at September 30, 2022, of which $3.7 million were speculative construction loans.
Multi-family real estate loans totaled $34.9 million, or 2.0% of total loans at September 30, 2023, compared to $32.4 million, or 2.2% of total loans at September 30, 2022. These loans are primarily secured by apartment buildings and other multi-tenant developments in our primary market area.
Land and land development loans totaled $11.9 million, or 0.8% of total loans at September 30, 2022, compared to $10.2 million, or 0.9% of total loans at September 30, 2021. These loans are primarily secured by vacant lots to be improved for residential and nonresidential development, and farmland.
These loans are primarily secured by vacant lots to be improved for residential and nonresidential development, and farmland. Commercial business loans, including in-market commercial business loans and SBA commercial business loans, totaled $134.5 million, or 7.5% of total loans, at September 30, 2023 compared to $110.3 million, or 7.4% of total loans, at September 30, 2022.
We believe, however, based on past experience that a significant portion of our time deposits will remain with us.
We believe, 49 Table of Contents however, based on past experience that a significant portion of our time deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.
In addition, we have continued to develop and promote cash management services including sweep accounts and remote deposit capture in order to increase the level of commercial deposit accounts. We believe that the development and promotion of these products has made us more competitive in attracting commercial deposits during recent periods.
We believe that the development and promotion of these products has made us more competitive in attracting commercial deposits during recent periods.
The increase in total interest income is due primarily to increases in the average balance of interest earning assets of $230.2 million, from $1.36 billion for 2020 to $1.59 billion for 2021, partially offset by a decrease in the average tax-equivalent yield on interest-earning assets from 4.33% for 2020 to 4.18% for 2021.
The increase in total interest income is due primarily to increases in the average balance of interest earning assets of $380.9 million, from $1.67 billion for 2022 to $2.05 billion for 2023, and an increase in the average tax-equivalent yield on interest-earning assets, from 4.35% for 2022 to 5.13% for 2023.
The average balance of borrowings from the Federal Home Loan Bank increased $21.8 million, or 8.4%, from $260.2 million for 2020 to $282.0 million for 2021, and the average cost of funds for Federal Home Loan Bank borrowings decreased from 1.29% for 2020 to 1.13% for 2021.
The average balance of borrowings from the Federal Home Loan Bank increased $75.4 million, or 25.8%, from $292.8 million for 2022 to $368.2 million for 2023, and the average cost of Federal Home Loan Bank borrowings increased from 1.14% for 2022 to 2.92% for 2023.
FHLB borrowings are primarily used to fund loan demand and to purchase available for sale securities. 39 Table of Contents The following table sets forth certain information regarding the Bank’s use of FHLB borrowings. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (Dollars in thousands) 2022 2021 2020 Maximum amount of FHLB borrowings outstanding at any month-end during period $ 404,098 $ 340,092 $ 332,152 ​ Average FHLB borrowings outstanding during period ​ 292,803 ​ 282,001 ​ 260,222 ​ Weighted average interest rate during period ​ 1.14 % ​ 1.13 % ​ 1.29 % Balance outstanding at end of period $ 307,303 $ 250,000 $ 310,858 ​ Weighted average interest rate at end of period ​ 2.05 % ​ 1.13 % ​ 1.10 % ​ On September 20, 2018, the Company entered into a subordinated note purchase agreement in the principal amount of $20 million.
The following table sets forth certain information regarding the Bank’s use of FHLB borrowings. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (Dollars in thousands) 2023 2022 2021 Maximum amount of FHLB borrowings outstanding at any month-end during period $ 486,886 $ 404,098 $ 340,092 ​ Average FHLB borrowings outstanding during period ​ 368,239 ​ 292,803 ​ 282,001 ​ Weighted average interest rate during period ​ 2.92 % ​ 1.14 % ​ 1.13 % Balance outstanding at end of period $ 363,183 $ 307,303 $ 250,000 ​ Weighted average interest rate at end of period ​ 2.90 % ​ 2.05 % ​ 1.13 % ​ 38 Table of Contents Other borrowings were comprised of subordinated debt at September 30, 2023.
The Bank recognized increases in money market deposit accounts of $15.2 million, noninterest-bearing checking accounts of $49.1 million, interest-bearing checking accounts of $28.1 million and savings accounts of $9.7 million, when comparing the two years. Brokered certificates of deposit totaled $292.5 million at September 30, 2022 compared to $70.1 million at September 30, 2021.
The Bank recognized increases in money market deposit accounts of $85.5 million and retail time deposits of $41.1 million, when comparing the two years. Brokered certificates of deposit totaled $438.3 million at September 30, 2023 compared to $292.5 million at September 30, 2022. There were no reciprocal time deposits at September 30, 2023 and 2022.
Changes attributable to changes in both rate and volume have been allocated proportionally based on the absolute dollar amounts of change in each. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, 2022 ​ Year Ended September 30, 2021 ​ ​ Compared to Compared to ​ ​ Year Ended September 30, 2021 Year Ended September 30, 2020 ​ ​ Increase (Decrease) ​ ​ ​ Increase (Decrease) ​ ​ ​ ​ ​ Due to ​ ​ ​ Due to ​ ​ ​ (In thousands) Volume Rate Net Volume Rate Net Interest income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing deposits with banks $ (53) ​ $ 141 ​ $ 88 ​ $ 5 ​ $ (349) ​ $ (344) Loans excluding PPP ​ 6,477 ​ 1,991 ​ 8,468 ​ 7,009 ​ (3,056) ​ 3,953 PPP loans ​ ​ (5,730) ​ ​ 1,095 ​ ​ (4,635) ​ ​ 2,169 ​ ​ 1,823 ​ ​ 3,992 Investment securities - taxable 1,068 ​ (505) ​ 563 ​ (145) ​ (159) ​ (304) Investment securities - nontaxable 1,603 ​ (157) ​ 1,446 ​ 229 ​ 145 ​ 374 FRB and FHLB stock 9 ​ 138 ​ 147 ​ 111 ​ (146) ​ (35) Total interest-earning assets 3,374 ​ 2,703 ​ 6,077 ​ 9,378 ​ (1,742) ​ 7,636 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense: ​ ​ ​ ​ ​ ​ Deposits 616 ​ 1,091 ​ 1,707 ​ 507 ​ (2,971) ​ (2,464) Federal funds purchased ​ ​ — ​ ​ — ​ ​ — ​ ​ (2) ​ ​ (1) ​ ​ (3) Borrowings from FHLB ​ 123 ​ ​ 12 ​ ​ 135 ​ ​ 264 ​ ​ (411) ​ ​ (147) Federal Reserve PPPLF ​ ​ (400) ​ — ​ (400) ​ 180 ​ — ​ 180 Other borrowings (subordinated debt) ​ 1,014 ​ (197) ​ 817 ​ 5 ​ (22) ​ (17) Total interest-bearing liabilities ​ 1,353 ​ ​ 906 ​ ​ 2,259 ​ ​ 954 ​ ​ (3,405) ​ ​ (2,451) Net increase (decrease) in net interest income (taxable equivalent basis) ​ $ 2,021 ​ $ 1,797 ​ $ 3,818 ​ $ 8,424 ​ $ 1,663 ​ $ 10,087 ​ Provision for Loan Losses.
Changes attributable to changes in both rate and volume have been allocated proportionally based on the absolute dollar amounts of change in each. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, 2023 ​ Year Ended September 30, 2022 ​ ​ Compared to Compared to ​ ​ Year Ended September 30, 2022 Year Ended September 30, 2021 ​ ​ Increase (Decrease) Increase (Decrease) ​ ​ Due to Due to (In thousands) Volume Rate Net Volume Rate Net Interest income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing deposits with banks $ (184) ​ $ 892 ​ $ 708 ​ $ (53) ​ $ 141 ​ $ 88 Loans ​ 15,790 ​ 11,986 ​ 27,803 ​ 943 ​ 3,086 ​ 4,029 Investment securities - taxable 1,169 ​ 362 ​ 1,531 ​ 1,068 ​ (505) ​ 563 Investment securities - nontaxable 1,309 ​ 461 ​ 1,770 ​ 1,603 ​ (157) ​ 1,446 FRB and FHLB stock 199 ​ 507 ​ 706 ​ 9 ​ 138 ​ 147 Total interest-earning assets 18,283 ​ 14,208 ​ 32,518 ​ 3,570 ​ 2,703 ​ 6,273 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense: ​ ​ ​ ​ ​ ​ Deposits 3,871 ​ 18,898 ​ 22,769 ​ 616 ​ 1,091 ​ 1,707 Federal funds purchased ​ ​ 1 ​ ​ — ​ ​ 1 ​ ​ — ​ ​ — ​ ​ — Borrowings from FHLB ​ 1,531 ​ ​ 5,875 ​ ​ 7,406 ​ ​ 123 ​ ​ 12 ​ ​ 135 Federal Reserve PPPLF ​ ​ — ​ — ​ — ​ (400) ​ — ​ (400) Other borrowings ​ 1,002 ​ (62) ​ 937 ​ 1,210 ​ (197) ​ 1,013 Total interest-bearing liabilities ​ 6,405 ​ ​ 24,711 ​ ​ 31,113 ​ ​ 1,549 ​ ​ 906 ​ ​ 2,455 Net increase (decrease) in net interest income (taxable equivalent basis) ​ $ 11,878 ​ $ (10,503) ​ $ 1,405 ​ $ 2,021 ​ $ 1,797 ​ $ 3,818 ​ Provision for Loan Losses.
Results of our simulation modeling, which assumes an immediate and sustained parallel shift in market interest rates, project that the Company’s EVE could change as follows, relative to our base case scenario, based on September 30, 2022 and 2021 financial information. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, 2022 ​ Immediate Change Economic Value of Equity ​ Economic Value of Equity as a ​ in the Level Dollar Dollar Percent Percent of Present Value of Assets ​ of Interest Rates Amount Change Change EVE Ratio Change ​ ​ (Dollars in thousands) ​ 300bp ​ $ 184,168 ​ $ (126,111) (40.64) % 10.76 % (519) bp 200bp ​ 228,400 ​ (81,879) (26.39) 12.81 (314) bp 100bp ​ 275,626 ​ (34,653) (11.17) 14.81 (114) bp Static ​ 310,279 ​ — — 15.95 — bp (100)bp ​ 344,508 ​ 34,229 11.03 16.93 98 bp (200)bp ​ 380,048 ​ 69,769 22.49 17.82 187 bp ​ 50 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, 2021 ​ Immediate Change Economic Value of Equity Economic Value of Equity as a ​ in the Level Dollar Dollar Percent Percent of Present Value of Assets ​ of Interest Rates Amount Change Change EVE Ratio Change ​ ​ (Dollars in thousands) 300bp ​ $ 306,486 ​ $ 1,449 0.48 % 19.18 % 183 bp 200bp ​ 313,652 ​ 8,615 2.82 18.96 161 bp 100bp ​ 315,840 ​ 10,803 3.54 18.46 111 bp Static ​ 305,037 ​ — — 17.35 — bp (100)bp ​ 283,983 ​ (21,054) (6.90) 15.74 (161) bp ​ The previous table indicates that at September 30, 2022, the Company would expect a decrease in its EVE in the event of a sudden and sustained 100, 200 and 300 basis point increase in prevailing interest rates, and an increase in its EVE in the event of a sudden and sustained 100 and 200 basis point decrease in prevailing interest rates.
Results of our simulation modeling, which assumes an immediate and sustained parallel shift in market interest rates, project that the Company’s EVE could change as follows, relative to our base case scenario, based on September 30, 2023 and 2022 financial information. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, 2023 ​ Immediate Change Economic Value of Equity ​ Economic Value of Equity as a ​ in the Level Dollar Dollar Percent Percent of Present Value of Assets ​ of Interest Rates Amount Change Change EVE Ratio Change ​ ​ (Dollars in thousands) ​ 300bp ​ $ 168,287 ​ $ (103,095) (37.99) % 8.80 % (386) bp 200bp ​ 200,335 ​ (71,047) (26.18) 10.10 (256) bp 100bp ​ 234,422 ​ (36,960) (13.62) 11.38 (128) bp Static ​ 271,382 ​ — — 12.66 — bp (100)bp ​ 309,457 ​ 38,075 14.03 13.87 121 bp (200)bp ​ 348,979 ​ 77,597 28.59 15.00 234 bp ​ 48 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, 2022 ​ Immediate Change Economic Value of Equity Economic Value of Equity as a ​ in the Level Dollar Dollar Percent Percent of Present Value of Assets ​ of Interest Rates Amount Change Change EVE Ratio Change ​ ​ (Dollars in thousands) 300bp ​ $ 183,110 ​ $ (126,111) (40.78) % 10.71 % (520) bp 200bp ​ 227,342 ​ (81,879) (26.48) 12.76 (315) bp 100bp ​ 274,568 ​ (34,653) (11.21) 14.77 (114) bp Static ​ 309,221 ​ — — 15.91 — bp (100)bp ​ 343,450 ​ 34,229 11.07 16.89 98 bp (200)bp ​ 378,990 ​ 69,769 22.56 17.78 187 bp ​ The previous table indicates that at September 30, 2023, the Company would expect a decrease in its EVE in the event of a sudden and sustained 100, 200 and 300 basis point increase in prevailing interest rates, and an increase in its EVE in the event of a sudden and sustained 100 and 200 basis point decrease in prevailing interest rates.

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