Real-time Form 4 intelligence. Smarter insider tracking.
YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.00pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.09pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.09pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adverse+1
impair+1
challenging+1
difficulty+1
harmed+1
Positive rising
satisfaction+1
Risk Factors (Item 1A)
5,971 words
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
unfunded+2
termination+1
volatile+1
Positive rising
gain+7
efficiency+1
stronger+1
MD&A (Item 7)
14,656 words
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion sets forth the material risk factors that could affect First Savings Financial Group’s consolidated financial condition and results of operations and an investment in its securities. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect us. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect our business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in a decrease in earnings or material losses.
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, 2025, $1.22 billion, or 63.9%, 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. 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. Commercial real estate loans also typically involve larger loan balances to single borrowers or groups of related borrowers both at origination and at maturity because many of our commercial real estate loans are not fully-amortizing, but result in “balloon” balances at maturity. Commercial business loans expose us to additional risks since they typically are made on the basis of the borrower’s ability to make repayments from the cash flow of the borrower’s business and are secured by non-real estate collateral that may depreciate over time. In addition, some of our commercial borrowers have more than one loan outstanding with us. 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, 2025, nonperforming commercial real estate loans totaled $6.0 million. At September 30, 2025 nonperforming commercial business loans totaled $1.7 million. For more information about the credit risk we face, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management.”
Our construction loan and land and land development loan portfolios may expose us to increased credit risk.
At September 30, 2025, $60.0 million, or 2.9% of our loan portfolio consisted of construction loans, and land and land development loans, and $6.5 million, or 16.2% of the construction loan portfolio (excluding undisbursed commitments and portions participated to other financial institutions), consisted of speculative construction loans at that date. Speculative construction loans are loans made to builders who have not identified a buyer for the completed property at the time of loan origination. Subject to market conditions, we intend to continue to emphasize the origination of construction loans and land and land development loans. These loan types generally expose a lender to greater risk of nonpayment and loss than residential mortgage loans because the repayment of such loans often depends on the successful operation or sale of the property and the income stream of the borrowers and such loans typically involve larger balances to a single borrower or groups of related borrowers. In addition, many borrowers of these types of loans have more than one loan outstanding with us so an adverse development with respect to one loan or credit relationship can expose us to significantly greater risk of non-payment and . Furthermore, we may need to increase our allowance for credit through future charges to income as the portfolio of these types of loans grows, which would affect our earnings. For more information about the credit risk we face, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management.”
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Our concentration in non-owner occupied residential real estate loans may expose us to increased credit risk.
At September 30, 2025, $24.6 million, or 4.1% of our residential mortgage loan portfolio and 1.3% of our total loan portfolio, consisted of loans secured by non-owner occupied residential properties. Loans secured by non-owner occupied properties generally expose a lender to greater risk of non-payment and loss than loans secured by owner occupied properties because repayment of such loans depend primarily on the tenant’s continuing ability to pay rent to the property owner, who is our borrower, or, if the property owner is unable to find a tenant, the property owner’s ability to repay the loan without the benefit of a rental income stream. In addition, the physical condition of non-owner occupied properties is often below that of owner occupied properties due to lax property maintenance standards, which has a negative impact on the value of the collateral properties. Furthermore, some of our non-owner occupied residential loan borrowers have more than one loan outstanding with us. At September 30, 2025, we had five non-owner occupied residential loan relationships, each having an outstanding balance over $500,000, with aggregate outstanding balances of $4.7 million. Consequently, an adverse development with respect to one credit relationship may us to a risk of compared to an development with respect to an owner occupied residential mortgage loan. At September 30, 2025 and 2024, 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. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management.”
We may sufferlosses 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. 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. 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. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount that can be recovered on these loans. For more information about the credit risk we face, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management.”
Our allowance for credit losses may not be adequate to cover actual losses.
Like all financial institutions, we maintain an allowance for credit losses for loans to provide for current expected credit losses due to loan defaults, non-performance, and other qualitative factors. Our allowance for credit losses for loans is based on our historical loss experience as well as an evaluation of the risks associated with our loan portfolio, including the size and composition of the loan portfolio, loan portfolio performance, fair value of collateral securing the loans, current and forecasted economic conditions and geographic concentrations within the portfolio. Our allowance for credit losses may not be adequate to cover actual loan losses, and future provisions for credit losses could materially and adversely affect our earnings and financial condition. Similarly, we maintain an allowance for credit losses for securities to provide for current expected credit losses due to payment defaults or significant financial performance of the issuer. Our allowance for credit for securities may not be adequate to cover actual credit on securities, and future provisions for credit could materially and affect our earnings and financial condition. For more information about our analysis and determination of allowance for credit , see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management.”
Our SBA lending program is dependent upon the federal government and we face specific risks associated with originating SBA loans.
Our SBA lending program is dependent upon the federal government. As an SBA Preferred Lender, we enable our clients to obtain SBA loans without being subject to the potentially lengthy SBA approval process necessary for lenders that are not SBA Preferred Lenders. The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management. When weaknesses are identified, the SBA may request corrective actions or impose enforcement actions, including revocation of the lender’s Preferred Lender status. If we lose our status as a Preferred Lender, we may lose some or all of our customers to lenders who are SBA Preferred Lenders. Also, any changes to the SBA program, including changes to the level of guarantee provided by the federal government on SBA loans, could adversely affect our business and earnings.
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We generally sell the guaranteed portion of our SBA 7(a) program loans in the secondary market. These sales have resulted in premium income for us at the time of sale and created a stream of future servicing income. We may not be able to continue originating these loans or selling them in the secondary market. Furthermore, even if we are able to continue originating and selling SBA 7(a) program loans in the secondary market, we might not continue to realize premiums upon the sale of the guaranteed portion of these loans. When we sell the guaranteed portion of our SBA 7(a) program loans, we incur credit risk on the non-guaranteed portion of the loans, and if a customer defaults on the non-guaranteed portion of a loan, we share any loss and recovery related to the loan pro-rata with the SBA. If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced by us, the SBA may seek recovery of the principal loss related to the deficiency from us, which could affect our business and earnings.
The laws, regulations and standard operating procedures that are applicable to SBA loan products may change in the future. We cannot predict the effects of these changes on our business and 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.
We may be required to repurchase mortgage loans or indemnify buyers againstlosses in some circumstances.
When residential mortgage loans are sold, whether as whole loans or pursuant to a securitization, we are required to make customary representations and warranties to purchasers, guarantors and insurers about the mortgage loans and the manner in which they were originated. We may be required to repurchase or substitute mortgage loans, or indemnify buyers againstlosses, in the event we breach certain representations or warranties in connection with the sale of such loans. If repurchase and indemnity demands increase, are valid claims and are in excess of our provision for potential losses, our liquidity, results of operations or financial condition may be materially and adversely affected.
Recessionary conditions could result in increases in our level of nonperforming loans and/or reduce demand for our products and services, which would lead to lower revenue, higher loan losses and lower earnings.
Recessionary conditions and/or continued negative developments in the domestic and international credit markets may significantly affect the markets in which we do business, the value of our loans and investments, and our ongoing operations, costs and profitability. Declines in real estate values and sales volumes and increased unemployment levels may result in higher than expected loan delinquencies, increases in our levels of nonperforming and classified assets and a decline in demand for our products and services. These negative events may cause us to incur losses and may adversely affect our capital, liquidity, and financial condition.
The value of our residential mortgage loan servicing rights and SBA loan servicing rights is subjective by nature and may be vulnerable to inaccuracies or other events outside our control.
The value of our loan servicing rights can fluctuate. The assets could decrease if prepayment speeds or delinquency rates of the underlying loans increase, or if the costs to service the loans increase. The value of the assets could also decline if there is a lack of liquidity in the loan servicing rights market. Similarly, the value may decrease if interest rates decrease or change in a non-parallel manner or are otherwise volatile. All of these factors are largely out of our control. Estimates must be developed and assumptions and judgments must be made when valuing these assets. An inaccurate valuation, or changes to the valuation due to factors outside of our control, could negatively impact our ability to realize the full value of these assets. As a result, our balance sheet may not precisely represent the fair market value of these and other financial assets. As of September 30, 2025, the Company had no residential loans mortgage loan servicing rights due to the wind down of the national mortgage banking operation and subsequent sale of the residential mortgage loan servicing rights portfolio, which was completed during the year ended September 30, 2024.
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Risks Related to Competition
Strong competition within our primary market area could hurt our profits and slow growth.
We face intense competition both in making loans and attracting deposits. This competition has made it more difficult for us to make new loans and attract deposits. Price competition for loans and deposits might result in us earning less on our loans and paying more on our deposits, which would reduce net interest income. Competition also makes it more difficult to grow loans and deposits. At June 30, 2025, which is the most recent date for which data is available from the FDIC, we held approximately 22.78%, 22.65%, 4.16%, 25.20%, 100.00% and 40.70% of the FDIC-insured deposits in Clark, Daviess, Floyd, Harrison, Crawford and Washington Counties, Indiana, respectively. Some of the institutions with which we compete have substantially greater resources and lending limits than we have and may offer services that we do not provide. 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. Our profitability depends upon 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.
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. 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. Changes in interest rates—up or down—could adversely affect our net interest margin and, as a result, our net interest income. Although the yield we earn on our assets and our funding costs tend to move in the same direction in response to changes in interest rates, one can rise or fall faster than the other, causing our net interest margin to expand or contract. Our liabilities tend to be shorter in duration than our assets, so they may adjust faster in response to changes in interest rates. As a result, when interest rates rise, our funding costs may rise faster than the yield we earn on our assets, causing our net interest margin to contract until the yield catches up. Changes in the slope of the “yield curve”—or the spread between short-term and long-term interest rates—could also reduce our net interest margin. Normally, the yield curve is upward sloping, meaning short-term rates are lower than long-term rates. 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 years, 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. 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 our income. At September 30, 2025, approximately $943.9 million, or 49.5% of the total loan portfolio, consisted of fixed-rate loans with maturity dates after September 30, 2026. This investment in fixed-rate loans 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. Generally, the value of fixed-rate securities fluctuates inversely with changes in interest rates. Unrealized gains and losses on securities available for sale are reported as a separate component of equity, net of tax. Decreases in the fair value of securities available for sale resulting from increases in interest rates could have an adverse effect on stockholders’ equity. Conversely, the value of MSRs generally increases when market interest rates increase. For further discussion of how changes in interest rates could impact us, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations —Risk Management — Interest Rate Risk Management.”
Inflation can have an adverse impact on our business and on our customers.
Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. In recent years, there have been market indicators of a pronounced rise in inflation and the Federal Reserve Board has raised certain benchmark interest rates in an effort to combat inflation. As inflation increases, the value of our investment securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments. In addition, inflation increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our noninterest expenses. Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us.
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Risks Related to Our Liquidity Position
Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.
Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a material adverse effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general. Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity due to a market downturn or adverse regulatory action against us. Our ability to acquire deposits or borrow could also be impaired by factors that are not specific to us, such as a severedisruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole.
Risks Related to Our Pending Merger with First Merchants Corporation
If the merger is not completed, we will have incurred substantial expenses without realizing the expected benefits of the merger.
We have incurred substantial expenses in connection with the pending merger with First Merchants Corporation. Although some of these expenses will not be incurred if the merger is not completed, others will and such expenses could have a material adverse impact on the our financial condition and results of operations. The completion of the merger depends on the satisfaction of several conditions. We cannot guarantee that these conditions will be met. There can be no assurance that the merger will be completed.
We will be subject to business uncertainties and contractual restrictions while the merger is pending.
Uncertainty about the effect of the pending merger on our employees and customers may have an adverse effect on us. These uncertainties may impair our ability to attract, retain, and motivate key personnel until the merger is completed, and could cause customers and others that deal with us to seek to change existing business relationships with us. Retention of certain of our employees may be challenging while the merger is pending, as certain employees may experience uncertainty about their future roles with us or First Merchants Corporation. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with us or First Merchants Corporation, our business could be harmed.
Risks Related to Our Investment Portfolio
If additional provisions for credit losses are recorded in connection with our investment portfolio it could have a significant negative impact on our profitability.
Our investment portfolio consists primarily of U.S. government agency and sponsored enterprises securities, mortgage backed securities and collateralized mortgage obligations issued by U.S. government agencies and sponsored enterprises, municipal bonds, and privately-issued collateralized mortgage obligations and asset-backed securities. We must evaluate these securities for credit losses on a periodic basis. The privately-issued collateralized mortgage obligations and asset-backed securities exhibit signs of weakness, which may necessitate a provision for credit loss in the future should the financial condition of the pools deteriorate further. Any future provisions for credit losses on securities could have a significant adverse effect our earnings.
Risks Related to Our Operations
Because the nature of the financial services business involves a high volume of transactions, we face significant operational risks.
Operational risk is the risk of loss resulting from our operations, including, but not limited to, the risk of fraud by employees or persons outside of the Company and Bank, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology, breaches of the internal control system and compliance requirements and business continuation and disaster recovery. This risk of loss also includes the potential legal actions that could arise as a result of an operational deficiency or as a result of noncompliance with applicable regulatory standards, adverse business decisions or their implementation, and customer attrition due
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to potential negative publicity. In the event of a breakdown in the internal control system, improper operation of systems or improper employee actions, we could suffer financial loss, face regulatory action and sufferdamage to our reputation.
A disruption, failure in or breach, including cyber-attacks, of our operational, communications, information or security systems, or those of our third party vendors and other service providers, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses.
We rely heavily on communications and information systems to conduct our business and face the risk of operational disruption, failure, termination or capacity constraints of any of the third parties that facilitate our business activities, including exchanges, clearing agents, clearing houses or other financial intermediaries. Any failure or interruption of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan and other systems. While we have policies and procedures designed to prevent or limit the effect of the failure or interruption of these information systems, there can be no assurance that any such failures or interruptions will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures or of these information systems could our reputation, result in a of customer business, subject us to additional regulatory , or us to civil and possible financial liability, any of which could have a material effect on our financial condition and results of operations.
We rely on the secure processing, storage and transmission of confidential and other information on our computer systems and networks. Although we take numerous protective measures to maintain the confidentiality, integrity and availability of our and our clients’ information across all geographic and product lines, and endeavor to modify these protective measures as circumstances warrant, the nature of the threats continues to evolve. As a result, our computer systems, software and networks and those of our customers may be vulnerable to unauthorized access, loss or destruction of data (including confidential client information), account takeovers, unavailability of service, computer viruses or other malicious code, cyber-attacks and other events that could have an adverse security impact and result in significant losses by us and/or our customers. Despite the defensive measures we take to manage our internal technological and operational infrastructure, these may originate externally from third parties, such as foreign governments, organized and other hackers, and outsource or infrastructure-support providers and application developers, or the may originate from within our organization. Given the increasingly high volume of our transactions, certain may be repeated or compounded before they can be discovered and rectified.
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 breachesagainst our clients or damage to our reputation. These risks include fraud by employees, customers and other outside entities targeting us and/or our customers, and such fraudulent activity may take many forms, including internet fraud, check fraud, electronic fraud, wire fraud, phishing, and other dishonest acts. In recent periods, there has been a rise in electronic activity within the financial services industry, especially in the commercial banking sector, due to cyber targeting commercial bank accounts. Consistent with industry trends, we have also experienced an increase in attempted electronic activity in recent periods. Given such increase in electronic activity and the growing level of use of electronic, internet-based and networked systems to conduct business directly or indirectly with our clients, certain may not be avoidable regardless of the preventative and detection systems in place.
Although, to date, we have not experienced any material losses relating to cyber-attacks or other information security breaches, there can be no assurance that we will not suffer such losses in the future. Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, the outsourcing of some of our business operations and the continued uncertain global economic environment. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.
We maintain an insurance policy which we believe provides sufficient coverage at a manageable expense for an institution of our size and scope with similar technological systems. However, we cannot assure that this policy will afford coverage for all possible losses or would be sufficient to cover all financial losses, damages, penalties, including lost revenues, should we experience any one or more of our or a third party’s systems failing or experiencing attack.
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If the goodwill that we recorded in connection with a business acquisition becomes impaired, it could have a significant negative impact on our profitability.
We have acquired other financial institutions and have recorded goodwill in connection with those transactions. 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, 2025, our goodwill totaled $9.8 million. 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.
We operate in a highly regulated environment and we may be adversely affected by changes in laws and regulations.
The Bank is subject to extensive regulation, supervision and examination by the INDFI, its chartering authority, the FRB, its primary federal regulator, and the FDIC, as insurer of its deposits. The Company is also subject to regulation and supervision by the Federal Reserve Bank of St. Louis. Such regulation and supervision governs the activities in which an institution and its holding company may engage, and are intended primarily for the protection of the insurance fund and the depositors and borrowers of the Bank rather than for holders of the Company’s common stock. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for credit losses. If our regulators require us to charge-off loans or increase our allowance for credit losses, our earnings would suffer. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations.
The Dodd-Frank Act has created a new federal agency to administer consumer protection and fair lending laws, a function that was formerly performed by the depository institution regulators. The Dodd-Frank Act contains various other provisions designed to enhance the regulation of depository institutions including the implementation of more stringent capital adequacy rules. The full impact of the Dodd-Frank Act on our business and operations will not be known for years until regulations implementing the statute are written and adopted. The Dodd-Frank Act may have a material impact on our operations, particularly through increased regulatory burden and compliance costs. Any future legislative changes could have a material impact on our profitability, the value of assets held for investment or collateral for loans. Future legislative changes could require changes to business practices or force us to discontinue businesses and potentially expose us to additional costs, liabilities, enforcement action and reputational risk.
In addition to the enactment of the Dodd-Frank Act, the federal regulatory agencies have taken stronger supervisory actions against financial institutions that have experienced increased loan losses and other weaknesses as a result of the recent economic crisis. The actions include entering into written agreements and cease and desist orders that place certain limitations on operations. Federal bank regulators have also been using with more frequency their ability to impose individual minimum capital requirements on banks, which requirements may be higher than those required under the Dodd-Frank Act or that would otherwise qualify a bank as being “well capitalized” under applicable prompt corrective action regulations. If we were to become subject to a regulatory agreement or higher individual minimum capital requirements, such action may have a negative impact on our ability to execute our business plan, as well as our ability to grow, pay dividends or engage in mergers and acquisitions and may result in restrictions in our operations. For a further discussion, see “Item 1. Business – Regulation and Supervision.”
We rely heavily on our management team and the unexpectedloss 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. We expect our future growth to be driven in a large part by the relationships maintained with our customers by our executive and other senior officers. Although we are party to non-compete and non-solicitation agreements with certain executive, senior and other officers, the unexpectedloss of any of our key employees could have an adverse effect on our business, results of operations and financial condition.
The implementation of our business strategy will also require us to continue to attract, hire, motivate and retain skilled personnel to develop new customer relationships as well as new financial products and services. The market for qualified employees in the businesses in which we operate is competitive and we may not be successful in attracting, hiring or retaining key personnel. Our inability to attract, hire or retain key personnel could have a material adverse effect on our business, results of operations and financial condition.
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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 2025 or that we will be able to pay future dividends at all.
Our ability to declare and pay dividends is subject to the guidelines of the FRB regarding capital adequacy and dividends, other regulatory restrictions, and the need to maintain sufficient consolidated capital. The ability of the Bank to pay dividends to the Company is subject to regulation by the INDFI, applicable Indiana law and the FRB, and is limited by the Bank’s obligations to maintain sufficient capital and liquidity. In addition, banking regulators may propose guidelines seeking greater liquidity and regulations requiring greater capital requirements. If such new regulatory requirements were not met, the Bank would not be able to pay dividends to the Company, and consequently we may be unable to pay dividends on our common stock.
The trading volume of our stock varies and you may not be able to resell your shares at or above the price you paid for them.
The price of the common stock purchased may decrease significantly. Although our common stock is quoted on the NASDAQ Capital Market under the symbol “FSFG”, trading activity in the stock historically has been sporadic. A public trading market having the desired characteristics of liquidity and order depends on the presence in the market of willing buyers and sellers at any given time. The presence of willing buyers and sellers depends on the individual decisions of investors and general economic conditions, all of which are beyond our control.
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 5, 2025, our directors, executive officers, and their related entities and persons currently beneficially own, in the aggregate, approximately 16.53% of our outstanding common stock. The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise. In addition, these shareholders will be able to exercise influence over all matters requiring shareholder approval, including the election of directors and approval of corporate transactions, such as a merger or other sale of our company or its assets. This concentration of ownership could limit your ability to influence corporate matters and may have the effect of delaying or preventing a change in control, including a merger, consolidation or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if that change in control would benefit our other shareholders. 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 Owners and Management and Related Shareholder Matters”.
Overview
Income. Our primary source of pre-tax income is net interest income. Net interest income is the difference between interest income, which is the income that we earn on our loans and investments, and interest expense, which is the interest that we pay on our deposits and borrowings. Other significant sources of pre-tax income are service charges (mostly from service charges on deposit accounts and loan servicing fees), ATM and interchange fees on debit and credit cards, increases in the cash surrender value of life insurance, income from sales of residential mortgage and SBA loans originated for sale in the secondary market, commissions on sales of securities and insurance products, and real estate lease income. We also recognize income from the sale of investment securities.
Allowance for Credit Losses. On October 1, 2023, the Company adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which replaced the previously required incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The allowance for credit losses (ACL) is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. The ACL is increased by provision expense and decreased by charge-offs, net of recoveries of amounts previously charged off. The Company’s policy is to charge off all or a portion of a loan when, in management’s opinion, it is unlikely to collect the principal amount owed in full either through payments from the borrower or a guarantor or from the liquidation of the collateral. See Note 1 of the Notes to Consolidated Financial Statements beginning on page F-1 of this annual report for additional information regarding the methodology used to determine the allowance for credit losses.
Expenses. The noninterest expenses we incur in operating our business consist of salaries and employee benefits expenses, occupancy expenses, data processing expenses, professional service fees, federal deposit insurance premiums, advertising, net losses on foreclosed real estate and other miscellaneous expenses. Salaries and employee benefits consist primarily of salaries, wages and incentive compensation paid to our employees; payroll taxes; and expenses for health insurance, retirement plans and other employee benefits. We also recognize annual employee compensation expenses related to our equity incentive plans as the equity incentive awards vest. Occupancy expenses, which are the fixed and variable costs of buildings and equipment, consist primarily of depreciation charges, furniture and equipment expenses, maintenance, real estate taxes, office lease expense and costs of utilities. Depreciation of premises and equipment is computed using the straight-line method based on the useful lives of the related assets, which range from three to 40 years. Data processing expenses are the fees we pay to third parties for processing customer information, deposits and loans. Professional fees expense represents the fees we pay to third parties for legal, accounting, investment advisory and other consulting services. Federal deposit insurance premiums are payments we make to the FDIC to insure of our deposit accounts. Other expenses include expenses for office supplies, postage, telephone, insurance, regulatory assessments and other miscellaneous operating expenses.
Critical Accounting Policies and Critical Accounting Estimates
The accounting and reporting policies of the Company comply with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and conform to general practices within the banking industry. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. The Company’s consolidated financial position and results of operations can be affected by these estimates and assumptions, which are integral to understanding reported results. Critical accounting policies are those policies that require management to make assumptions about matters that are highly uncertain at the time an accounting estimate is made; and different estimates that the Company reasonably could have used in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, would have a material impact on the Company’s financial condition, changes in financial condition or results of operations. Most accounting policies are not considered by management to be critical accounting policies. Several factors are considered in determining whether or not a policy is critical in the preparation of financial statements. These factors include, among other things, whether the estimates are significant to the financial statements, the nature of the estimates, the ability to readily validate the estimates with other information including third parties or available prices, and sensitivity of the estimates to changes in economic conditions and whether alternative accounting methods may be utilized under generally accepted accounting principles. 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.
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Allowance for Credit Losses. Determining the amount of the allowance for credit losses necessarily involves a high degree of judgment. Among the material estimates required to establish the allowance are: loss exposure at default; the amount and timing of future cash flows on impacted loans; value of collateral; and determination of loss factors to be applied to the various elements of the portfolio. All of these estimates are susceptible to significant change. Management reviews the level of the allowance at least quarterly and establishes the provision for credit losses based upon an evaluation of the portfolio, past loss experience, current and forecasted economic conditions and other factors related to the collectability of the loan portfolio. Although we believe that we use the best information available to establish the allowance for credit losses, future adjustments to the allowance may be necessary if economic or other conditions differ substantially from the assumptions used in making the evaluation. In addition, the banking regulators, as an integral part of their examination process, periodically review our allowance for credit losses and may require us to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings. See Note 1 of the Notes to Consolidated Financial Statements beginning on page F-1 of this annual report for additional information regarding the methodology used to determine the allowance for credit losses.
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. 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)
Financial Condition Data:
Total assets
Cash and cash equivalents
Securities available-for-sale
Securities held-to-maturity
Loans held for sale
Loans, net
Deposits
Borrowings from FHLB
Other borrowings
Stockholders’ equity
For the Year Ended September 30,
(In thousands)
Operating Data:
Interest income
Interest expense
Net interest income
Total provision (credit) for credit losses
Net interest income after provision (credit) for loan losses
Noninterest income
Noninterest expense
Income before income taxes
Income tax expense
Net income
Less: net income attributable to noncontrolling interests
Net income attributable to First Savings Financial Group
For the Year Ended September 30,
Per Share Data:
Net income per common share, basic
Net income per common share, diluted
Dividends per common share
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At or For the Year Ended September 30,
Performance Ratios:
Return on average assets
Return on average equity
Return on average common stockholders’ equity
Interest rate spread (1)
Net interest margin (2)
Other expenses to average assets
Efficiency ratio (3)
Efficiency ratio (excluding nonrecurring items) (4)
Average interest-earning assets to average interest-bearing liabilities
Dividend payout ratio
Average equity to average assets
Capital Ratios:
Total capital (to risk-weighted assets):
Consolidated
Bank
Tier 1 capital (to risk-weighted assets):
Consolidated
Bank
Common equity Tier 1 capital (to risk-weighted assets):
Consolidated
Bank
Tier 1 capital (to average adjusted total assets):
Consolidated
Bank
Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost on average interest-bearing liabilities. Tax exempt income is reported on a tax equivalent basis using a federal marginal tax rate of 21% for all years presented.
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 all years presented.
Represents other expenses divided by the sum of net interest income and other income.
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 2025 excludes income of $255,000, $487,000, $403,000 and $45,000 related to a gain on life insurance, gain on lease termination, gain on sale of equity securities, and gain on premises and equipment, respectively, and excludes the insured recovery of legal fees previously recognized of $203,000 and merger related professional fees of $707,000. The efficiency ratio for 2024 excludes income of $116,000, $456,000, $777,000 and $113,000 related to a gain on premises and equipment, recording Visa Class C shares, an adjustment to the MSR valuation allowance and a distribution from an equity investment, respectively, and excludes expenses of $656,000 related to the reversal of SBA guaranteed loan contingency, $283,000 related to the reversal of contingent liabilities and $156,000 related to the adjustment of data processing expenses related to contract termination. The efficiency ratio for 2023 excludes expenses of $1.4 million related to the core processing system conversion, $769,000 related to MSR valuation allowance for intended sale, $1.5
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million related to SBA guaranteed loan contingency, $1.1 million related to mortgage banking loss contingencies and $1.2 million of professional fees related to the mortgage banking loss contingencies. The efficiency ratio for 2022 excludes the income from tax credit investments of $12,000 and expenses of $2.0 million related to consulting fees paid in connection with the evaluation and negotiation of a new core processing contract. The efficiency ratio for 2021 and 2020 excludes the income from tax credit investments of $32,000, $426,000 and $210,000, respectively. 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,
Asset Quality Ratios:
Allowance for credit losses as a percent of total loans
Allowance for credit losses as a percent of nonperforming loans
Net charge-offs to average outstanding loans during the period
Nonperforming loans as a percent of total loans
Nonperforming loans as a percent of total assets
Nonperforming assets as a percent of total assets
Other Data:
Number of full service branch offices
Number of deposit accounts
Number of loans
Balance Sheet Analysis
Cash and Cash Equivalents. At September 30, 2025 and 2024, cash and cash equivalents totaled $31.9 million and $52.1 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. Residential mortgage loans held for sale increased by $551,000 in 2025. There were no residential mortgage loans held for sale at September 30, 2024. Home equity line of credit loans held for sale increased by $36.1 million in 2025. There were no home equity line of credit loans held for sale at September 30, 2024. SBA loans held for sale decreased by $10.9 million in 2025, from $25.7 million at September 30, 2024 to $14.8 million at September 30, 2025 due to sales outpacing originations during the year.
Loans. Our primary lending activity is the origination of loans secured by real estate. We originate one to four family mortgage loans, multifamily loans, commercial real estate loans, commercial business loans and construction loans. To a lesser extent, we originate various consumer loans including home equity lines of credit. Net loans decreased $77.0 million, from $1.96 billion at September 30, 2024 to $1.89 billion at September 30, 2025.
At September 30, 2025, residential mortgage loans totaled $605.9 million, or 31.8% of total loans, compared to $670.0 million, or 33.8% of total loans at September 30, 2024. The decrease in residential mortgage loans is primarily due an $87.2 million sale of 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 $351.0 million and $433.0 million at September 30, 2025 and 2024, respectively. We generally originate loans for investment purposes, although, depending on the interest rate environment, we typically sell 15-year and 30-year fixed rate residential mortgage loans that we originate into the secondary market in order to limit exposure to interest rate risk and to earn noninterest income. Management intends to continue offering short-term adjustable rate residential mortgage loans and generally sell long-term fixed rate mortgage loans in the secondary market.
Commercial real estate loans, including in-market commercial real estate loans, single tenant net lease loans, and SBA real commercial real estate loans, totaled $1.02 billion, or 53.8% of total loans at September 30, 2025, compared to $1.01 billion,
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or 51.0% of total loans at September 30, 2024. The increase in commercial real estate loans is primarily due to an increase in single tenant net lease loans, which increased $14.8 million during the year ended September 30, 2025.
Multi-family real estate loans totaled $38.9 million, or 2.0% of total loans at September 30, 2025, compared to $37.8 million, or 1.9% of total loans at September 30, 2024. These loans are primarily secured by apartment buildings and other multi-tenant developments in our primary market area.
Residential construction loans totaled $25.3 million, or 1.3% of total loans at September 30, 2025, of which $6.5 million were speculative construction loans. At September 30, 2024, residential construction loans totaled $53.2 million, or 2.7% of total loans, of which $6.4 million were speculative construction loans.
Commercial construction loans totaled $14.6 million, or 0.8% of total loans, at September 30, 2025 compared to $9.2 million, or 0.5% of total loans at September 30, 2024.
Land and land development loans totaled $16.1 million, or 0.9% of total loans at September 30, 2025, compared to $17.7 million, or 0.9% of total loans at September 30, 2024. 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 $140.5 million, or 7.4% of total loans, at September 30, 2025 compared to $143.0 million, or 7.2% of total loans, at September 30, 2024. In-market commercial business loans decreased $1.2 million during the year due primarily to decreased 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.
Consumer loans totaled $40.0 million, or 2.1% of total loans, at September 30, 2025 compared to $42.2 million, or 2.1% of total loans, at September 30, 2024.
The following table sets forth the composition of our loan portfolio at the dates indicated.
At September 30,
(Dollars in thousands)
Amount
Percent
Amount
Percent
Real estate mortgage:
Residential
Commercial
Single tenant net lease
SBA commercial real estate
Multi-family
Residential construction
Commercial construction
Land and land development
Commercial business
SBA commercial business
Consumer
Total loans
Deferred loan origination fees and costs, net
Allowance for credit losses – loans
Loans, net
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Loan Maturity
The following table sets forth certain information at September 30, 2025 regarding the dollar amount of loan principal repayments becoming due during the period indicated. The table does not include any estimate of prepayments which significantly shorten the average life of all loans and may cause our actual repayment experience to differ from that shown below. Demand loans having no stated schedule of repayments and no stated maturity are reported as due in one year or less.
At September 30, 2025
More Than
More Than One
Five Years
More Than
One Year or
Year to Five
to Fifteen
Fifteen
Amounts due in:
Less
Years
Years
Years
Total
(In thousands)
Residential real estate (1)
Commercial real estate (2)
Single tenant net lease
SBA commercial real estate
Residential construction (3)
Commercial construction (3)
Commercial business
SBA commercial business
Consumer
Total
(1) Includes multifamily loans.
(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, 2025 that are due after September 30, 2026, and have either fixed interest rates or adjustable interest rates. The amounts shown below exclude unearned loan origination fees.
(In thousands)
Fixed Rates
Adjustable Rates
Total
Residential real estate (1)
Commercial real estate (2)
Single tenant net lease
SBA commercial real estate
Commercial business
SBA commercial business
Consumer
Total
(1) Includes multifamily loans.
(2) Includes farmland, land and land development loans.
Securities Available for Sale. Our available for sale securities portfolio consists primarily of U.S. government agency and sponsored enterprises securities, mortgage backed securities and collateralized mortgage obligations issued by U.S. government agencies and sponsored enterprises, municipal bonds, privately-issued collateralized mortgage obligations and asset-backed securities and pass-through asset-backed securities guaranteed by the SBA. Available for sale securities increased by $3.2 million, from $248.7 million at September 30, 2024 to $251.8 million at September 30, 2025, due primarily to purchases of $19.0 million, partially offset by an increase in net unrealized losses of $4.9 million, maturities and calls of $4.4 million and principal repayments of $6.2 million.
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Securities Held to Maturity. 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 $262,000 from $1.0 million at September 30, 2024 to $778,000 at September 30, 2025, due primarily to maturities and principal repayments.
The following table sets forth the amortized costs and fair values of our investment securities at the dates indicated.
At September 30,
Amortized
Fair
Amortized
Fair
Amortized
Fair
(In thousands)
Cost
Value
Cost
Value
Cost
Value
Securities available for sale:
US Treasury notes and bills
Agency mortgage-backed
Agency CMO
Privately-issued CMO
Privately-issued asset-backed
SBA certificates
Municipal
Other
Total
Securities held to maturity:
Agency mortgage-backed
Municipal
Total
The following table sets forth the stated maturities and weighted average yields of debt securities at September 30, 2025. Weighted average yields on tax-exempt securities are presented on a tax equivalent basis using a federal marginal tax rate of 21.0%. Certain mortgage-backed securities and collateralized mortgage obligations have adjustable interest rates and will reprice annually within the various maturity ranges. These repricing schedules are not reflected in the table below. Weighted average yield calculations on investments available for sale do not give effect to changes in fair value that are reflected as a component of stockholders’ equity.
More than
More than
One Year
One Year Through
Five Years Through
More than
or Less
Five Years
Ten Years
Ten Years
Total
Weighted
Weighted
Weighted
Weighted
Weighted
Carrying
Average
Carrying
Average
Carrying
Average
Carrying
Average
Carrying
Average
(Dollars in thousands)
Value
Yield
Value
Yield
Value
Yield
Value
Yield
Value
Yield
Securities available for sale:
US Treasury notes
Agency mortgage-backed securities
Agency CMO
Privately-issued CMO
Privately-issued ABS
SBA certificates
Municipal
Other
Total
Securities held to maturity:
Agency mortgage-backed
Municipal
Total
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Deposits. 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 decreased $171.0 million from $1.88 billion at September 30, 2024 to $1.71 billion at September 30, 2025. The Bank recognized increases in money market deposit accounts of $138.5 million and interest-bearing checking accounts of $19.9 million, when comparing the two years. Brokered certificates of deposit totaled $219.9 million at September 30, 2025 compared to $509.2 million at September 30, 2024. There were no reciprocal time deposits at September 30, 2025 and 2024. We have continued to promote relationship oriented deposit accounts but at times also utilize brokered certificates of deposit and reciprocal time deposits as an alternative to retail time deposits. 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.
The following table sets forth the balances of our deposit accounts at the dates indicated.
At September 30,
(In thousands)
Non-interest-bearing demand deposits
NOW accounts
Money market accounts
Savings accounts
Retail time deposits
Brokered & reciprocal time deposits
Total
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, 2025.
(In thousands)
Amount
Three months or less
Over three through six months
Over six through twelve months
Over twelve months
Total
Our uninsured deposits, which consist solely of the portion of deposit accounts that exceed the FDIC insurance limit (currently $250,000) per insured account, were approximately $717.1 million and $565.7 million at September 30, 2025 and 2024, respectively. These amounts were estimated based on the same methodologies and assumptions used for regulatory reporting purposes.
Borrowings. We use borrowings from the FHLB consisting of advances and borrowings under a line of credit arrangement to supplement our supply of funds for loans and investments. The outstanding balance of borrowings from the FHLB increased $133.4 million, from $301.6 million at September 30, 2024 to $435.0 million at September 30, 2025. FHLB borrowings are primarily used to fund loan demand and to purchase available for sale securities.
The following table sets forth certain information regarding the Bank’s use of FHLB borrowings.
Year Ended September 30,
(Dollars in thousands)
Maximum amount of FHLB borrowings outstanding at any month-end during period
Average FHLB borrowings outstanding during period
Weighted average interest rate during period
Balance outstanding at end of period
Weighted average interest rate at end of period
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Other borrowings were comprised of subordinated debt at September 30, 2025 and 2024. Other borrowings decreased by $19.8 million from $48.6 million at September 30, 2024 to $28.8 million at September 30, 2025 primarily due to the repayment of a $20.0 million subordinated note during 2025.
On September 20, 2018, the Company entered into a subordinated note purchase agreement in the principal amount of $20 million. The subordinated note initially bore a fixed interest rate of 6.02% per year through September 30, 2023, and thereafter a floating rate, reset quarterly, equal to the three-month Secured Overnight Financing Rate (“SOFR”) plus 310 basis points. All interest is payable quarterly and the subordinated note is scheduled to mature on September 30, 2028. The subordinated note is an unsecured subordinated obligation of the Company and may be repaid in whole or in part, without penalty, on or after September 30, 2023. The debt issuance costs were amortized over five years, which represents the period from issuance to the first redemption date of September 30, 2023. The Company elected not to repay the subordinated note on the first optional redemption date of September 30, 2023, but has the right to repay the note without penalty upon providing adequate notice to the investors. The subordinated note is intended to qualify as Tier 2 capital for the Company under regulatory guidelines. However, following September 30, 2023, 20% of the remaining debt outstanding under this subordinated note agreement is disallowed from Tier 2 capital each year until maturity on September 30, 2028. This note was repaid in full during the fiscal year ended September 30, 2025.
On March 18, 2022, the Company entered into subordinated note purchase agreements in the aggregate principal amount of $31.0 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. All interest is payable semi-annually and the subordinated notes are scheduled to mature on March 30, 2032. The subordinated notes are unsecured subordinated obligations of the Company and may be repaid in whole or in part, without penalty, on or after March 30, 2027. The subordinated notes are intended to qualify as Tier 2 capital for the Company under regulatory guidelines. The subordinated notes are presented net of unamortized debt issuance costs of $238,000 at September 30, 2025, in the accompanying consolidated balance sheet. The debt issuance costs are being amortized over five years, which represents the period from issuance to the first redemption date of March 30, 2027. During the year ended September 30, 2023, the Company repurchased $2.0 million of this subordinated note from an investor and recognized a gain of $660,000 from the transaction. The remaining principal due on this subordinated note was $29.0 million at September 30, 2025.
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. At September 30, 2025, the Bank did not have any outstanding federal funds purchased under these lines of credit.
Stockholders’ Equity . Stockholders’ equity increased $16.4 million, from $177.1 million at September 30, 2024 to $193.5 million at September 30, 2025. The increase was due primarily to an $18.8 million increase in retained net income, partially offset by a $3.9 million increase in accumulated other comprehensive loss. The increase in accumulated other comprehensive loss was due primarily to increasing long term market interest rates during the year ended September 30, 2025, which resulted in a decrease in the fair value of securities available for sale.
Results of Operations for the Years Ended September 30, 2025, 2024 and 2023
Overview. The Company reported net income of $23.2 million ($3.32 per common share diluted) for the year ended September 30, 2025, compared to net income of $13.6 million ($1.98 per common share diluted) for the year ended September 30, 2024. The increase in net income for 2025 compared to 2024 was due to an increase in net interest income and noninterest income of $7.2 million and $6.3 million, respectively, and a decrease in total provision for credit losses of $2.8 million, partially offset by an increase in noninterest expense of $4.1 million.
Net income was $13.6 million ($1.98 per common share diluted) for the year ended September 30, 2024, compared to net income of $8.2 million ($1.19 per common share diluted) for the year ended September 30, 2023. The increase in net income for 2024 compared to 2023 was due to a decrease in noninterest expense of $23.2 million, partially offset by a $12.8 million decrease in noninterest income, a $3.5 million decrease in net interest income and a $480,000 increase in total provision for credit losses.
Net Interest Income. For the year ended September 30, 2025, net interest income increased $7.2 million, or 12.5%, as compared to 2024. 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 2.26% for 2024 to 2.55% for 2025 due primarily to an increase in the average yield of
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interest earning assets from 5.55% for 2024 to 5.66% for 2025 and a decrease in the average cost of interest-bearing liabilities from 3.29% for 2024 to 3.11% for 2025.
For the year ended September 30, 2024, net interest income decreased $3.5 million, or 5.7% as compared to 2023. The interest rate spread decreased from 2.69% for 2023 to 2.26% for 2024 due primarily to an increase in the average cost of interest-bearing liabilities from 2.44% for 2023 to 3.29% for 2024. This was partially offset by an increase in the average yield of interest earning assets from 5.13% for 2023 to 5.55% for 2024.
For the year ended September 30, 2025, total interest income increased $5.5 million, or 4.5%, as compared to 2024. The increase in total interest income is due primarily to increases in the average balance of interest earning assets of $55.1 million, from $2.23 billion for 2024 to $2.29 billion for 2025, and an increase in the average tax-equivalent yield on interest-earning assets, from 5.55% for 2024 to 5.66% for 2025. The increase in the average balance of interest-earning assets is due primarily to increases in the average balance of total loans of $55.9 million. For the year ended September 30, 2024, total interest income increased $18.8 million, or 18.2% as compared to 2023. The increase in total interest income is due primarily to increases in the average balance of interest earning assets of $179.0 million, from $2.05 billion for 2023 to $2.23 billion for 2024, and an increase in the average tax-equivalent yield on interest-earning assets, from 5.13% for 2023 to 5.55% for 2024. The increase in the average balance of interest-earning assets is due primarily to increases in the average balance of total loans of $245.8 million.
Interest income on loans increased $5.2 million, or 4.7%, from $110.4 million for 2024 to $115.6 million for 2025, due primarily to an increase in the average balance of loans outstanding of $55.9 million, from $1.93 billion for 2024 to $1.98 billion for 2025, and an increase in the average tax-equivalent yield on loans from 5.76% for 2024 to 5.86% for 2025. In 2024, interest income on loans increased $20.6 million, or 22.9%, from $89.8 million for 2023 to $110.4 million for 2024, due primarily to an increase in the average balance of loans outstanding of $245.8 million, from $1.68 billion for 2023 to $1.93 billion for 2024, and an increase in the average tax-equivalent yield on loans from 5.36% for 2023 to 5.76% for 2024.
Interest income on investment securities increased $246,000, or 2.7%, primarily due to an increase in the average balance of investment securities of $5.2 million, from $260.6 million for 2024 to $265.8 million for 2025 and an increase in the average tax equivalent yield on investments from 3.99% for 2024 to 4.02% for 2025. In 2024, interest income on investment securities decreased $2.1 million, or 19.2%, primarily due to a decrease in the average balance of investment securities of $68.2 million, from $328.8 million for 2023 to $260.6 million for 2024, partially offset by an increase in the average tax equivalent yield on investments from 3.97% for 2023 to 3.99% for 2024.
Total interest expense decreased $1.7 million, or 2.7%, due primarily to a decrease in the average cost of funds from 3.29% for 2024 to 3.11% for 2025, partially offset by an increase in the average balance of interest-bearing liabilities of $60.3 million, from $1.94 billion for 2024 to $2.00 billion for 2025. The average balance of interest-bearing deposits increased $78.0 million, or 5.1%, from $1.52 billion for 2024 to $1.60 billion for 2025, and the average cost of funds for deposits decreased from 3.17% for 2024 to 2.93% for 2025. The average balance of borrowings from the Federal Home Loan Bank decreased $9.4 million, or 2.5%, from $376.2 million for 2024 to $366.8 million for 2025, and the average cost of Federal Home Loan Bank borrowings increased from 3.35% for 2024 to 3.56% for 2025. Average other borrowings, which is comprised of subordinated debt, decreased $8.3 million or 17.1% from $48.5 million for 2024 to $40.2 million for 2025. The average cost of other borrowings decreased from 6.63% for 2024, net of amortization of debt issuance costs, to 5.92% for 2025, net of amortization of debt issuance costs. In 2024, total interest expense increased $22.3 million or 53.4%, due primarily to an increase in the average cost of funds from 2.44% for 2023 to 3.29% for 2024, and an increase in the average balance of interest-bearing liabilities of $233.2 million, from $1.71 billion for 2023 to $1.94 billion for 2024. The average balance of interest-bearing deposits increased $235.9 million, or 18.4%, from $1.28 billion for 2023 to $1.52 billion for 2024, and the average cost of funds for deposits increased from 2.16% for 2023 to 3.17% for 2024. The average balance of borrowings from the Federal Home Loan Bank increased $8.0 million, or 2.2%, from $368.2 million for 2023 to $376.2 million for 2024, and the average cost of Federal Home Loan Bank borrowings increased from 2.92% for 2023 to 3.35% for 2024. Average other borrowings, which are comprised of subordinated debt, decreased $10.6 million or 17.9% from $59.2 million for 2023 to $48.5 million for 2024. The average cost of other borrowings increased from 5.48% for 2023, net of amortization of debt issuance costs, to 6.63% for 2024, net of amortization of debt issuance costs.
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Average Balances and Yields.
The following tables present information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs. 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 $1.4 million, $1.1 million and $1.2 million for 2025, 2024 and 2023, respectively. Tax exempt income on loans and investment securities has been adjusted to a tax equivalent basis using a federal marginal tax rate of 21.0%. There were no out-of-period items or adjustments required to be excluded from the following table.
Year Ended September 30,
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
Loans
Investment securities - taxable
Investment securities - nontaxable
FRB and FHLB stock
Total interest-earning assets
Non-interest-earning assets
Total assets
Liabilities and equity:
NOW accounts
Money market deposit accounts
Savings accounts
Time deposits
Total interest-bearing deposits
Federal funds purchased
Borrowings from FHLB
Subordinated debt and other borrowings
Total interest-bearing liabilities
Non-interest-bearing deposits
Other non-interest-bearing liabilities
Total liabilities
Total stockholders’ equity
Total liabilities and equity
Net interest income (taxable equivalent basis)
Less: taxable equivalent adjustment
Net interest income
Interest rate spread (taxable equivalent basis)
Net interest margin (taxable equivalent basis)
Average interest-earning assets to average interest-bearing liabilities
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Rate/Volume Analysis. The following table sets forth the effects of changing rates and volumes on our net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. 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, 2025
Year Ended September 30, 2024
Compared to
Compared to
Year Ended September 30, 2024
Year Ended September 30, 2023
Increase (Decrease)
Increase (Decrease)
Due to
Due to
(In thousands)
Volume
Rate
Net
Volume
Rate
Net
Interest income:
Interest-bearing deposits with banks
Loans
Investment securities - taxable
Investment securities - nontaxable
FRB and FHLB stock
Total interest-earning assets
Interest expense:
Deposits
Federal funds purchased
Borrowings from FHLB
Other borrowings
Total interest-bearing liabilities
Net increase (decrease) in net interest income (taxable equivalent basis)
Provision for Credit Losses. The Company recognized a provision for unfunded lending commitments of $452,000 for the year ended September 30, 2025, and a reversal of provision for credit losses for loans and securities of $118,000 and $9,000, respectively, compared to a provision for credit losses for loans and securities of $3.5 million and $21,000, respectively, and a reversal of provision for unfunded lending commitments of $421,000 for the year ended September 30, 2024. Provisions for the year ended September 30, 2025 were lower due to lower loan balances and a decrease in qualitative reserves. Net charge-offs in 2025 were $887,000 compared to $527,000 for 2024 and nonperforming loans decreased $2.3 million to $14.6 million at September 30, 2025. In 2024, the Company recognized a provision for credit losses for loans of $3.5 million, a credit for unfunded lending commitments of $421,000, and a provision for credit losses for securities of $21,000 for the year ended September 30, 2024 compared to a provision for loan losses of $2.6 million only for 2023. The provision for credit losses for loans increased primarily due to loan growth and the effects of adopting the Current Expected Credit Loss (CECL) methodology during 2024. Net charge-offs in 2024 were $527,000 compared to $1.1 million for 2023 and nonperforming loans increased $3.0 million to $16.9 million at September 30, 2024. See “ Analysis of Nonperforming and Classified Assets ” included herein. It is management’s assessment that the allowance for credit losses at September 30, 2025 was adequate and appropriately reflected the current expected losses in the Bank’s loan portfolio at that date.
Noninterest Income. Noninterest income increased $6.3 million, or 50.4%, from $12.5 million for the year ended September 30, 2024 to $18.8 million for the year ended September 30, 2025. The increase was due primarily to a $4.0 million net gain on sale of home equity lines of credit (“HELOC”) in 2025 with no corresponding amount for 2024 and a $1.2 million increase in net gain on sale of SBA loans. In 2024, noninterest income decreased $12.8 million, or 50.6%, from $25.3 million for the year ended September 30, 2023 to $12.5 million for the year ended September 30, 2024. The decrease was due primarily to a $14.1 million decrease in mortgage banking income due to the wind down of the Company’s national mortgage banking operations in 2024. Mortgage loans originated for sale were $60.8 million in the year ended September 30, 2024 as compared to $587.7 million for 2023.
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Noninterest Expense. Noninterest expenses increased $4.1 million, or 7.7%, from $52.9 million for the year ended September 30, 2024 to $57.0 million for the year ended September 30, 2025. The increase was due primarily to increases in compensation and benefits and other operating expenses of $2.9 million and $1.2 million, respectively. The increase in compensation and benefits is primarily due to routine salary increases and increases in incentive and bonus compensation in 2025 related to stronger Company performance. The increase in other operating expenses was due primarily to a $395,000 accrued contingent liability associated with employee benefits recognized in the 2025 period with no corresponding amount in 2024 and a $721,000 reversal of accrued loss contingencies for SBA-guaranteed loans in the 2024 period with no corresponding amount for 2025. In 2024, noninterest expenses decreased $23.2 million, or 30.5%, from $76.1 million for the year ended September 30, 2023 to $52.9 million for the year ended September 30, 2024. The decrease was due primarily to decreases in compensation and benefits, data processing expense and other operating expenses of $12.0 million, $2.2 million and $7.8 million, respectively. The decrease in compensation and benefits expense was due primarily to a reduction in staffing related to the wind down of the Company’s national mortgage banking operations in the quarter ended December 31, 2023. The decrease in data processing expense was due primarily to expenses recognized in the prior year related to the implementation of the new core operating system in August 2023. The decrease in other operating expense was due primarily to a $1.9 million decrease in net loss on captive insurance operations due to the dissolution of the captive insurance company in September 2023; a decrease in loss contingency accrual for SBA-guaranteed loans of $754,000 in 2024 compared to an increase of $1.5 million in 2023; a decrease in the loss contingency accrual for restitution to mortgage borrowers of $283,000 in 2024 compared to an increase of $609,000 in 2023; and a decrease of $853,000 in loan expense for 2024 as compared to 2023 due primarily to lower mortgage loan originations related to the cessation of national mortgage banking operations in the quarter ended December 31, 2023.
Income Tax Expense. The Company recognized income tax expense of $3.7 million for the year ended September 30, 2025, compared to $1.0 million for the year ended September 30, 2024 and $10,000 for the year ended September 30, 2023. The effective tax rate was 13.8%, 7.0% and 0.1%, for the years ended September 30, 2025, 2024 and 2023, respectively. The higher effective tax rate for 2025 compared to 2024 was primarily due to higher taxable income in 2025. The higher effective tax rate for 2024 compared to 2023 was primarily due to higher taxable income in the 2024 period.
Risk Management
Overview. Managing risk is essential to successfully managing a financial institution. Our most prominent risk exposures are credit risk, interest rate risk and market risk. Credit risk is the risk of not collecting the interest and/or the principal balance of a loan or investment when it is due. 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. 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. Liquidity risk is the possible inability to fund obligations to depositors, lenders or borrowers. The Company has implemented an enterprise risk management structure in order to better manage and mitigate these identified and perceived risks.
Credit Risk Management. 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. When the loan becomes 15 days past due, a late notice is sent to the borrower and a late fee is assessed. When the loan becomes 30 days past due, a more formal letter is sent. Between 15 and 30 days past due, telephone calls are also made to the borrower. After 30 days, we regard the borrower as in default. The borrower may be sent a letter from our attorney and we may commence collection proceedings. If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure sale, the real property securing the loan generally is sold at foreclosure. Generally, when a consumer loan becomes 60 days past due, we institute collection proceedings and attempt to repossess any personal property that secures the loan. Generally, we institute foreclosure proceedings when a loan is 60 days past due. Management obtains the approval of the Board of Directors to proceed with foreclosure of property. 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, financial difficulty modifications (“FDMs”), repossessed assets and loans that are 90 days or more past due to be nonperforming assets. Loans are generally placed on nonaccrual status when they become 90 days delinquent at which time the accrual of interest ceases and the allowance for any uncollectible accrued
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interest is established and charged against operations. Typically, payments received on a nonaccrual loan are first applied to the outstanding principal balance.
Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned until it is sold. When property is acquired it is recorded at its fair market value, less estimated costs to sell, at the date of foreclosure. Holding costs and declines in fair value after acquisition of the property result in charges against income. Former bank premises held for sale are also included in other real estate owned, but are not included in the nonperforming asset totals below.
The following table provides information with respect to our nonperforming assets at the dates indicated. Included in nonperforming loans are loans for which the Bank has modified the repayment terms, and therefore are considered to be FDMs. There were no new FDMs made or modifications of existing FDMs during the year ended September 30, 2025.
At September 30,
(Dollars in thousands)
Nonaccrual loans
Accruing loans past due 90 days or more
Total nonperforming loans
Performing TDRs
Foreclosed real estate
Total nonperforming assets
Nonaccrual loans to total loans
Total nonperforming loans to total loans
Total nonperforming loans to total assets
Total nonperforming assets to total assets
Federal and state banking regulations require us to review and classify our assets on a regular basis. In addition, the Bank’s regulators have the authority to identify problem assets and, if appropriate, require them to be classified. There are three classifications for problem assets: substandard, doubtful and loss. “Substandard assets” must have one or more defined weaknesses and are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. “Doubtful assets” have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified “loss” is considered uncollectible and of such little value that continuance as an asset of the institution, without establishment of a specific allowance or charge-off, is not warranted. The regulations also provide for a “special mention” category, described as assets which do not currently expose us to a sufficient degree of risk to warrant classification but do possess credit deficiencies or potential weaknesses deserving our close attention. When we classify an asset as doubtful we may establish a specific allowance for credit losses. If we classify an asset as loss, we charge off an amount equal to 100% of the portion of the asset classified loss.
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. Other than as disclosed in the above tables, there are no other loans where management has seriousdoubts about the ability of the borrowers to comply with the present loan repayment terms. Classified assets also include investment securities that have experienced a downgrade of the security’s credit quality rating by various rating agencies.
The Company adopted ASU 2016-13 effective October 1, 2023. See Note 1 of the Notes to Consolidated Financial Statements beginning on page F-1 of this annual report for additional information regarding the methodology used to determine the allowance for credit losses. The following table sets forth the breakdown of the allowance for credit losses by loan category at the dates indicated.
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At September 30,
Loans in
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
Commercial real estate
Single tenant net lease
SBA commercial real estate
Multi-family
Residential construction
Commercial construction
Land and land development
Commercial business
SBA commercial business
Consumer
Total allowance for credit losses
Although we believe that we use the best information available to establish the allowance for credit losses, future adjustments to the allowance for credit 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 banking regulators may assess our allowance for credit losses based on judgments different from ours, and we may determine to increase our allowance for credit losses based on their assessments. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for credit losses is adequate or that increases will not be necessary should the quality of any loans deteriorate as a result of the factors discussed above. Any material increase in the allowance for credit losses may adversely affect our financial condition and results of operations.
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Analysis of Loan Loss Experience. The following table sets forth an analysis of the allowance for credit losses for the periods indicated.
Year Ended September 30,
(Dollars in thousands)
Allowance for credit losses at beginning of period
ASU 2016 - 13 (CECL) implementation
Provision (credit) for credit losses
Charge offs:
Residential real estate
Commercial real estate
Single tenant net lease
SBA commercial real estate
Multi-family
Residential construction
Commercial construction
Land and land development
Commercial business
SBA commercial business
Consumer
Total charge-offs
Recoveries:
Residential real estate
Commercial real estate
Single tenant net lease
SBA commercial real estate
Multi-family
Residential construction
Commercial construction
Land and land development
Commercial business
SBA commercial business
Consumer
Total recoveries
Net charge-offs
Allowance for credit losses at end of period
Allowance for credit losses to nonaccrual loans
Allowance for credit losses to nonperforming loans
Allowance for credit losses to total loans outstanding at the end of the period
Net charge-offs during the period to average loans outstanding during the period
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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
Residential real estate
Commercial real estate
Single tenant net lease
SBA commercial real estate
Multi-family
Residential construction
Commercial construction
Land and land development
Commercial business
SBA commercial business
Consumer
Total loans
Interest Rate Risk Management. We manage the interest rate sensitivity of our interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects of changes in the interest rate environment. Deposit accounts typically react more quickly to changes in market interest rates than mortgage loans because of the shorter maturities of deposits. As a result, sharp increases in interest rates may adversely affect our earnings while decreases in interest rates may beneficially affect our earnings. To reduce the potential volatility of our earnings, we have sought to improve the match between asset and liability maturities and rates, while maintaining an acceptable interest rate spread. Our strategy for managing interest rate risk emphasizes: adjusting the maturities of borrowings; adjusting the investment portfolio mix and duration and generally selling in the secondary market substantially all newly originated, fixed rate one-to four-family residential real estate loans. We currently do not participate in hedging programs, interest rate swaps or other activities involving the use of derivative financial instruments. See Note 18 of the Notes to Consolidated Financial Statements beginning on page F-1 of this annual report for additional information regarding derivative financial instruments.
We have an Asset/Liability Management Committee, which includes members of management selected by the Board of Directors, to communicate, coordinate and control all aspects involving asset/liability management. The committee establishes and monitors the volume, maturities, pricing and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that are consistent with liquidity, growth, risk limits and profitability goals.
Our goal is to manage asset and liability positions to moderate the effects of interest rate fluctuations on net interest income and net income.
Market Risk Analysis. An element in our ongoing interest rate risk management process is to measure and monitor interest rate risk using a Net Interest Income at Risk simulation to model the interest rate sensitivity of the balance sheet and to quantify the impact of changing interest rates on the Company. The model quantifies the effects of various possible interest rate scenarios on projected net interest income over a one-year horizon. The model assumes a semi-static balance sheet and measures the impact on net interest income relative to a base case scenario of hypothetical changes in interest rates over twelve months and provides no effect given to any steps that management might take to counter the effect of the interest rate movements. 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.
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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, 2025 and 2024 financial information. The simulated changes presented in the following table are within policy guidelines approved by the Company’s Board of Directors.
At September 30, 2025
At September 30, 2024
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)
Static
At September 30, 2025, 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 $3.6 million or 4.95% 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 8.70% and 12.40%, respectively. An immediate and sustained decrease in rates of 1.00% and 2.00% would increase our net interest income by $3.8 million and $7.7 million, or 5.23% and 10.56%, respectively, over a one year horizon compared to a flat interest rate scenario.
The Company also has longer term interest rate risk exposure, which may not be appropriately measured by Net Interest Income at Risk modeling, and therefore uses an Economic Value of Equity (“EVE”) interest rate sensitivity analysis in order to evaluate the impact of its interest rate risk on earnings and capital. This is measured by computing the changes in net EVE for its cash flows from assets, liabilities and off-balance sheet items in the event of a range of assumed changes in market interest rates. EVE modeling involves discounting present values of all cash flows for on and off balance sheet items under different interest rate scenarios and provides no effect given to any steps that management might take to counter the effect of the interest rate movements. The discounted present value of all cash flows represents the Company’s EVE and is equal to the market value of assets minus the market value of liabilities, with adjustments made for off-balance sheet items. The amount of base case EVE and its sensitivity to shifts in interest rates provide a measure of the longer term re-pricing and option risk in the balance sheet.
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, 2025 and 2024 financial information. The simulated changes presented in the following table are not within policy guidelines approved by the Company’s Board of Directors due to the strategic decision to attempt to enhance the Company’s profile in the declining rate scenarios.
At September 30, 2025
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)
Static
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At September 30, 2024
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)
Static
The previous table indicates that at September 30, 2025, 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.
The models are driven by expected behavior in various interest rate scenarios and many factors besides market interest rates affect the Company’s net interest income and EVE. For this reason, we model many different combinations of interest rates and balance sheet assumptions to understand its overall sensitivity to market interest rate changes. Therefore, as with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing tables and it is recognized that the model outputs are not guarantees of actual results. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate mortgage loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from time deposits could deviate significantly from those assumed in calculating the table.
Liquidity Management. Liquidity is the ability to meet current and future short-term financial obligations. Our primary sources of funds consist of deposit inflows, loan repayments, maturities and sales of investment securities and borrowings from the FHLB. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.
The Bank regularly adjusts its investments in liquid assets based upon its assessment of (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities and (4) the objectives of our asset/liability management policy.
The Bank’s most liquid assets are cash and cash equivalents and interest-bearing deposits. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At September 30, 2025, cash and cash equivalents totaled $31.9 million. Securities classified as available-for-sale, amounting to $251.8 million, at September 30, 2025, provide additional sources of liquidity. At September 30, 2025, we had the ability to borrow a total of approximately $884.9 million from the FHLB, of which $435.0 million was borrowed and outstanding. 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, 2025. 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, 2025.
At September 30, 2025, the Bank had $362.6 million in commitments to extend credit outstanding. Time deposits due within one year of September 30, 2025 totaled $452.6 million, or 91.8% of time deposits. 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 volatile interest rate environment and local competitive pressure. The balance also includes $219.9 million in brokered and reciprocal time deposits at September 30, 2025. 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, 2026. We believe, 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.
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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. 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. At September 30, 2025, the Company had liquid assets of $3.4 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. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors and other factors. We generally manage the pricing of our deposits to be competitive. Occasionally, we offer promotional rates on certain deposit products to attract deposits.
Capital Management. The Bank is subject to various regulatory capital requirements administered by the federal banking agencies, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At September 30, 2025, 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. In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. 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, 2025, 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.
Effect of Inflation and Changing Prices
The consolidated financial statements and related financial data presented in this annual report have been prepared according to accounting principles generally accepted in the United States, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institution’s performance than do general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.
