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First Savings Financial Group, Inc. Reports Financial Results for The Second Fiscal Quarter Ended March 31, 2024
Source: Nasdaq GlobeNewswire / 25 Apr 2024 19:00:01 America/New_York
JEFFERSONVILLE, Ind., April 25, 2024 (GLOBE NEWSWIRE) -- First Savings Financial Group, Inc. (NASDAQ: FSFG - news) (the "Company"), the holding company for First Savings Bank (the "Bank"), today reported net income of $4.9 million, or $0.72 per diluted share, for the quarter ended March 31, 2024 compared to net income of $3.7 million, or $0.54 per diluted share, for the quarter ended March 31, 2023. Excluding nonrecurring items, the Company reported net income of $3.6 million (non-GAAP measure)(1) and net income per diluted share of $0.52 (non-GAAP measure)(1) for the quarter ended March 31, 2024. The core banking segment reported net income of $4.5 million, or $0.66 per diluted share for the quarter ended March 31, 2024. Excluding nonrecurring items, the core banking segment reported net income of $3.6 million, or $0.53 per diluted share for the quarter ended March 31, 2024 (non-GAAP measure)(1).
Commenting on the Company’s performance, Larry W. Myers, President and CEO, stated, “We continue to focus on reducing balance sheet and operating inefficiencies; strong asset quality; selective high-quality lending; deposit growth; and improvement of liquidity, capital and interest rate sensitivity positions. We’ve been successful in executing these strategies and we continue to move on the right trajectory, which we believe will deliver increasing financial results and shareholder value.”
(1) Non-GAAP net income and net income per diluted share exclude certain nonrecurring items. A reconciliation to GAAP and discussion of the use of non-GAAP measures is included in the table at the end of this release.
Results of Operations for the Three Months Ended March 31, 2024 and 2023
Net interest income decreased $574,000, or 3.9%, to $14.3 million for the three months ended March 31, 2024 as compared to the same period 2023. The decrease in net interest income was due to a $5.8 million increase in interest expense, partially offset by a $5.2 million increase in interest income. Interest income increased due to an increase in the average balance of interest-earning assets of $199.9 million, from $2.02 billion for 2023 to $2.22 billion for 2024, and an increase in the weighted-average tax-equivalent yield, from 5.01% for 2023 to 5.48% for 2024. The increase in the average balance of interest-earning assets was due primarily to a $293.5 million increase in the average balance of loans, partially offset by a decrease in the average balance of investment securities of $92.2 million. Interest expense increased due to an increase in the average balance of interest-bearing liabilities of $254.8 million, from $1.68 billion for 2023 to $1.93 billion for 2024, and an increase in the average cost of interest-bearing liabilities, from 2.36% for 2023 to 3.25% for 2024. The increase in the average cost of interest-bearing liabilities for 2024 was due primarily to higher rates for borrowings and brokered deposits as a result of increased market interest rates due to competition and higher U.S. Treasury rates, and migration of deposits from lower-yielding transaction and savings accounts to higher-yielding money market accounts and certificates of deposits.
The Company recognized a provision for credit losses for loans of $454,000 and a provision for credit losses for securities of $23,000 for the three months ended March 31, 2024, compared to a provision for loan losses of $372,000 for the same period in 2023. The Company recognized net charge-offs of $110,000 for the three months ended March 31, 2024, of which $42,000 was related to unguaranteed portions of SBA loans, compared to net recoveries of $6,000 in 2023.
Noninterest income decreased $3.8 million for the three months ended March 31, 2024 as compared to the same period in 2023. The decrease was due primarily to a $4.1 million decrease in mortgage banking income due to the cessation of national mortgage banking operations in the quarter ended December 31, 2023.
Noninterest expense decreased $6.2 million for the three months ended March 31, 2024 as compared to the same period in 2023. The decrease was due primarily to decreases in compensation and benefits expense of $2.8 million and other operating expense of $2.4 million. The decrease in compensation and benefits expense was due primarily to a reduction in staffing related to the cessation of national mortgage banking operations in the quarter ended December 31, 2023. The decrease in other operating expense was due primarily to a decrease in loss contingency for SBA-guaranteed loans of $656,000 in 2024 compared to an increase of $490,000 in 2023, and an adjustment to the valuation allowance related to sale of residential mortgage servicing rights of $247,000 in 2024 with no corresponding amounts in 2023.
The Company recognized income tax expense of $866,000 for the three months ended March 31, 2024 compared to $333,000 for the same period in 2023. The effective tax rate for 2024 was 14.9%, which was an increase from the effective tax rate of 8.2% in 2023. The increase was due to higher pre-tax income in 2024 as compared to 2023.
Results of Operations for the Six Months Ended March 31, 2024 and 2023
The Company reported net income of $5.8 million, or $0.85 per diluted share, for the six months ended March 31, 2024 compared to net income of $6.6 million, or $0.95 per diluted share, for the six months ended March 31, 2023. Excluding nonrecurring items, the Company reported net income of $4.5 million (non-GAAP measure)(1) and net income per diluted share of $0.65 (non-GAAP measure)(1) for the six months ended March 31, 2024. The core banking segment reported net income of $8.6 million, or $1.25 per diluted share for the six months ended March 31, 2024. Excluding nonrecurring items, the core banking segment reported net income of $7.7 million, or $1.12 per diluted share for the six months ended March 31, 2024 (non-GAAP measure)(1).
Net interest income decreased $2.7 million, or 8.7%, to $28.5 million for the six months ended March 31, 2024 as compared to the same period 2023. The decrease in net interest income was due to a $13.1 million increase in interest expense, partially offset by a $10.4 million increase in interest income. Interest income increased due to an increase in the average balance of interest-earning assets of $195.3 million, from $2.00 billion for 2023 to $2.20 billion for 2024, and an increase in the weighted-average tax-equivalent yield, from 4.94% for 2023 to 5.43% for 2024. The increase in the average balance of interest-earning assets was due primarily to a $284.0 million increase in the average balance of loans, partially offset by a decrease in the average balance of investment securities of $91.0 million. Interest expense increased due to an increase in the average balance of interest-bearing liabilities of $260.5 million, from $1.64 billion for 2023 to $1.90 billion for 2024, and an increase in the average cost of interest-bearing liabilities, from 2.08% for 2023 to 3.17% for 2024. The increase in the average cost of interest-bearing liabilities for 2024 was due primarily to higher rates for borrowings and brokered deposits as a result of increased market interest rates due to competition and higher U.S. Treasury rates, and migration of deposits from lower-yielding transaction and savings accounts to higher-yielding money market accounts and certificates of deposits.
The Company recognized a provision for credit losses for loans of $866,000 and a provision for credit losses for securities of $23,000 for the six months ended March 31, 2024, compared to a provision for loan losses of $1.4 million for the same period in 2023. Nonperforming loans, which consist of nonaccrual loans and loans over 90 days past due and still accruing interest, increased $1.7 million from $13.9 million at September 30, 2023 to $15.6 million at March 31, 2024. The Company recognized net charge-offs of $119,000 for the six months ended March 31, 2024, of which $22,000 was related to unguaranteed portions of SBA loans, compared to net charge-offs of $258,000 in 2023, of which $238,000 was related to unguaranteed portions of SBA loans.
Noninterest income decreased $6.2 million for the six months ended March 31, 2024 as compared to the same period in 2023. The decrease was due primarily to a $6.5 million decrease in mortgage banking income due to the cessation of national mortgage banking operations in the quarter ended December 31, 2023.
Noninterest expense decreased $7.7 million for the six months ended March 31, 2024 as compared to the same period in 2023. The decrease was due primarily to decreases in compensation and benefits expense of $3.8 million and other operating expense of $3.4 million. The decrease in compensation and benefits expense was due primarily to a reduction in staffing related to the cessation of national mortgage banking operations in the quarter ended December 31, 2023. The decrease in other operating expense was due primarily to a decrease in loss contingency for SBA-guaranteed loans of $721,000 in 2024 compared to an increase of $490,000 in 2023, and a decrease in loss contingency for restitution to mortgage borrowers of $17,000 in 2024 compared to an increase of $609,000 in 2023.
The Company recognized income tax expense of $390,000 for the six months ended March 31, 2024 compared to tax expense of $416,000 for the same period in 2023. The effective tax rate for 2024 was 6.3%, which was an increase from the effective tax rate of 5.9% in 2023.
Comparison of Financial Condition at March 31, 2024 and September 30, 2023
Total assets increased $76.1 million, from $2.29 billion at September 30, 2023 to $2.36 billion at March 31, 2024. Net loans held for investment increased $112.2 million during the six months ended March 31, 2024 due primarily to growth in residential construction and mortgage loans. Residential mortgage loan servicing rights decreased $59.8 million during the six months ended March 31, 2024, due to the sale of the entire residential mortgage loan servicing rights portfolio during the period.
Total liabilities increased $62.1 million due primarily to increases in total deposits of $105.7 million, partially offset by a decrease in FHLB borrowings of $48.2 million. As of March 31, 2024, deposits exceeding the FDIC insurance limit of $250,000 per insured account were 27.1% of total deposits and 13.1% of total deposits when excluding public funds insured by the Indiana Public Deposit Insurance Fund.
Common stockholders’ equity increased $14.1 million, from $151.0 million at September 30, 2023 to $165.1 million at March 31, 2024, due primarily to a $12.4 million decrease in accumulated other comprehensive loss and an increase in retained net income of $1.3 million. The decrease in accumulated other comprehensive loss was due primarily to decreasing long term market interest rates during the six months ended March 31, 2024, which resulted in an increase in the fair value of securities available for sale. At March 31, 2024 and September 30, 2023, the Bank was considered “well-capitalized” under applicable regulatory capital guidelines.
First Savings Bank is an entrepreneurial community bank headquartered in Jeffersonville, Indiana, which is directly across the Ohio River from Louisville, Kentucky, and operates fifteen depository branches within Southern Indiana. The Bank also has two national lending programs, including single-tenant net lease commercial real estate and SBA lending, with offices located predominately in the Midwest. The Bank is a recognized leader, both in its local communities and nationally for its lending programs. The employees of First Savings Bank strive daily to achieve the organization’s vision, We Expect To Be The BEST community BANK, which fuels our success. The Company’s common shares trade on The NASDAQ Stock Market under the symbol “FSFG.”
This release may contain forward-looking statements within the meaning of the federal securities laws. These statements are not historical facts; rather, they are statements based on the Company's current expectations regarding its business strategies and their intended results and its future performance. Forward-looking statements are preceded by terms such as "expects," "believes," "anticipates," "intends" and similar expressions.
Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties could cause or contribute to the Company's actual results, performance and achievements to be materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, changes in general economic conditions; changes in market interest rates; changes in monetary and fiscal policies of the federal government; legislative and regulatory changes; and other factors disclosed periodically in the Company's filings with the Securities and Exchange Commission.
Because of the risks and uncertainties inherent in forward-looking statements, readers are cautioned not to place undue reliance on them, whether included in this report or made elsewhere from time to time by the Company or on its behalf. Except as may be required by applicable law or regulation, the Company assumes no obligation to update any forward-looking statements.
Contact:
Tony A. Schoen, CPA
Chief Financial Officer
812-283-0724FIRST SAVINGS FINANCIAL GROUP, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) Three Months Ended Six Months Ended OPERATING DATA: March 31, March 31, (In thousands, except share and per share data) 2024 2023 2024 2023 Total interest income $ 30,016 $ 24,811 $ 58,671 $ 48,294 Total interest expense 15,678 9,899 30,220 17,121 Net interest income 14,338 14,912 28,451 31,173 Provision for credit losses - loans 454 372 866 1,356 Provision for credit losses - securities 23 - 23 - Net interest income after provision for credit losses 13,861 14,540 27,562 29,817 Total noninterest income 3,710 7,516 6,492 12,704 Total noninterest expense 11,778 17,999 27,817 35,510 Income before income taxes 5,793 4,057 6,237 7,011 Income tax expense 866 333 390 416 Net income $ 4,927 $ 3,724 $ 5,847 $ 6,595 Net income per share, basic $ 0.72 $ 0.54 $ 0.86 $ 0.96 Weighted average shares outstanding, basic 6,832,130 6,842,897 6,828,017 6,879,805 Net income per share, diluted $ 0.72 $ 0.54 $ 0.85 $ 0.95 Weighted average shares outstanding, diluted 6,859,611 6,881,496 6,849,928 6,926,277 Performance ratios (annualized) Return on average assets 0.92 % 0.68 % 0.58 % 0.61 % Return on average equity 13.06 % 9.15 % 8.48 % 8.36 % Return on average common stockholders' equity 13.06 % 9.15 % 8.48 % 8.36 % Net interest margin (tax equivalent basis) 2.66 % 3.06 % 2.68 % 3.23 % Efficiency ratio 65.26 % 80.25 % 79.61 % 80.93 % QTD FYTD FINANCIAL CONDITION DATA: March 31, December 31, Increase September 30, Increase (In thousands, except per share data) 2024 2023 (Decrease) 2023 (Decrease) Total assets $ 2,364,983 $ 2,308,092 $ 56,891 $ 2,288,854 $ 76,129 Cash and cash equivalents 62,969 33,366 29,603 30,845 32,124 Investment securities 240,142 246,801 (6,659 ) 229,039 11,103 Loans held for sale 19,108 22,866 (3,758 ) 45,855 (26,747 ) Gross loans 1,901,850 1,860,742 41,108 1,787,143 114,707 Allowance for credit losses (1) 19,392 18,789 603 16,900 2,492 Interest earning assets 2,214,039 2,152,941 61,098 2,083,397 130,642 Goodwill 9,848 9,848 - 9,848 - Core deposit intangibles 479 520 (41 ) 561 (82 ) Loan servicing rights 3,028 3,711 (683 ) 62,819 (59,791 ) Noninterest-bearing deposits 196,239 202,769 (6,530 ) 242,237 (45,998 ) Interest-bearing deposits (customer) 1,043,032 978,182 64,850 1,001,238 41,794 Interest-bearing deposits (brokered) 548,175 502,895 45,280 438,319 109,856 Federal Home Loan Bank borrowings 315,000 356,699 (41,699 ) 363,183 (48,183 ) Subordinated debt and other borrowings 48,523 48,484 39 48,444 79 Total liabilities 2,199,927 2,143,569 56,358 2,137,873 62,054 Accumulated other comprehensive loss (17,144 ) (13,606 ) (3,538 ) (29,587 ) 12,443 Stockholders' equity 165,056 164,523 533 150,981 14,075 Book value per share $ 23.98 $ 23.90 0.08 $ 21.99 $ 1.99 Tangible book value per share - Non-GAAP (2) 22.48 22.40 0.08 20.47 2.01 Non-performing assets: Nonaccrual loans - SBA guaranteed $ 5,053 $ 5,066 $ (13 ) $ 5,091 $ (38 ) Nonaccrual loans 10,585 10,442 143 8,857 1,728 Total nonaccrual loans $ 15,638 $ 15,508 $ 130 $ 13,948 $ 1,690 Accruing loans past due 90 days - - - - - Total non-performing loans 15,638 15,508 130 13,948 1,690 Foreclosed real estate 444 444 - 474 (30 ) Troubled debt restructurings classified as performing loans - - - 1,266 (1,266 ) Total non-performing assets $ 16,082 $ 15,952 $ 130 $ 15,688 $ 394 Asset quality ratios: Allowance for credit losses as a percent of total gross loans 1.02 % 1.01 % 0.01 % 0.95 % 0.07 % Allowance for credit losses as a percent of nonperforming loans 124.01 % 121.16 % 2.85 % 121.16 % 2.84 % Nonperforming loans as a percent of total gross loans 0.82 % 0.83 % (0.01 %) 0.78 % 0.04 % Nonperforming assets as a percent of total assets 0.68 % 0.69 % (0.01 %) 0.69 % (0.01 %) (1) The Company adopted ASU 2016-13 Topic 326 on October 1, 2023. Allowance was determined using expected loss methodology (CECL) as of March 31, 2024 and December 31, 2024. Allowance was determined using the previous incurred loss methodology as of September 30, 2023. (2) See reconciliation of GAAP and non-GAAP financial measures for additional information relating to calculation of these figures. RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES (UNAUDITED): The following non-GAAP financial measures used by the Company provide information useful to investors in understanding the Company's performance. The Company believes the financial measures presented below are important because of their widespread use by investors as a means to evaluate capital adequacy and earnings. The following table summarizes the non-GAAP financial measures derived from amounts reported in the Company's consolidated financial statements and reconciles those non-GAAP financial measures with the comparable GAAP financial measures. Three Months Ended Fiscal Year Ended Net Income March 31, March 31, (In thousands) 2024 2023 2024 2023 Net income attributable to the Company (non-GAAP) $ 3,561 $ 3,724 $ 4,481 $ 6,595 Plus: Decrease in loss contingency for SBA-guaranteed loans, net of tax effect 492 - 492 - Plus: Adjustment to MSR valuation allowance related to sale, net of tax effect 583 - 583 - Plus: Gain on sale of premises, net of tax effect 90 - 90 - Plus: Adjustment to previous data processing contract termination accrual, net of tax effect 117 - 117 - Plus: Distribution from equity investment, net of tax 85 - 85 - Net income attributable to the Company (GAAP) $ 4,927 $ 3,724 $ 5,847 $ 6,595 Three Months Ended Fiscal Year Ended Net Income per Share, Diluted March 31, March 31, 2024 2023 2024 2023 Net income per share, diluted (non-GAAP) $ 0.52 $ 0.54 $ 0.65 $ 0.95 Plus: Decrease in loss contingency for SBA-guaranteed loans 0.07 - 0.07 - Plus: Adjustment to MSR valuation allowance related to sale 0.08 - 0.08 - Plus: Gain on sale of premises 0.01 - 0.01 - Plus: Adjustment to previous data processing contract termination accrual 0.02 - 0.02 - Plus: Distribution from equity investment 0.02 - 0.02 - Net income per share, diluted (GAAP) $ 0.72 $ 0.54 $ 0.85 $ 0.95 Three Months Ended Fiscal Year Ended Efficiency Ratio March 31, March 31, (In thousands) 2024 2023 2024 2023 Net interest income (GAAP) $ 14,338 $ 14,912 $ 28,451 $ 31,173 Noninterest income (GAAP) 3,710 7,516 6,492 12,704 Noninterest expense (GAAP) 11,778 17,999 27,817 35,510 Efficiency ratio (GAAP) 65.26 % 80.25 % 79.61 % 80.93 % Noninterest income (GAAP) 3,710 7,516 6,492 12,704 Less: Adjustment to MSR valuation allowance related to sale (530 ) - (530 ) - Less: Gain on sale of premises (120 ) - (120 ) - Less: Distribution from equity investment (113 ) - (113 ) - Noninterest income (Non-GAAP) 2,947 7,516 5,729 12,704 Noninterest expense (GAAP) 11,778 17,999 27,817 35,510 Plus: Adjustment to MSR valuation allowance related to sale 247 - 247 - Plus: Decrease in loss contingency for SBA-guaranteed loans 656 - 656 - Plus: Adjustment to previous data processing contract termination accrual 156 - 156 - Noninterest expense (non-GAAP) $ 12,837 $ 17,999 $ 28,876 $ 35,510 Efficiency ratio (excluding nonrecurring items) (non-GAAP) 74.27 % 80.25 % 84.48 % 80.93 % QTD FYTD Tangible Book Value Per Share March 31, December 31, Increase September 30, Increase (In thousands, except share and per share data) 2024 2023 (Decrease) 2023 (Decrease) Stockholders' equity, net of noncontrolling interests (GAAP) $ 165,056 $ 164,523 $ 533 $ 150,981 $ 14,075 Less: goodwill and core deposit intangibles (10,327 ) (10,368 ) 41 (10,409 ) 82 Tangible equity (non-GAAP) $ 154,729 $ 154,155 $ 574 $ 140,572 14,157 Outstanding common shares 6,883,160 6,883,160 $ - 6,867,121 16,039 Tangible book value per share (non-GAAP) $ 22.48 $ 22.40 $ 0.08 $ 20.47 $ 2.01 Book value per share (GAAP) $ 23.98 $ 23.90 $ 0.08 $ 21.99 $ 1.99 SUMMARIZED FINANCIAL INFORMATION (UNAUDITED): As of Summarized Consolidated Balance Sheets March 31, December 31, September 30, June 30, March 31, (In thousands, except per share data) 2024 2023 2023 2023 2023 Total cash and cash equivalents $ 62,969 $ 33,366 $ 30,845 $ 42,475 $ 41,810 Total investment securities 240,142 246,801 229,039 249,788 336,317 Total loans held for sale 19,108 22,866 45,855 63,142 48,783 Total loans, net of allowance for credit losses 1,882,458 1,841,953 1,770,243 1,691,289 1,598,440 Loan servicing rights 3,028 3,711 62,819 64,139 65,045 Total assets 2,364,983 2,308,092 2,288,854 2,260,421 2,239,606 Customer deposits $ 1,239,271 $ 1,180,951 $ 1,243,475 $ 1,245,534 $ 1,206,154 Brokered deposits 548,175 502,895 438,319 414,231 336,728 Total deposits 1,787,446 1,683,846 1,681,794 1,659,765 1,542,882 Federal Home Loan Bank borrowings 315,000 356,699 363,183 345,000 437,795 Common stock and additional paid-in capital $ 27,475 $ 27,397 $ 27,064 $ 27,518 $ 27,443 Retained earnings - substantially restricted 167,648 163,753 166,306 168,015 166,652 Accumulated other comprehensive income (loss) (17,144 ) (13,606 ) (29,587 ) (17,565 ) (14,199 ) Unearned stock compensation (1,096 ) (1,194 ) (1,015 ) (1,113 ) (1,211 ) Less treasury stock, at cost (11,827 ) (11,827 ) (11,787 ) (11,787 ) (11,787 ) Total stockholders' equity 165,056 164,523 150,981 165,068 166,898 Outstanding common shares 6,883,160 6,883,160 6,867,121 6,865,921 6,865,921 Three Months Ended Summarized Consolidated Statements of Income March 31, December 31, September 30, June 30, March 31, (In thousands, except per share data) 2024 2023 2023 2023 2023 Total interest income $ 30,016 $ 28,655 $ 28,137 $ 26,798 $ 24,811 Total interest expense 15,678 14,542 12,601 11,933 9,899 Net interest income 14,338 14,113 15,536 14,865 14,912 Provision for credit losses - loans 454 412 815 441 372 Provision for credit losses - securities 23 - - - - Net interest income after provision for credit losses 13,861 13,701 14,721 14,424 14,540 Total noninterest income 3,710 2,782 5,442 7,196 7,516 Total noninterest expense 11,778 16,039 21,647 18,965 17,999 Income (loss) before income taxes 5,793 444 (1,484 ) 2,655 4,057 Income tax expense (benefit) 866 (476 ) (737 ) 331 333 Net income (loss) $ 4,927 $ 920 $ (747 ) $ 2,324 $ 3,724 Net income (loss) per share, basic $ 0.72 $ 0.13 $ (0.11 ) $ 0.34 $ 0.54 Weighted average shares outstanding, basic 6,832,130 6,823,948 6,817,365 6,816,608 6,842,897 Net income (loss) per share, diluted $ 0.72 $ 0.13 $ (0.11 ) $ 0.34 $ 0.54 Weighted average shares outstanding, diluted 6,859,611 6,839,704 6,837,919 6,819,748 6,881,496 SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED): Three Months Ended Noninterest Income Detail March 31, December 31, September 30, June 30, March 31, (In thousands) 2024 2023 2023 2023 2023 Service charges on deposit accounts $ 387 $ 473 $ 479 $ 509 $ 471 ATM and interchange fees 585 449 816 615 586 Net loss on sales of available for sale securities - - (11 ) (540 ) - Net unrealized gain on equity securities 6 38 11 11 21 Net gain on sales of loans, Small Business Administration 951 834 538 497 907 Mortgage banking income 53 89 3,018 4,668 4,149 Increase in cash surrender value of life insurance 333 329 311 279 266 Commission income 220 222 182 247 189 Real estate lease income 115 115 116 119 117 Net gain on premises and equipment 120 - 20 - 29 Gain from repurchase of subordinated debt - - - 660 - Other income 940 233 (38 ) 131 781 Total noninterest income $ 3,710 $ 2,782 $ 5,442 $ 7,196 $ 7,516 Three Months Ended March 31, December 31, September 30, June 30, March 31, Consolidated Performance Ratios (Annualized) 2024 2023 2023 2023 2023 Return on average assets 0.92 % 0.16 % (0.13 %) 0.41 % 0.68 % Return on average equity 13.06 % 2.42 % (1.82 %) 5.60 % 9.15 % Return on average common stockholders' equity 13.06 % 2.42 % (1.82 %) 5.60 % 9.15 % Net interest margin (tax equivalent basis) 2.66 % 2.69 % 3.03 % 2.94 % 3.06 % Efficiency ratio 65.26 % 94.93 % 103.19 % 85.97 % 80.25 % As of or for the Three Months Ended March 31, December 31, September 30, June 30, March 31, Consolidated Asset Quality Ratios 2024 2023 2023 2023 2023 Nonperforming loans as a percentage of total loans 0.82 % 0.83 % 0.78 % 0.69 % 0.77 % Nonperforming assets as a percentage of total assets 0.68 % 0.69 % 0.69 % 0.62 % 0.67 % Allowance for credit losses as a percentage of total loans 1.02 % 1.01 % 0.95 % 0.99 % 1.02 % Allowance for credit losses as a percentage of nonperforming loans 124.01 % 121.16 % 121.16 % 143.83 % 132.20 % Net charge-offs to average outstanding loans 0.01 % 0.00 % 0.04 % 0.00 % -0.00 % SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED): Three Months Ended Segmented Statements of Income Information March 31, December 31, September 30, June 30, March 31, (In thousands) 2024 2023 2023 2023 2023 Core Banking Segment: Net interest income $ 13,469 $ 13,113 $ 14,167 $ 13,407 $ 13,632 Provision (credit) for credit losses - loans 650 (49 ) 1,266 880 422 Provision for credit losses - securities 23 - - - - Net interest income after provision for credit losses 12,796 13,162 12,901 12,527 13,210 Noninterest income 2,537 1,679 2,136 1,965 1,733 Noninterest expense 10,093 10,252 13,559 11,010 10,651 Income before income taxes 5,240 4,589 1,478 3,482 4,292 Income tax expense 729 541 3 561 401 Net income $ 4,511 $ 4,048 $ 1,475 $ 2,921 $ 3,891 SBA Lending Segment (Q2 Business Capital, LLC): Net interest income $ 869 $ 1,003 $ 990 $ 1,098 $ 1,093 Provision (credit) for credit losses - loans (196 ) 461 (451 ) (439 ) (50 ) Provision for credit losses - securities - - - - - Net interest income after provision for credit losses 1,065 542 1,441 1,537 1,143 Noninterest income 1,173 1,003 367 580 1,636 Noninterest expense 1,685 2,146 2,907 2,107 2,662 Income (loss) before income taxes 553 (601 ) (1,099 ) 10 117 Income tax expense (benefit) 137 (131 ) (273 ) (21 ) 20 Net income (loss) $ 416 $ (470 ) $ (826 ) $ 31 $ 97 Mortgage Banking Segment: (3) Net interest income (loss) $ - (3 ) $ 379 $ 360 $ 187 Provision for credit losses - loans - - - - - Provision for credit losses - securities - - - - - Net interest income (loss) after provision for credit losses - (3 ) 379 360 187 Noninterest income - 100 2,939 4,651 4,147 Noninterest expense - 3,641 5,181 5,848 4,686 Loss before income taxes - (3,544 ) (1,863 ) (837 ) (352 ) Income tax benefit - (886 ) (467 ) (209 ) (88 ) Net loss $ - $ (2,658 ) $ (1,396 ) $ (628 ) $ (264 ) (3) National mortgage banking operations were ceased in the quarter ended December 31, 2023 and subsequent immaterial mortgage lending activity is reported within the Core Banking segment. SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED): Three Months Ended Segmented Statements of Income Information March 31, December 31, September 30, June 30, March 31, (In thousands, except percentage data) 2024 2023 2023 2023 2023 Net Income (Loss) Per Share by Segment Net income per share, basic - Core Banking $ 0.66 $ 0.59 $ 0.22 $ 0.43 $ 0.57 Net income (loss) per share, basic - SBA Lending (Q2 Business Capital, LLC) 0.06 (0.07 ) (0.12 ) - 0.01 Net income (loss) per share, basic - Mortgage Banking 0.00 (0.40 ) (0.21 ) (0.09 ) (0.04 ) Total net income (loss) per share, basic $ 0.72 $ 0.12 $ (0.11 ) $ 0.34 $ 0.54 Net Income (Loss) Per Diluted Share by Segment Net income per share, diluted - Core Banking $ 0.66 $ 0.59 $ 0.22 $ 0.43 $ 0.57 Net income (loss) per share, diluted - SBA Lending (Q2 Business Capital, LLC) 0.06 (0.07 ) (0.12 ) - 0.01 Net loss per share, diluted - Mortgage Banking 0.00 (0.40 ) (0.21 ) (0.09 ) (0.04 ) Total net income (loss) per share, diluted $ 0.72 $ 0.12 $ (0.11 ) $ 0.34 $ 0.54 Return on Average Assets by Segment (annualized) (4) Core Banking 0.80 % 0.73 % 0.28 % 0.61 % 0.85 % SBA Lending 1.81 % (2.11 %) (3.81 %) 0.15 % 0.42 % Efficiency Ratio by Segment (annualized) (4) Core Banking 63.06 % 69.31 % 83.17 % 71.62 % 69.32 % SBA Lending 82.52 % 106.98 % 214.22 % 125.57 % 97.54 % Three Months Ended Noninterest Expense Detail by Segment March 31, December 31, September 30, June 30, March 31, (In thousands) 2024 2023 2023 2023 2023 Core Banking Segment: Compensation $ 5,656 $ 5,691 $ 6,528 $ 4,978 $ 5,578 Occupancy 1,615 1,481 1,418 1,738 1,401 Advertising 205 189 404 334 298 Other 2,617 2,891 5,209 3,960 3,374 Total Noninterest Expense $ 10,093 $ 10,252 $ 13,559 $ 11,010 $ 10,651 SBA Lending Segment (Q2 Business Capital, LLC): Compensation $ 1,933 $ 1,826 $ 1,533 $ 1,803 $ 1,800 Occupancy 58 91 68 70 70 Advertising 7 10 10 11 8 Other (313 ) 219 1,296 223 784 Total Noninterest Expense $ 1,685 $ 2,146 $ 2,907 $ 2,107 $ 2,662 Mortgage Banking Segment: (3) (5) Compensation $ - $ 2,146 $ 3,647 $ 4,357 $ 3,029 Occupancy - 469 395 469 449 Advertising - 119 129 191 213 Other - 907 1,010 831 995 Total Noninterest Expense $ - $ 3,641 $ 5,181 $ 5,848 $ 4,686 (4) Ratios for Mortgage Banking Segment are not considered meaningful due to cessation of national mortgage banking operations in the quarter ended December 31, 2023. (5) Compensation includes increases for the Core Banking segment and corresponding decreases for the Mortgage Banking segment that represent intersegment allocations for loans originated by the Mortgage Banking segment to be held for investment in the Core Banking loan portfolio of: $ - $ 1,403 $ 1,516 $ 1,440 $ 1,328 SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED): Three Months Ended SBA Lending (Q2 Business Capital, LLC) Data March 31, December 31, September 30, June 30, March 31, (In thousands, except percentage data) 2024 2023 2023 2023 2023 Final funded loans guaranteed portion sold, SBA $ 15,144 $ 14,098 $ 8,431 $ 7,721 $ 15,337 Gross gain on sales of loans, SBA $ 1,443 $ 1,303 $ 809 $ 780 $ 1,293 Weighted average gross gain on sales of loans, SBA 9.53 % 9.24 % 9.60 % 10.10 % 8.43 % Net gain on sales of loans, SBA (6) $ 951 $ 834 $ 538 $ 497 $ 907 Weighted average net gain on sales of loans, SBA 6.28 % 5.92 % 6.38 % 6.44 % 5.91 % (6) Inclusive of gains on servicing assets and net of commissions, referral fees, SBA repair fees and discounts on unguaranteed portions held-for-investment. SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) (CONTINUED): Three Months Ended Summarized Consolidated Average Balance Sheets March 31, December 31, September 30, June 30, March 31, (In thousands) 2024 2023 2023 2023 2023 Interest-earning assets Average balances: Interest-bearing deposits with banks $ 24,587 $ 20,350 $ 21,631 $ 20,661 $ 27,649 Loans 1,914,609 1,857,654 1,796,749 1,719,733 1,621,147 Investment securities - taxable 102,699 103,728 105,393 109,319 110,373 Investment securities - nontaxable 157,960 159,907 160,829 234,118 242,530 FRB and FHLB stock 24,986 24,968 24,939 24,509 23,289 Total interest-earning assets $ 2,224,841 $ 2,166,607 $ 2,109,541 $ 2,108,340 $ 2,024,988 Interest income (tax equivalent basis): Interest-bearing deposits with banks $ 261 $ 249 $ 266 $ 267 $ 192 Loans 27,133 26,155 25,214 23,279 21,339 Investment securities - taxable 923 942 969 984 957 Investment securities - nontaxable 1,662 1,687 1,695 2,456 2,533 FRB and FHLB stock 499 74 428 423 364 Total interest income (tax equivalent basis) $ 30,478 $ 29,107 $ 28,572 $ 27,409 $ 25,385 Weighted average yield (tax equivalent basis, annualized): Interest-bearing deposits with banks 4.25 % 4.89 % 4.92 % 5.17 % 2.78 % Loans 5.67 % 5.63 % 5.61 % 5.41 % 5.27 % Investment securities - taxable 3.59 % 3.63 % 3.68 % 3.60 % 3.47 % Investment securities - nontaxable 4.21 % 4.22 % 4.22 % 4.20 % 4.18 % FRB and FHLB stock 7.99 % 1.19 % 6.86 % 6.90 % 6.25 % Total interest-earning assets 5.48 % 5.37 % 5.42 % 5.20 % 5.01 % Interest-bearing liabilities Interest-bearing deposits $ 1,549,012 $ 1,389,384 $ 1,385,994 $ 1,278,776 $ 1,251,080 Fed funds purchased - - 76 11 - Federal Home Loan Bank borrowings 333,275 440,786 353,890 434,182 374,593 Subordinated debt and other borrowings 48,497 48,458 48,406 49,339 50,293 Total interest-bearing liabilities $ 1,930,784 $ 1,878,628 $ 1,788,366 $ 1,762,308 $ 1,675,966 Interest expense: Interest-bearing deposits $ 12,546 $ 9,989 $ 9,457 $ 7,791 $ 6,265 Fed funds purchased - - 1 - - Federal Home Loan Bank borrowings 2,298 3,769 2,459 3,446 2,915 Subordinated debt and other borrowings 833 784 684 696 719 Total interest expense $ 15,677 $ 14,542 $ 12,601 $ 11,933 $ 9,899 Weighted average cost (annualized): Interest-bearing deposits 3.24 % 2.88 % 2.73 % 2.44 % 2.00 % Fed funds purchased 0.00 % 0.00 % 5.26 % 0.00 % 0.00 % Federal Home Loan Bank borrowings 2.76 % 3.42 % 2.78 % 3.17 % 3.11 % Subordinated debt and other borrowings 6.87 % 6.47 % 5.65 % 5.64 % 5.72 % Total interest-bearing liabilities 3.25 % 3.10 % 2.82 % 2.71 % 2.36 % Net interest income (taxable equivalent basis) $ 14,801 $ 14,565 $ 15,971 $ 15,476 $ 15,486 Less: taxable equivalent adjustment (463 ) (452 ) (435 ) (611 ) (574 ) Net interest income $ 14,338 $ 14,113 $ 15,536 $ 14,865 $ 14,912 Interest rate spread (tax equivalent basis, annualized) 2.23 % 2.27 % 2.60 % 2.49 % 2.65 % Net interest margin (tax equivalent basis, annualized) 2.66 % 2.69 % 3.03 % 2.94 % 3.06 % 
