Breaking Down First Savings Financial Group, Inc. (FSFG) Financial Health: Key Insights for Investors

You're looking at First Savings Financial Group, Inc. (FSFG) and seeing a bank that just closed its fiscal year 2025 with strong operational results, but the real story is the near-term strategic pivot. Honestly, the financials are defintely solid: net income jumped to $23.2 million for the year, a massive leap from $13.6 million in 2024, pushing diluted earnings per share (EPS) up to $3.32. That's the kind of performance that signals effective management of their loan book and a 12.5% rise in net interest income to $65.3 million. But here's the quick math on the opportunity: the announced merger with First Merchants Corporation is the single biggest factor to watch, as it fundamentally changes the valuation equation and is driving the current analyst consensus of a Strong Buy with an average price target around $32.33. Still, you have to map the risk of integration failure against the reward of a larger platform, especially since total assets actually decreased by $50.8 million to $2.40 billion as of September 30, 2025.

Revenue Analysis

If you're looking at First Savings Financial Group, Inc. (FSFG), the direct takeaway is this: the company's revenue engine is running hotter, primarily driven by a strong core lending environment and a smart shift in their loan-sale strategy. For the fiscal year ended September 30, 2025, the growth story is all about maximizing their net interest margin (NIM), which is the bank's core profitability metric.

The revenue streams for a bank holding company like FSFG boil down to two main components: Net Interest Income (NII), which is the money made from loans minus the cost of deposits, and Noninterest Income, which comes from fees and gains on sales. This is a very simple model.

Core Revenue Stream: Net Interest Income (NII)

Net Interest Income remains the backbone of First Savings Financial Group, Inc.'s financial health. For fiscal year 2025, NII hit a strong $65.3 million. This figure is a critical indicator of their core banking segment's efficiency and pricing power in the current rate environment.

The year-over-year (YoY) growth here is defintely compelling. NII increased by $7.2 million, representing a 12.5% jump compared to the prior fiscal year. This isn't just a simple rate hike benefit; it's a sign that they've successfully managed their cost of funds (what they pay on deposits) better than the yield on their earning assets (what they make on loans). The tax-equivalent net interest margin (NIM) itself improved significantly, rising to 2.94% from 2.68% in fiscal year 2024.

Strategic Shift in Noninterest Income

The secondary revenue stream, Noninterest Income, is where you see the strategic pivot that's driving outsized gains. This income stream increased by a substantial $6.3 million year-over-year. This is a huge boost for a bank of this size.

The bulk of this increase came from a deliberate move to an originate-for-sale model for certain products. The biggest drivers were:

• Net gain on sales of Home Equity Lines of Credit (HELOC): $4.0 million
• Increased net gain on sale of Small Business Administration (SBA) loans: $1.2 million

Here's the quick math on the strategic growth: The $4.0 million gain on HELOC sales is entirely new revenue, as there was no corresponding gain in fiscal year 2024. Plus, the SBA Lending segment, which is part of their specialty finance business, is now consistently profitable, posting its third consecutive profitable quarter by the end of FY 2025. You can dive deeper into the ownership structure and strategy behind these moves in Exploring First Savings Financial Group, Inc. (FSFG) Investor Profile: Who's Buying and Why?

Fiscal Year 2025 Revenue Component Breakdown

To map the contribution of each segment, you need to see the raw numbers. The table below shows the core revenue components for the last two fiscal years, clearly illustrating where the growth is coming from.

What this estimate hides is the exact proportion of total revenue, but the trend is clear: the $7.2 million NII increase and the $6.3 million Noninterest Income jump are the dual engines of their improved performance. The core banking business is strong, and the strategic decision to sell certain loans is paying off handsomely in noninterest income.

Profitability Metrics

The profitability of First Savings Financial Group, Inc. (FSFG) for the fiscal year ended September 30, 2025, shows a dramatic turnaround, with the net profit margin more than doubling year-over-year. This surge indicates strong operational efficiency and a successful navigation of the interest rate environment, which is a defintely positive signal for investors.

For a bank, the traditional metrics of Gross Profit and Operating Profit are slightly different than for a manufacturing company. We focus instead on Net Interest Income (NII) and Pre-Tax Income. FSFG reported a net income of $23.2 million for the 2025 fiscal year on total revenue of $83.83 million, translating directly into the bottom-line performance you care about.

Gross Profit, Operating Profit, and Net Profit Margins

The core measure of a bank's gross profitability is the Net Interest Margin (NIM), which is the difference between the interest income earned on assets (like loans) and the interest paid on liabilities (like deposits), relative to earning assets. FSFG's NIM improved to 2.94% in fiscal year 2025, up from 2.68% in 2024. This 26 basis point improvement shows the bank is effectively managing its funding costs and loan yields.

To gauge operational efficiency before taxes, we look at the Pre-Tax Margin (Pre-Tax Income divided by Revenue), which acts as the bank's Operating Profit Margin. Based on the reported net income and a 2025 effective tax rate of 13.8%, FSFG's Pre-Tax Margin is approximately 32.1%. This is a strong indicator of cost control and high revenue generation relative to overhead. The most significant figure is the Net Profit Margin, which surged to 27.1% for the fiscal year 2025.

• Net Interest Margin (NIM): 2.94% (Core 'Gross' Profitability)
• Pre-Tax Margin: $\approx$ 32.1% (Proxy for Operating Profit Margin)
• Net Profit Margin: 27.1% (Bottom-Line Profitability)

Trends and Industry Comparison

The trend in profitability is exceptional. FSFG's Net Profit Margin of 27.1% is more than double the 12.7% margin reported in the previous fiscal year. This is a massive leap, driven by a 12.5% increase in Net Interest Income, which hit $65.3 million, and a jump in noninterest income from loan sales. The company's Return on Equity (ROE) for 2025 was 12.50%, which comfortably exceeds the regional banking industry's ROE of 11% reported in late 2024, demonstrating superior return generation. The market seems to recognize this but still offers a discount; FSFG's Price-to-Earnings (P/E) ratio of 9.5x sits below the broader industry average of 11x.

Analysis of Operational Efficiency

The surge in margins is directly tied to improved operational efficiency, which is measured by the efficiency ratio (noninterest expense as a percentage of revenue). The lower this ratio, the better. FSFG saw its efficiency ratio decrease by a substantial 723 basis points in 2025 compared to the prior fiscal year. This means the company is spending significantly less to generate each dollar of revenue. The management team is clearly executing on cost control and revenue growth simultaneously.

Here's the quick math on the efficiency improvement and profitability: The noninterest expenses increased by $4.1 million, but the revenue growth outpaced this cost increase by a wide margin, proving that the fixed cost base is being better utilized. This is a classic case of positive operating leverage (operating leverage is the ratio of fixed costs to variable costs, and positive leverage means revenue growth is faster than cost growth). For more on the strategic drivers behind this performance, you can review the Mission Statement, Vision, & Core Values of First Savings Financial Group, Inc. (FSFG).

Your action item is to investigate the sustainability of the noninterest income gains-specifically, the gains on sales of SBA and HELOC loans-to determine if the 27.1% net margin is a new baseline or a one-time peak.

Debt vs. Equity Structure

You need a clear picture of how First Savings Financial Group, Inc. (FSFG) funds its operations, and honestly, the balance is tilted heavily toward debt, which is typical for a bank, but still worth watching. For the fiscal year ending September 30, 2025, the company's total stockholders' equity stood at a solid $193.5 million. This equity base supports a much larger liability profile.

The company's primary funding mechanism involves deposits and wholesale borrowings, which is how a bank operates. A key component of their borrowing structure is the use of Federal Home Loan Bank (FHLB) borrowings, which totaled approximately $434.924 million as of June 30, 2025. Their more explicit long-term debt, categorized as subordinated debt and other borrowings, was reduced to about $28.722 million as of the same date. This mix shows a reliance on secured, short-to-medium-term funding (FHLB) alongside their core customer deposits.

Debt-to-Equity: The Industry Context

The Debt-to-Equity (D/E) ratio is your quick measure of financial leverage (the amount of debt used to finance assets relative to the value represented in shareholders' equity). For First Savings Financial Group, Inc. (FSFG), the D/E ratio for the 2025 fiscal year was approximately 2.40 (or 240%). This is a high number, but you have to compare it to the right industry benchmark.

Here's the quick math: The average D/E ratio for the broader Financials sector in the developed economic region is significantly lower, hovering around 98.2% (or 0.982). First Savings Financial Group, Inc. (FSFG) runs with a leverage ratio well over double the sector average, reflecting a more aggressive use of debt capital to drive asset growth, which is a common strategy for smaller, growth-focused regional banks.

• FSFG D/E Ratio (FY 2025): 2.40
• Financials Sector Average D/E: 0.982

Strategic Debt Management and Refinancing

The company is defintely not sitting still on its debt structure. In a clear move to expand its net interest margin, First Savings Financial Group, Inc. (FSFG) redeemed $20.0 million in high-cost subordinated notes on April 30, 2025. These notes, which were due in 2028, were yielding a significant 7.66% before the redemption.

This redemption was a smart tactical shift: they paid off the high-yield debt using a $19.0 million dividend from their bank subsidiary, which was funded by short-term wholesale borrowings at a much lower rate of 4.48%. This action immediately lowers their cost of funds and frees up capital for other uses, potentially including future share repurchases. This is how management balances debt financing-by actively swapping expensive, long-term debt for cheaper, short-term funding when market conditions allow.

The company's overall financial health was recently assessed as a 'Buy (B-)' by Weiss Ratings in October 2025, which suggests a stable-to-positive outlook despite the high leverage relative to equity. For a deeper dive into the company's long-term vision, you can review their Mission Statement, Vision, & Core Values of First Savings Financial Group, Inc. (FSFG).

Liquidity and Solvency

You are looking at the liquidity of First Savings Financial Group, Inc. (FSFG), and the first thing to understand is that a bank's balance sheet is structured differently than a manufacturing or retail company. So, don't panic when you see the ratios.

The core takeaway is that while the traditional short-term liquidity ratios look extremely low, this is standard for a regional bank. Their real liquidity is in the quality of their loan portfolio and their access to funding sources, like customer deposits and Federal Home Loan Bank (FHLB) borrowings. The key is monitoring cash flow trends and the stability of their funding base, which saw a positive trend in 2025.

Current and Quick Ratios: A Bank's Anomaly

For the fiscal year ended September 30, 2025, First Savings Financial Group, Inc.'s liquidity ratios appear concerning if you apply a general industry benchmark of 1.0 or higher. The current ratio (current assets / current liabilities) and the quick ratio (a more stringent measure of liquid assets) are both reported at approximately 0.15 (TTM). This means current liabilities-primarily customer deposits-are significantly greater than short-term liquid assets like cash and short-term investments.

Here's the quick math: a bank's largest current liability is deposits, and its largest asset is long-term loans. The low ratio is a feature, not a bug, of the banking model. What this estimate hides is the bank's ability to quickly sell marketable securities or access wholesale funding. Honestly, a bank's liquidity position is better judged by its loan-to-deposit ratio and capital adequacy, which have shown improvement.

• Current Ratio (FY 2025 TTM): 0.15
• Quick Ratio (FY 2025 TTM): 0.15

Working Capital Trends and Cash Flow Overview

The working capital (current assets minus current liabilities) for First Savings Financial Group, Inc. is deeply negative, reflected by a Net Current Asset Value of approximately $-1.97 billion (TTM). This large deficit is normal because customer deposits are classified as current liabilities, and they are the fuel for a bank's long-term lending. The real story is in the cash flow statement, which maps the movement of that fuel.

The cash flow statement for the fiscal year ended September 30, 2025, shows a significant shift in the core operating activities. Cash Flow from Operating Activities (CFO) was $-26.0 million. A negative CFO is a red flag for most companies, but for a bank, it can signal a rapid increase in the loan portfolio, which is an operating activity that consumes cash. However, in this case, the negative flow is more likely tied to changes in working capital accounts like deposits and loans held for sale, which can fluctuate wildly.

The Investing and Financing sections show a strategic repositioning:

• Investing Cash Flow: The company executed an $87.2 million bulk sale of residential real estate home equity line of credit loans in the first fiscal quarter of 2025. This is a clear move to generate capital, moderate the loan-to-deposit ratio, and decrease reliance on non-core funding, which will show up as a cash inflow in investing activities.
• Financing Cash Flow: Customer deposits, a key source of financing, increased by a solid $118.2 million since September 2024. This growth in stable funding is a major strength, plus the company's announced merger with First Merchants Corporation in September 2025 provides a clear, near-term liquidity and capital exit strategy.

Here is a summary of the key cash flow components for the fiscal year 2025:

Potential Liquidity Concerns and Strengths

The primary liquidity strength is the growth in customer deposits and the proactive capital management, like the 2025 loan bulk sale, which generated a cash surplus to potentially retire high-cost subordinated debt. The biggest near-term liquidity concern for any regional bank in this environment is interest rate risk and deposit flight, but First Savings Financial Group, Inc.'s deposit growth of $118.2 million is a strong counter-indicator. The announced merger also provides a defintely clear path for long-term capital stability. For a deeper dive into the bank's overall financial picture, you should check out Breaking Down First Savings Financial Group, Inc. (FSFG) Financial Health: Key Insights for Investors.

Valuation Analysis

You need a clear answer on whether First Savings Financial Group, Inc. (FSFG) is a value play or a trap, and the data gives us a mixed, but actionable, signal. The company looks undervalued based on core earnings multiples compared to its peers, but its stock price is currently trading at a premium to its estimated discounted cash flow (DCF) fair value. This means you must weigh the strong fundamental performance against the market's current premium and the pending merger.

Here's the quick math: For the fiscal year ended September 30, 2025, First Savings Financial Group reported a net income of $23.2 million, or $3.32 per diluted share, a significant jump from the prior year. This strong earnings growth makes its valuation multiples look compelling.

The market is pricing First Savings Financial Group at a trailing Price-to-Earnings (P/E) ratio of only 9.07x as of November 2025. To be fair, the regional bank sector average P/E is around 9.4x, and the peer average is higher at 12.1x. This discount suggests the stock is inexpensive on core earnings. However, the Price-to-Book (P/B) ratio, a crucial metric for banks that compares market value to book value, sits at 1.07x, which is right in line with the peer and sector average of roughly 1.0x. So, you're not getting a massive discount on the company's tangible assets.

• P/E Ratio (TTM): 9.07x (Suggests undervaluation vs. peers).
• P/B Ratio: 1.07x (In line with sector average).
• Analyst Consensus: Strong Buy (Average target of $32.50).

The stock price has been relatively resilient, increasing 4.08% over the last 12 months, with a 52-week trading range between $21.63 and $33.00. As of November 2025, the stock trades around $29.32 per share. The average 12-month price target from analysts is $32.50, which implies an upside of about 10.85% from the current price. That's a decent margin, but it's defintely not a screaming bargain.

What this estimate hides is the intrinsic value picture. Some models suggest the DCF fair value is closer to $20.00 per share, meaning the current price of $29.32 is trading at a significant premium to its long-term cash flow potential. This premium is likely driven by the announced merger agreement with First Merchants Corporation, which is expected to integrate in 2026. This acquisition premium is a near-term opportunity, but it adds risk if the deal structure or terms change.

The dividend profile is solid, too. The stock offers a current dividend yield of 2.18%, with a conservative payout ratio of just 18.98% of earnings. This low payout ratio gives the company plenty of room to reinvest in the business or weather unexpected economic shifts. It's a sign of financial discipline.

Your next step should be to analyze the merger's terms, specifically the cash and stock components of the First Merchants Corporation deal, to see if the implied acquisition price is closer to the analyst target or the DCF value. You can find more detail on the company's performance in Breaking Down First Savings Financial Group, Inc. (FSFG) Financial Health: Key Insights for Investors.

Risk Factors

You're looking at First Savings Financial Group, Inc. (FSFG) after a strong fiscal year 2025, with net income hitting $23.2 million, a significant jump from the prior year. But as a seasoned analyst, I have to tell you that recent performance doesn't erase all the risks. The biggest near-term risk is defintely the merger, but you also need to keep your eye on the long-term earnings trend and the broader economic environment.

Here's the quick math: while the net profit margin surged to 27.1% in FY 2025, the five-year average still shows an annual earnings decline of 28.3%. This means the recent momentum needs to be sustained for several more quarters before we can call the long-term recovery complete. That's the reality of a regional bank in a volatile market.

The Overarching Merger Risk

The most immediate and specific risk is the pending merger with First Merchants Corporation, announced in September 2025. While this is a strategic move intended to create shareholder value, mergers always carry execution risk-the chance that the integration goes sideways, or that key talent walks away.

More concretely, the definitive agreement includes a financial risk: if First Savings Financial Group, Inc. terminates the merger under certain specific circumstances, the company is required to pay First Merchants Corporation a termination fee of $10.0 million. That's a direct hit to capital that would negate a significant portion of the quarter's earnings if the deal collapses.

External and Industry Headwinds

Like any regional bank, First Savings Financial Group, Inc. is highly exposed to macroeconomic shifts. You can't control the Federal Reserve, so interest rate risk is always a factor. While the tax equivalent net interest margin improved to 2.94% in FY 2025, a sudden shift in the interest rate environment could quickly reverse this gain.

Also, the competitive landscape is brutal. The company operates in a specific market area in southern Indiana, and competition for both loans and deposits is intense. Plus, regulatory changes-especially those coming out of Washington, D.C., for the financial sector-can impose new compliance costs that eat into that $83.83 million in annual revenue.

• Changes in U.S. monetary policy or fiscal policies.
• Fluctuations in local real estate market values.
• Increased competition for high-quality loan demand.

Operational and Credit Quality Concerns

Looking deeper into the financials, a few operational and credit-related metrics warrant attention. While the overall provision for credit losses was lower, the company's charge-offs increased to $887,000 for FY 2025, up from $527,000 in the previous year. This modest increase in charge-offs is a sign that credit quality, while currently manageable, requires close monitoring, especially in the loan portfolio.

Furthermore, noninterest expenses rose by $4.1 million in the fiscal year, mainly due to higher compensation and benefits. While the efficiency ratio improved to 67.69%, cost control remains a continuous battle, and rising personnel costs could pressure future margins.

To be fair, the merger is the ultimate mitigation strategy here; it's a clear path to scale and diversification, which should help stabilize the long-term earnings trend. If you want to dive deeper into the full picture, check out this post: Breaking Down First Savings Financial Group, Inc. (FSFG) Financial Health: Key Insights for Investors.

Growth Opportunities

You're looking past the strong 2025 numbers and asking the right question: What is the next catalyst for First Savings Financial Group, Inc. (FSFG)? The direct takeaway is that their near-term growth story is less about organic expansion and entirely about the strategic merger with First Merchants Corporation, announced in September 2025, which is expected to drive significant scale and efficiency in 2026 and beyond. This is the defintely the biggest move on the board.

The Merger: A Strategic Leap for Scale

The planned merger with First Merchants Corporation, which is slated for integration in 2026, is the single most important factor shaping First Savings Financial Group, Inc.'s future. This move isn't just a simple acquisition; it's a strategy to enhance shareholder value and strengthen their market position by joining a much larger entity. For investors, this means the focus shifts from a regional bank's standalone performance to the value First Savings Financial Group, Inc.'s franchise will contribute to the combined institution.

Here's the quick math on their 2025 performance, which provides a strong baseline for the merger:

• Net Income: Surged to $23.2 million for the fiscal year ended September 30, 2025, up from $13.6 million in 2024.
• Diluted EPS: Rose substantially to $3.32 per share in FY 2025, compared to $1.98 in the prior year.
• Net Interest Income: Increased 12.5% to $65.3 million, a clear sign of improved earning power.

Key Growth Drivers and Product Focus

Even before the merger, First Savings Financial Group, Inc. demonstrated strong operational growth, largely through smart product specialization. Their noninterest income saw a boost from the successful sale of Home Equity Lines of Credit (HELOC) and Small Business Administration (SBA) loans. This is a clear product innovation strategy: originate high-quality loans and sell them for a gain, which diversifies their revenue streams beyond just traditional net interest income (NII).

Plus, the SBA Lending segment returned to profitability in the second quarter of 2025, which is a crucial turnaround for a specialized business line. This focus on profitable loan origination and sale is a competitive advantage (a 'fee income' stream) that many regional banks struggle to execute consistently.

Competitive Advantages and Financial Precision

First Savings Financial Group, Inc. has a distinct advantage in operational efficiency, which is reflected in their margins. Their net profit margin for the period surged to 27.1%, more than double the prior year's 12.7%. This margin strength is a major differentiator in the regional bank sector, where many peers face persistent profitability pressure. This efficiency is what makes the company an attractive partner for First Merchants. Their tax equivalent net interest margin (NIM)-the spread between what they earn on loans and pay on deposits-also improved to 2.94% in FY 2025, up 26 basis points from 2.68% in 2024.

What this estimate hides, however, is the short-term noise. While some analysts project a significant revenue figure for 2026-around $509 million-they also forecast a short-term negative annual earnings growth rate of -47.54%. This is a common phenomenon around a merger, where one-time costs and the integration process temporarily depress reported earnings. You need to look at the long-term combined entity's value, not just the immediate post-merger quarter. For a deeper dive into who is buying the stock right now, you should check out Exploring First Savings Financial Group, Inc. (FSFG) Investor Profile: Who's Buying and Why?