First Savings Financial (FSFG) - 2024 Q4 - Annual Report

Loan Portfolio Composition - As of September 30, 2024, 58.2% of the loan portfolio, amounting to $1.15 billion, consisted of commercial real estate and commercial business loans [128]. - Nonperforming commercial real estate loans totaled$ 8.8 million, while nonperforming commercial business loans amounted to $3.2 million as of September 30, 2024 [128]. - Construction loans and land development loans represented 4.0% of the loan portfolio, totaling$ 80.1 million, with speculative construction loans making up 10.2% of this segment [129]. - Loans secured by non-owner occupied residential properties accounted for 3.7% of the residential mortgage loan portfolio, totaling $24.9 million [130]. - The company had four non-owner occupied residential loan relationships with aggregate outstanding balances of$ 6.8 million as of September 30, 2024 [132]. Interest Rate Risk - Approximately $977.3 million, or 49.3% of the total loan portfolio, consisted of fixed-rate loans with maturity dates after September 30, 2025, exposing the company to increased interest rate risk [148]. Competition and Market Position - The company faces intense competition in loan origination and deposit attraction, holding approximately 33.22% of FDIC-insured deposits in its primary market area as of June 30, 2024 [147]. Credit Losses and Financial Risks - The allowance for credit losses may not be adequate to cover actual losses, which could materially and adversely affect earnings and financial condition [134]. - The SBA lending program is dependent on federal government support, and any changes to the program could adversely affect business and earnings [135]. - Inflation risk may negatively impact the company's business operations and customers' ability to repay loans, increasing noninterest expenses [150]. Goodwill and Shareholder Impact - Goodwill totaled$ 9.8 million as of September 30, 2024, with no impairment charges recorded to date, but future evaluations may result in write-downs impacting financial condition [160]. - The company may issue additional shares for future acquisitions, potentially diluting current shareholders' ownership interests [157]. - Insiders own approximately 15.32% of the outstanding common stock, which may limit other shareholders' influence over corporate matters [185]. Investment Portfolio and Operational Risks - The investment portfolio primarily consists of U.S. government agency securities, mortgage-backed securities, and municipal bonds, with potential credit losses that could adversely affect earnings [162]. - The company faces significant operational risks, including fraud, unauthorized transactions, and technology failures, which could lead to financial loss and regulatory scrutiny [164]. Regulatory and Compliance Issues - Regulatory changes, including those from the Dodd-Frank Act, may impose increased compliance costs and affect profitability and operational flexibility [175]. - The ability to pay dividends is subject to regulatory restrictions and capital adequacy guidelines, with no guarantee of maintaining current dividend levels [180]. Employee and Stock Trading Risks - The company relies on a competitive market for qualified employees, and the loss of key personnel could adversely affect operations and financial condition [178]. - The trading volume of the company's stock is sporadic, which may affect the ability of shareholders to resell shares at desired prices [183].