First Savings Financial Group, Inc. :FSFG-US: Earnings Analysis: Q4, 2017 By the Numbers : December 20, 2017

First Savings Financial Group, Inc. reports financial results for the quarter ended September 30, 2017.

We analyze the earnings along side the following peers of First Savings Financial Group, Inc. – FFD Financial Corporation and Flagstar Bancorp, Inc. (FFDF-US and FBC-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 10.50 million, Net Earnings of USD 2.34 million.
  • Net interest income margins narrowed from 85.07% to 73.83% compared to the same period last year.
  • Net loan assets changed 13.08% compared to same period last year and 3.84% from previous period, total deposits changed 15.52% compared to same period last year and -0.67% from previous period.
  • Year-on-year change in operating cash flow of 154.23% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings declined although operating margins improved from 24.28% to 30.20%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 10.5 9.66 9.28 8.8 7.88
Revenue Growth (%YOY) 33.21 20 24.94 15.94 -2.06
Earnings (mil) 2.34 2.44 2.19 2.34 2.81
Earnings Growth (%YOY) -16.64 9.7 34.19 88.01 53.5
Net Margin (%) 22.28 25.28 23.65 26.57 35.6
EPS 0.99 1.04 0.94 1 1.22
Return on Equity (%) 2.54 2.73 2.54 2.72 3.29
Return on Assets (%) 1.06 1.14 1.06 1.15 1.42

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Market Share Versus Profits

Revenues History
Earnings History

FSFG-US’s change in revenue this period compared to the same period last year of 33.21% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that FSFG-US is holding onto its market share. Also, for comparison purposes, revenues changed by 8.67% and earnings by -4.26% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

FSFG-US’s year-on-year decline in earnings was influenced by a weakening of net interest income margins from 85.07% to 73.83% as well as issues with loan loss provisions. As a result, net interest income after provisions margins went from 82.42% to 70.98% in this period. For comparison, net interest income margins were 77.95% and net interest income after provisions margins 74.63% in the last period. In addition, loan loss provisions as a percentage of net interest income were 3.86% this period and 3.12% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (Qtr YOY)
Total Deposits Growth Rate History (Qtr YOY)

The firm’s decline in net interest income margins came despite the relative increase in the levels of net loan assets. In addition, total deposits as a percentage of equity went from 6.69% to 7.19%. On an absolute basis, net loan assets changed 13.08% compared to the same period last year and 3.84% from the previous period. Total deposits changed 15.52% compared to the same period last year and -0.67% from the previous period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

FSFG-US’s change in operating cash flow of 154.23% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings declined despite overall improvement in operating margins. Operating margins went from 24.28% to 30.20%. The decline in earnings seems to be largely because of one-time item. Pretax margins narrowed from 50.96% to 30.207619047619%.

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

Access our Ratings and Scores for First Savings Financial Group, Inc.

Company Profile

First Savings Financial Group, Inc. operates as a savings and loans holding company for First Savings Bank FSB, a federally chartered savings bank. It operates as a community-oriented financial institution offering traditional financial services to consumers and businesses in its primary market area. Its services include personal banking, business banking and lending services. The company was founded in May 2008 and is headquartered in Clarksville, IN.

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