First Savings Financial Group, Inc. - Quarter Report: 2013 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from______________________ to__________________

Commission File No. 1-34155

First Savings Financial Group, Inc.

(Exact name of registrant as specified in its charter)

Indiana		37-1567871
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

501 East Lewis & Clark Parkway, Indiana 47129

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code 1-812-283-0724

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

(Check one):	Large Accelerated Filer ¨	Accelerated Filer ¨

	Non-accelerated Filer ¨	Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of the registrant’s common stock as of July 31, 2013 was 2,313,237.

FIRST SAVINGS FINANCIAL GROUP, INC.

INDEX

		Page
Part I	Financial Information

	Item 1. Financial Statements

	Consolidated Balance Sheets as of June 30, 2013 and September 30, 2012 (unaudited)	3

	Consolidated Statements of Income for the three months and nine months ended June 30, 2013 and 2012 (unaudited)	4

	Consolidated Statements of Comprehensive Income (Loss) for the three months and nine months ended June 30, 2013 and 2012 (unaudited)	5

	Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended June 30, 2013 and 2012 (unaudited)	6

	Consolidated Statements of Cash Flows for the nine months ended June 30, 2013 and 2012 (unaudited)	7

	Notes to Consolidated Financial Statements (unaudited)	8-43

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	44-56

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	57-59

	Item 4. Controls and Procedures	60

Part II	Other Information

	Item 1. Legal Proceedings	61

	Item 1A. Risk Factors	61

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	62

	Item 3. Defaults Upon Senior Securities	62

	Item 4. Mine Safety Disclosures	62

	Item 5. Other Information	63

	Item 6. Exhibits	63

Signatures		64

-2-

PART I - FINANCIAL INFORMATION

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30,			September 30,
(In thousands, except share and per share data)	2013			2012

ASSETS
Cash and due from banks	$	7,903		$	27,569
Interest-bearing deposits with banks		13,212			11,222
Total cash and cash equivalents		21,115			38,791

Trading account securities, at fair value		2,277			3,562
Securities available for sale, at fair value		165,051			152,543
Securities held to maturity		6,772			7,848

Loans held for sale		233			643
Loans, net		404,482			389,067

Federal Home Loan Bank stock, at cost		5,400			5,400
Real estate development and construction		7,228			4,538
Premises and equipment		11,324			10,907
Foreclosed real estate		671			1,481
Accrued interest receivable:
Loans		1,276			1,358
Securities		1,432			1,054
Cash surrender value of life insurance		12,834			8,548
Goodwill		7,936			7,936
Core deposit intangibles		2,155			2,413
Other assets		2,834			2,824

Total Assets	$	653,020		$	638,913

LIABILITIES
Deposits:
Noninterest-bearing	$	51,908		$	50,502
Interest-bearing		432,475			443,732
Total deposits		484,383			494,234

Repurchase agreements		1,334			1,329
Borrowings from Federal Home Loan Bank		76,365			53,062
Other long-term debt		4,962			2,132
Accrued interest payable		186			236
Advance payments by borrowers for taxes and insurance		464			622
Accrued expenses and other liabilities		3,299			4,372
Total Liabilities		570,993			555,987

STOCKHOLDERS' EQUITY
Preferred stock of $.01 par value per share Authorized 982,880 shares; none issued		-			-
Senior Non-Cumulative Perpetual Preferred Stock, Series A, $.01 par value; Authorized 17,120 shares; issued 17,120 shares; aggregate liquidation preference of $17,120		-			-
Common stock of $.01 par value per share
Authorized 20,000,000 shares; issued 2,542,042 shares; outstanding 2,313,237 and 2,329,681 shares in 2013 and 2012, respectively		25			25
Additional paid-in capital - preferred		17,120			17,120
Additional paid-in capital - common		25,375			24,901
Retained earnings - substantially restricted		41,775			39,917
Accumulated other comprehensive income		2,220			5,609
Unearned ESOP shares		(903	)		(1,198	)
Unearned stock compensation		(488	)		(682	)
Less treasury stock, at cost - 228,805 shares (212,361 shares at September 30, 2012)		(3,097	)		(2,766	)
Total Stockholders' Equity		82,027			82,926

Total Liabilities and Stockholders' Equity	$	653,020		$	638,913

See notes to consolidated financial statements.

-3-

PART I - FINANCIAL INFORMATION

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
(In thousands, except share and per share data)	2013			2012			2013		2012

INTEREST INCOME
Loans, including fees	$	5,183		$	5,083		$	15,942	$	15,217
Securities:
Taxable		1,081			1,117			3,180		2,919
Tax-exempt		367			317			1,156		862
Dividend income		48			38			151		110
Interest-bearing deposits with banks		10			4			21		10
Total interest income		6,689			6,559			20,450		19,118

INTEREST EXPENSE
Deposits		642			817			2,172		2,584
Repurchase agreements		2			2			5		64
Borrowings from Federal Home Loan Bank		255			305			814		841
Loans payable		10			-			23		-
Total interest expense		909			1,124			3,014		3,489

Net interest income		5,780			5,435			17,436		15,629
Provision for loan losses		560			308			1,562		897

Net interest income after provision for loan losses		5,220			5,127			15,874		14,732

NONINTEREST INCOME
Service charges on deposit accounts		304			289			921		864
Net gain on sales of available for sale securities		-			18			1		18
Net gain (loss) on trading account securities		(30	)		31			201		31
Unrealized gain (loss) on derivative contract		7			(13	)		6		(33	)
Net gain on sales of loans		235			41			414		114
Increase in cash surrender value of life insurance		98			72			289		221
Gain on life insurance		-			321			-		321
Commission income		77			67			225		202
Real estate lease income		86			-			190		-
Other income		258			219			713		633
Total noninterest income		1,035			1,045			2,960		2,371

NONINTEREST EXPENSE
Compensation and benefits		2,515			2,326			7,825		6,593
Occupancy and equipment		651			468			1,648		1,403
Data processing		262			452			887		1,074
Advertising		96			122			312		481
Professional fees		163			301			650		711
FDIC insurance premiums		133			83			366		266
Net loss on foreclosed real estate		76			96			173		206
Other operating expenses		777			721			2,408		2,202
Total noninterest expense		4,673			4,569			14,269		12,936
Income before income taxes		1,582			1,603			4,565		4,167
Income tax expense		441			331			1,238		1,021
Net Income	$	1,141		$	1,272		$	3,327	$	3,146

Preferred stock dividends declared		43			43			129		128
Net Income Available to Common Shareholders	$	1,098		$	1,229		$	3,198	$	3,018

Net income per common share:
Basic	$	0.51		$	0.57		$	1.48	$	1.40
Diluted	$	0.48		$	0.55		$	1.41	$	1.36

Weighted average common shares outstanding:
Basic		2,173,914			2,167,488			2,164,281		2,159,515
Diluted		2,277,824			2,237,130			2,261,821		2,223,922

Dividends per common share	$	0.10		$	-		$	0.60	$	-

See notes to consolidated financial statements.

-4-

PART I - FINANCIAL INFORMATION

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
(In thousands)	2013			2012			2013			2012

Net Income	$	1,141		$	1,272		$	3,327		$	3,146

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Unrealized gains (losses) on securities available for sale:
Unrealized holding gains (losses) arising during the period		(4,900	)		1,109			(5,135	)		1,598
Income tax (expense) benefit		1,666			(377	)		1,746			(543	)
Net of tax amount		(3,234	)		732			(3,389	)		1,055

Less: reclassification adjustment for realized gains included in net income		-			(18	)		(1	)		(18	)
Income tax expense		-			6			1			6
Net of tax amount		-			(12	)		-			(12	)

Other Comprehensive Income (Loss)		(3,234	)		720			(3,389	)		1,043

Comprehensive Income (Loss)	$	(2,093	)	$	1,992		$	(62	)	$	4,189

See notes to consolidated financial statements.

-5-

PART I - FINANCIAL INFORMATION

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)


										Accumulated			Unearned
										Other			Stock
	Preferred		Common		Additional		Retained			Comprehensive			Compensation			Treasury
(In thousands, except share and per share data)	Stock		Stock		Paid-in Capital		Earnings			Income			and ESOP			Stock			Total

Balances at October 1, 2011	$	-	$	25	$	41,729	$	35,801		$	3,354		$	(2,285	)	$	(2,023	)		76,601

Net income		-		-		-		3,146			-			-			-			3,146

Other comprehensive income		-		-		-		-			1,043			-			-			1,043

Preferred stock dividends		-		-		-		(128	)		-			-			-			(128	)

Stock compensation expense		-		-		147		-			-			195			-			342

Shares released by ESOP trust		-		-		77		-			-			108			-			185

Purchase of 10,128 treasury shares		-		-		-		-			-			-			(172	)		(172	)

Balances at June 30, 2012	$	-	$	25	$	41,953	$	38,819		$	4,397		$	(1,982	)	$	(2,195	)	$	81,017

Balances at October 1, 2012	$	-	$	25	$	42,021	$	39,917		$	5,609		$	(1,880	)	$	(2,766	)	$	82,926

Net income		-		-		-		3,327			-			-			-			3,327

Other comprehensive loss		-		-		-		-			(3,389	)		-			-			(3,389	)

Preferred stock dividends		-		-		-		(129	)		-			-			-			(129	)

Common stock dividends ($0.60 per share)		-		-		-		(1,393	)		-			-			-			(1,393	)

Stock compensation expense		-		-		184		-			-			195			-			379

Shares released by ESOP trust		-		-		290		53			-			294			-			637

Purchase of 16,444 treasury shares		-		-		-		-			-			-			(331	)		(331	)

Balances at June 30, 2013	$	-	$	25	$	42,495	$	41,775		$	2,220		$	(1,391	)	$	(3,097	)	$	82,027

See notes to consolidated financial statements.

-6-

PART I - FINANCIAL INFORMATION

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	June 30,
(In thousands)	2013			2012

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	3,327		$	3,146
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		1,562			897
Depreciation and amortization		861			740
Amortization of premiums and accretion of discounts on securities, net		484			256
(Increase) decrease in trading account securities		1,285			(2,131	)
Loans originated for sale		(12,168	)		(5,231	)
Proceeds on sales of loans		12,992			5,253
Net gain on sales of loans		(414	)		(114	)
Net realized and unrealized loss on foreclosed real estate		11			83
Net gain on sales of available for sale securities		(1	)		(18	)
Unrealized (gain) loss on derivative contract		(6	)		33
Gain on life insurance		-			(321	)
Increase in cash surrender value of life insurance		(289	)		(221	)
Deferred income taxes		11			17
ESOP and stock compensation expense		870			494
Increase in accrued interest receivable		(296	)		(436	)
Decrease in accrued interest payable		(50	)		(151	)
Change in other assets and liabilities, net		138			1,072
Net Cash Provided By Operating Activities		8,317			3,368

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available for sale		(45,882	)		(69,555	)
Proceeds from sales of securities available for sale		801			518
Proceeds from maturities of securities available for sale		12,133			9,118
Proceeds from maturities of securities held to maturity		568			360
Principal collected on securities		15,215			16,912
Net increase in loans		(17,066	)		(12,276	)
Purchase of Federal Home Loan Bank stock		-			(1,000	)
Investment in cash surrender value of life insurance		(4,000	)		-
Proceeds from life insurance		606			-
Proceeds from sale of foreclosed real estate		835			160
Investment in real estate development and construction		(2,713	)		(4,112	)
Purchase of premises and equipment		(997	)		(321	)
Net Cash Used In Investing Activities		(40,500	)		(60,196	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits		(9,851	)		15,373
Net increase (decrease) in repurchase agreements		5			(15,076	)
Increase in Federal Home Loan Bank line of credit		11,359			4,963
Proceeds from Federal Home Loan Bank advances		55,000			100,000
Repayment of Federal Home Loan Bank advances		(43,056	)		(60,056	)
Proceeds from other long-term debt		2,830			-
Net increase (decrease) in advance payments by borrowers for taxes and insurance		(158	)		76
Purchase of treasury stock		(331	)		(172	)
Dividends paid on preferred stock		(129	)		(201	)
Dividends paid on common stock		(1,162	)		-
Net Cash Provided By Financing Activities		14,507			44,907

Net Decrease in Cash and Cash Equivalents		(17,676	)		(11,921	)

Cash and cash equivalents at beginning of period		38,791			27,203

Cash and Cash Equivalents at End of Period	$	21,115		$	15,282

See notes to consolidated financial statements.

-7-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Presentation of Interim Information

First Savings Financial Group, Inc. (the “Company”) is the savings and loan holding company of First Savings Bank, F.S.B. (the “Bank”), a wholly-owned subsidiary. The Bank is a federally-chartered savings bank which provides a variety of banking services to individuals and business customers through fourteen locations in southern Indiana. The Bank attracts deposits primarily from the general public and uses those funds, along with other borrowings, primarily to originate residential mortgage, commercial mortgage, construction, commercial business and consumer loans, and to a lesser extent, to invest in mortgage-backed securities and other securities.

The Bank has three-wholly owned subsidiaries: First Savings Investments, Inc., a Nevada corporation that manages a securities portfolio, FFCC, Inc., which is an Indiana corporation that participates in commercial real estate development and leasing, and Southern Indiana Financial Corporation, which is currently inactive.

In the opinion of management, the unaudited consolidated financial statements include all adjustments considered necessary to present fairly the financial position as of June 30, 2013, the results of operations for the three- and nine-month periods ended June 30, 2013 and 2012, and the cash flows for the nine-month periods ended June 30, 2013 and 2012. All of these adjustments are of a normal, recurring nature. Such adjustments are the only adjustments included in the unaudited consolidated financial statements. Interim results are not necessarily indicative of results for a full year.

The accompanying unaudited consolidated financial statements and notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements, conform to general practices within the banking industry and are presented as permitted by the instructions to Form 10-Q. Accordingly, they do not contain certain information included in the Company’s audited consolidated financial statements and related notes for the year ended September 30, 2012 included in the Company’s Annual Report on Form 10-K.

The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform with the current period presentation.

-8-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Acquisition of Branches

On July 6, 2012, the Company acquired the Indiana branch offices of Elizabethtown, Kentucky-based First Federal Savings Bank of Elizabethtown, Inc. (“First Federal”), pursuant to an Agreement to Purchase Assets and Assume Liabilities dated February 8, 2012 (the “Agreement”). Pursuant to the terms of the Agreement, the Company assumed certain deposit and other liabilities and purchased certain performing loans, real estate and other assets associated with the four First Federal banking offices. The transaction was accounted for using the purchase method of accounting.

The offices are located in Corydon, Elizabeth, Georgetown and Lanesville, Indiana. The Company has consolidated the operations of the acquired Corydon and Georgetown offices with its existing Corydon and Georgetown offices because of their close proximities. The acquisition expanded the Company’s presence in Harrison and Floyd Counties, Indiana, and the Company expects to benefit from growth in this market area as well as from expansion of the banking services provided to the existing customers of First Federal.

Investment Securities

Agency bonds and notes, agency mortgage-backed securities and agency collateralized mortgage obligations (“CMO”) include securities issued by the Government National Mortgage Association (“GNMA”), a U.S. government agency, and the Federal National Mortgage Association (“FNMA”), the Federal Home Loan Mortgage Corporation (“FHLMC”) and the Federal Home Loan Bank (“FHLB”), which are U.S. government-sponsored enterprises. The Company also holds a pass-through asset-backed security guaranteed by the Small Business Administration (“SBA”) representing participating interests in pools of long-term debentures issued by state and local development companies certified by the SBA. Privately-issued CMO and asset-backed securities (“ABS”) are complex securities issued by non-government special-purpose entities that are collateralized by residential mortgage loans and residential home equity loans.

Investment securities have been classified according to management’s intent.

Trading Account Securities

On May 31, 2012, the Company invested in a managed brokerage account that invests in small and medium lot, investment grade municipal bonds. The brokerage account is managed by an investment advisory firm registered with the U.S. Securities and Exchange Commission. At June 30, 2013 and September 30, 2012, trading account securities recorded at fair value totaled $2.3 million and $3.6 million, respectively, comprised of investment grade municipal bonds. During the nine-months ended June 30, 2013, the Company reported net gains on trading account securities of $201,000, including net realized gains on the sale of securities of $242,000, partially offset by net unrealized losses on securities still held as of the balance sheet date of $41,000. During the three months ended June 30, 2013 the Company reported net losses on trading account securities of $30,000, including net realized losses on the sale of securities of $3,000 and net unrealized losses on securities still held as of the balance sheet date of $27,000. During the three and six months ended June 30, 2012 the Company reported net gains on trading account securities of $31,000, including net realized gains on the sale of securities of $22,000 and net unrealized gains on securities still held as of the balance sheet date of $9,000.

-9-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Securities Available for Sale and Held to Maturity

The amortized cost of securities available for sale and held to maturity and their approximate fair values are as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In thousands)
June 30, 2013:
Securities available for sale:

Agency bonds and notes	$	15,885	$	13	$	553	$	15,345
Agency mortgage-backed		42,831		346		329		42,848
Agency CMO		24,730		195		295		24,630
Privately-issued CMO		4,020		682		-		4,702
Privately-issued ABS		5,894		2,229		1		8,122
SBA certificates		2,146		16		-		2,162
Municipal obligations		65,849		2,572		1,270		67,151
Subtotal – debt securities		161,355		6,053		2,448		164,960

Equity securities		-		91		-		91

Total securities available for sale	$	161,355	$	6,144	$	2,448	$	165,051

Securities held to maturity:

Agency mortgage-backed	$	873	$	63	$	-	$	936
Municipal obligations		5,899		6		46		5,859

Total securities held to maturity	$	6,772	$	69	$	46	$	6,795

-10-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In thousands)
September 30, 2012:
Securities available for sale:

Agency bonds and notes	$	15,940	$	124	$	-	$	16,064
Agency mortgage-backed		42,255		1,165		-		43,420
Agency CMO		17,186		358		3		17,541
Privately-issued CMO		4,283		1,006		-		5,289
Privately-issued ABS		5,797		1,481		51		7,227
Municipal		58,135		4,838		40		62,933
Subtotal – debt securities		143,596		8,972		94		152,474

Equity securities		-		69		-		69

Total securities available for sale	$	143,596	$	9,041	$	94	$	152,543

Securities held to maturity:

Agency mortgage-backed	$	1,342	$	118	$	-	$	1,460
Municipal obligations		6,506		348		-		6,854

Total securities held to maturity	$	7,848	$	466	$	-	$	8,314

The amortized cost and fair value of investment securities as of June 30, 2013 by contractual maturity are shown below. Expected maturities of mortgage-backed securities, CMO and ABS may differ from contractual maturities because the mortgages underlying the obligations may be prepaid without penalty.

	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In thousands)

Due within one year	$	580	$	592	$	546	$	545
Due after one year through five years		5,004		5,049		2,286		2,277
Due after five years through ten years		16,908		16,951		1,759		1,743
Due after ten years		59,242		59,904		1,308		1,294
		81,734		82,496		5,899		5,859

Equity securities		-		91		-		-
CMO		28,750		29,332		-		-
ABS		5,894		8,122		-		-
SBA certificates		2,146		2,162		-		-
Mortgage-backed securities		42,831		42,848		873		936

	$	161,355	$	165,051	$	6,772	$	6,795

-11-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Information pertaining to investment securities with gross unrealized losses at June 30, 2013, aggregated by investment category and the length of time that individual securities have been in a continuous loss position, follows:

	Number				Gross
	of Investment		Fair		Unrealized
	Positions		Value		Losses
	(Dollars in thousands)
Securities available for sale:

Continuous loss position less than twelve months:
Agency bonds and notes		6	$	13,114	$	553
Agency mortgage-backed		13		22,254		329
Agency CMO		5		13,402		295
Municipal obligations		37		21,916		1,245

Total less than twelve months		61		70,686		2,422

Continuous loss position more than twelve months:
Privately-issued ABS		1		111		1
Municipal obligations		1		225		25

Total more than twelve months		2		336		26

Total securities available for sale		63	$	71,022	$	2,448

Securities held to maturity:

Continuous loss position less than twelve months:
Municipal obligations		3	$	4,556	$	46

Total securities held to maturity		3	$	4,556	$	46

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

The total investment securities in loss positions at June 30, 2013 had depreciated approximately 3.19% from the Company’s amortized cost basis and are fixed and variable rate securities with a weighted-average yield of 2.38% and a weighted-average coupon rate of 3.56% at June 30, 2013.

U.S. government agency bonds and notes, mortgage-backed securities, and CMOs, and municipal obligations in loss positions at June 30, 2013 had depreciated approximately 3.20% from the Company’s amortized cost basis as of June 30, 2013. All of the agency and municipal securities are issued by U.S. government agencies, U.S. government-sponsored enterprises and municipal governments, and are generally secured by first mortgage loans and municipal project revenues.

-12-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company evaluates the existence of a potential credit loss component related to the decline in fair value of the privately-issued CMO and ABS portfolios each quarter using an independent third party analysis. At June 30, 2013, the Company held twenty privately-issued CMO and ABS securities acquired in a 2009 bank acquisition with an aggregate carrying value of $3.0 million and fair value of $4.4 million that have been downgraded to a substandard regulatory classification due to a downgrade of the security’s credit quality rating by various rating agencies.

At June 30, 2013, the one privately-issued ABS security in a loss position had depreciated approximately 0.89% from the Company’s carrying value and was collateralized by residential mortgage loans. This security had a fair value of $111,000 and an unrealized loss of $1,000 at June 30, 2013, and was rated below investment grade by a nationally recognized statistical rating organization (“NRSRO”). Based on the independent third party analysis of the expected cash flows, management has determined that the decline in value for this security is temporary and, as a result, no other-than-temporary impairment has been recognized on the privately-issued CMO and ABS portfolios. While the Company did not recognize a credit-related impairment loss at June 30, 2013, additional deterioration in market and economic conditions may have an adverse impact on the credit quality in the future and therefore, require a credit-related impairment charge.

The unrealized losses on agency securities and municipal bonds relate principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government, its agencies, or other governments, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As management has the ability to hold debt securities to maturity, or for the foreseeable future if classified as available for sale, no declines are deemed to be other-than-temporary.

During the nine months ended June 30, 2013, the Company realized gross gains on sales of available for sale U.S. government agency notes of $1,000. During the three and nine months ended June 30, 2012, the Company realized gross gains on sales of available for sale U.S. government agency notes of $18,000.

Certain available for sale debt securities were pledged under repurchase agreements at June 30, 2013 and 2012, and may be pledged to secure federal funds borrowings and Federal Home Loan Bank (“FHLB”) borrowings.

-13-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Loans and Allowance for Loan Losses

Loans at June 30, 2013 and September 30, 2012 consisted of the following:

	June 30,			September 30,
	2013			2012
	(In thousands)
Real estate mortgage:
1-4 family residential	$	184,680		$	190,958
Commercial		115,546			90,290
Multifamily residential		27,148			23,879
Residential construction		11,918			10,748
Commercial construction		6,741			5,182
Land and land development		10,588			12,320
Commercial business loans		31,866			36,189
Consumer:
Home equity loans		17,179			18,294
Auto loans		6,935			8,219
Other consumer loans		3,584			4,114
Gross loans		416,185			400,193

Deferred loan origination fees and costs, net		213			382
Undisbursed portion of loans in process		(6,581	)		(6,602	)
Allowance for loan losses		(5,335	)		(4,906	)

Loans, net	$	404,482		$	389,067

During the nine-month period ended June 30, 2013, there was no significant change in the Company’s lending activities or methodology used to estimate the allowance for loan losses as disclosed in the Company’s Annual Report on Form 10-K for the year ended September 30, 2012.

-14-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table provides the components of the recorded investment in loans for each portfolio segment as of June 30, 2013:

	Residential Real Estate		Commercial Real Estate			Multifamily			Construction			Land & Land Development			Commercial Business			Consumer		Total
	(In thousands)

Recorded Investment in Loans:
Principal loan balance	$	184,680	$	115,546		$	27,148		$	12,078		$	10,588		$	31,866		$	27,698	$	409,604

Accrued interest receivable		649		305			57			23			44			118			80		1,276

Net deferred loan origination fees and costs		448		(146	)		(41	)		(49	)		(2	)		(10	)		13		213

Recorded investment in loans	$	185,777	$	115,705		$	27,164		$	12,052		$	10,630		$	31,974		$	27,791	$	411,093

Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	$	6,231	$	2,070		$	2,318		$	177		$	-		$	237		$	406	$	11,439

Collectively evaluated for impairment		178,908		113,635			24,846			11,875			10,630			31,737			27,351		398,982

Acquired with deteriorated credit quality		638		-			-			-			-			-			34		672

Ending balance	$	185,777	$	115,705		$	27,164		$	12,052		$	10,630		$	31,974		$	27,791	$	411,093

-15-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table provides the components of the recorded investment in loans for each portfolio segment as of September 30, 2012:

	Residential Real Estate		Commercial Real Estate			Multifamily			Construction			Land & Land Development			Commercial Business			Consumer		Total
	(In thousands)

Recorded Investment in Loans:
Principal loan balance	$	190,958	$	90,290		$	23,879		$	9,328		$	12,320		$	36,189		$	30,627	$	393,591

Accrued interest receivable		691		305			69			21			43			128			101		1,358

Net deferred loan origination fees and costs		502		(75	)		(6	)		(41	)		(5	)		(13	)		20		382

Recorded investment in loans	$	192,151	$	90,520		$	23,942		$	9,308		$	12,358		$	36,304		$	30,748	$	395,331

Recorded Investment in Loans as Evaluated for Impairment:
Individually evaluated for impairment	$	5,210	$	1,993		$	2,356		$	174		$	-		$	80		$	333	$	10,146

Collectively evaluated for impairment		186,236		88,331			21,586			9,134			12,358			36,224			30,379		384,248

Acquired with deteriorated credit quality		705		196			-			-			-			-			36		937

Ending balance	$	192,151	$	90,520		$	23,942		$	9,308		$	12,358		$	36,304		$	30,748	$	395,331

-16-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

An analysis of the allowance for loan losses as of June 30, 2013 is as follows:

	Residential Real Estate		Commercial Real Estate		Multifamily		Construction		Land & Land Development		Commercial Business		Consumer		Total
	(In thousands)
Ending Allowance Balance Attributable to Loans:
Individually evaluated for impairment	$	39	$	-	$	-	$	-	$	-	$	-	$	11	$	50

Collectively evaluated for impairment		777		2,204		234		99		72		1,688		211		5,285

Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-

Ending balance	$	816	$	2,204	$	234	$	99	$	72	$	1,688	$	222	$	5,335

An analysis of the allowance for loan losses as of September 30, 2012 is as follows:

	Residential Real Estate		Commercial Real Estate		Multifamily		Construction		Land & Land Development		Commercial Business		Consumer		Total
	(In thousands)
Ending Allowance Balance Attributable to Loans:
Individually evaluated for impairment	$	-	$	60	$	-	$	-	$	-	$	-	$	14	$	74

Collectively evaluated for impairment		908		2,144		389		52		2		1,084		253		4,832

Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-

Ending balance	$	908	$	2,204	$	389	$	52	$	2	$	1,084	$	267	$	4,906

-17-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

An analysis of the changes in the allowance for loan losses for the three months ended June 30, 2013 is as follows:

	Residential Real Estate			Commercial Real Estate		Multifamily			Construction		Land & Land Development		Commercial Business			Consumer			Total
	(In thousands)
Changes in Allowance for Loan Losses:
Beginning balance	$	881		$	2,171	$	328		$	63	$	43	$	1,664		$	239		$	5,389
Provisions		(29	)		33		(94	)		36		29		590			(5	)		560
Charge-offs		(40	)		-		-			-		-		(606	)		(26	)		(672	)
Recoveries		4			-		-			-		-		40			14			58

Ending balance	$	816		$	2,204	$	234		$	99	$	72	$	1,688		$	222		$	5,335

An analysis of the changes in the allowance for loan losses for the nine months ended June 30, 2013 is as follows:

	Residential Real Estate			Commercial Real Estate			Multifamily			Construction		Land & Land Development		Commercial Business			Consumer			Total
	(In thousands)
Changes in Allowance for Loan Losses:
Beginning balance	$	908		$	2,204		$	389		$	52	$	2	$	1,084		$	267		$	4,906
Provisions		50			(14	)		(155	)		47		70		1,576			(12	)		1,562
Charge-offs		(196	)		(11	)		-			-		-		(1,013	)		(79	)		(1,299	)
Recoveries		54			25			-			-		-		41			46			166

Ending balance	$	816		$	2,204		$	234		$	99	$	72	$	1,688		$	222		$	5,335

-18-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

An analysis of the changes in the allowance for loan losses for the three months ended June 30, 2012 is as follows:

	Residential Real Estate			Commercial Real Estate			Multifamily			Construction		Land & Land Development			Commercial Business			Consumer			Total
	(In thousands)
Changes in Allowance for Loan Losses:
Beginning balance	$	979		$	1,612		$	647		$	64	$	33		$	1,379		$	209		$	4,923
Provisions		29			547			(182	)		15		(9	)		(165	)		73			308
Charge-offs		(85	)		(178	)		-			-		-			(33	)		(61	)		(357	)
Recoveries		2			-			-			-		-			-			19			21

Ending balance	$	925		$	1,981		$	465		$	79	$	24		$	1,181		$	240		$	4,895

An analysis of the changes in the allowance for loan losses for the nine months ended June 30, 2012 is as follows:

	Residential Real Estate			Commercial Real Estate			Multifamily			Construction		Land & Land Development			Commercial Business			Consumer			Total
	(In thousands)
Changes in Allowance for Loan Losses:
Beginning balance	$	833		$	1,314		$	604		$	56	$	53		$	1,525		$	287		$	4,672
Provisions		359			859			(139	)		23		(29	)		(312	)		136			897
Charge-offs		(375	)		(192	)		-			-		-			(33	)		(228	)		(828	)
Recoveries		108			-			-			-		-			1			45			154

Ending balance	$	925		$	1,981		$	465		$	79	$	24		$	1,181		$	240		$	4,895

-19-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents impaired loans individually evaluated for impairment as of June 30, 2013 and for the three and nine months ended June 30, 2013 and 2012. Interest income received and recognized on impaired loans for the three and nine months ended June 30, 2013 and 2012 was immaterial.

	At June 30, 2013						Three Months Ended June 30,				Nine Months Ended June 30,
	Recorded Investment		Unpaid Principal Balance		Related Allowance		2013 Average Recorded Investment		2012 Average Recorded Investment		2013 Average Recorded Investment		2012 Average Recorded Investment
	(In thousands)
Loans with no related allowance recorded:
Residential real estate	$	4,200	$	4,503	$	-	$	4,634	$	2,303	$	4,615	$	2,927
Commercial real estate		794		829		-		766		1,316		754		1,082
Multifamily		-		-		-		-		-		-		-
Construction		177		174		-		174		174		174		174
Land and land development		-		-		-		-		340		-		340
Commercial business		218		218		-		443		82		498		41
Consumer		179		177		-		183		110		173		103

	$	5,568	$	5,901	$	-	$	6,200	$	4,325	$	6,214	$	4,667

Loans with an allowance recorded:
Residential real estate	$	135	$	133	$	39	$	136	$	150	$	174	$	156
Commercial real estate		-		-		-		147		221		141		229
Multifamily		-		-		-		-		-		-		-
Construction		-		-		-		-		-		-		-
Land and land development		-		-		-		-		-		-		-
Commercial business		-		-		-		247		-		219		-
Consumer		73		73		11		70		176		80		128

	$	208	$	206	$	50	$	600	$	547	$	614	$	513

Total:
Residential real estate	$	4,335	$	4,636	$	39	$	4,770	$	2,453	$	4,789	$	3,083
Commercial real estate		794		829		-		913		1,537		895		1,311
Multifamily		-		-		-		-		-		-		-
Construction		177		174		-		174		174		174		174
Land and land development		-		-		-		-		340		-		340
Commercial business		218		218		-		690		82		717		41
Consumer		252		250		11		253		286		253		231

	$	5,776	$	6,107	$	50	$	6,800	$	4,872	$	6,828	$	5,180

-20-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents impaired loans individually evaluated for impairment as of September 30, 2012.

	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)

Loans with no related allowance recorded:
Residential real estate	$	2,775	$	3,161	$	-
Commercial real estate		745		772		-
Multifamily		-		-		-
Construction		174		174		-
Land and land development		-		-		-
Commercial business		66		65		-
Consumer		97		99		-

	$	3,857	$	4,271	$	-

Loans with an allowance recorded:
Residential real estate	$	-	$	-	$	-
Commercial real estate		154		146		60
Multifamily		-		-		-
Construction		-		-		-
Land and land development		-		-		-
Commercial business		-		-		-
Consumer		78		78		14

	$	232	$	224	$	74

Total:
Residential real estate	$	2,775	$	3,161	$	-
Commercial real estate		899		918		60
Multifamily		-		-		-
Construction		174		174		-
Land and land development		-		-		-
Commercial business		66		65		-
Consumer		175		177		14

	$	4,089	$	4,495	$	74

-21-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Nonperforming loans consists of nonaccrual loans and loans over 90 days past due and still accruing interest. The following table presents the recorded investment in nonperforming loans at June 30, 2013:

	Nonaccrual Loans		Loans 90+ Days Past Due Still Accruing		Total Nonperforming Loans
	(In thousands)

Residential real estate	$	4,335	$	255	$	4,590
Commercial real estate		794		226		1,020
Multifamily		-		-		-
Construction		177		-		177
Land and land development		-		-		-
Commercial business		218		152		370
Consumer		252		24		276

Total	$	5,776	$	657	$	6,433

The following table presents the recorded investment in nonperforming loans at September 30, 2012:

	Nonaccrual Loans		Loans 90+ Days Past Due Still Accruing		Total Nonperforming Loans
	(In thousands)

Residential real estate	$	2,775	$	1,548	$	4,323
Commercial real estate		899		3		902
Multifamily		-		-		-
Construction		174		-		174
Land and land development		-		-		-
Commercial business		66		98		164
Consumer		175		94		269

Total	$	4,089	$	1,743	$	5,832

-22-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the aging of the recorded investment in past due loans at June 30, 2013:

	30-59 Days Past Due		60-89 Days Past Due		90 + Days Past Due		Total Past Due		Current		Total Loans
	(In thousands)

Residential real estate	$	3,243	$	1,747	$	3,468	$	8,458	$	177,319	$	185,777
Commercial real estate		242		40		897		1,179		114,526		115,705
Multifamily		-		-		-		-		27,164		27,164
Construction		-		-		-		-		12,052		12,052
Land and land development		46		136		-		182		10,448		10,630
Commercial business		99		12		370		481		31,493		31,974
Consumer		202		61		192		455		27,336		27,791

Total	$	3,832	$	1,996	$	4,927	$	10,755	$	400,338	$	411,093

The following table presents the aging of the recorded investment in past due loans at September 30, 2012:

	30-59 Days Past Due		60-89 Days Past Due		90 + Days Past Due		Total Past Due		Current		Total Loans
	(In thousands)

Residential real estate	$	4,636	$	1,926	$	3,754	$	10,316	$	181,835	$	192,151
Commercial real estate		20		90		833		943		89,577		90,520
Multifamily		-		-		-		-		23,942		23,942
Construction		-		-		-		-		9,308		9,308
Land and land development		51		-		-		51		12,307		12,358
Commercial business		109		-		164		273		36,031		36,304
Consumer		286		98		174		558		30,190		30,748

Total	$	5,102	$	2,114	$	4,925	$	12,141	$	383,190	$	395,331

-23-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, public information, historical payment experience, credit documentation, and current economic trends, among other factors. The Company classifies loans based on credit risk at least quarterly. The Company uses the following regulatory definitions for risk ratings:

Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss: Loans classified as loss are considered uncollectible and of such little value that their continuance on the Company’s books as an asset is not warranted.

-24-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. As of June 30, 2013, and based on the most recent analysis performed, the recorded investment in loans by risk category was as follows:

	Residential Real Estate		Commercial Real Estate		Multifamily		Construction		Land and Land Development		Commercial Business		Consumer		Total
	(In thousands)

Pass	$	173,082	$	108,262	$	27,164	$	12,052	$	9,800	$	29,530	$	27,102	$	386,992
Special Mention		2,810		408		-		-		830		451		80		4,579
Substandard		9,493		6,554		-		-		-		1,788		549		18,384
Doubtful		392		481		-		-		-		205		60		1,138
Loss		-		-		-		-		-		-		-		-

Total	$	185,777	$	115,705	$	27,164	$	12,052	$	10,630	$	31,974	$	27,791	$	411,093

As of September 30, 2012, the recorded investment in loans by risk category was as follows:

	Residential Real Estate		Commercial Real Estate		Multifamily		Construction		Land and Land Development		Commercial Business		Consumer		Total
	(In thousands)

Pass	$	175,694	$	85,439	$	21,268	$	9,308	$	11,942	$	32,687	$	29,993	$	366,331
Special Mention		4,919		2,642		318		-		416		2,158		142		10,595
Substandard		11,130		1,805		2,356		-		-		1,459		600		17,350
Doubtful		408		634		-		-		-		-		13		1,055
Loss		-		-		-		-		-		-		-		-

Total	$	192,151	$	90,520	$	23,942	$	9,308	$	12,358	$	36,304	$	30,748	$	395,331

-25-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Modification of a loan is considered to be a troubled debt restructuring (“TDR”) if the debtor is experiencing financial difficulties and the Company grants a concession to the debtor that it would not otherwise consider. By granting the concession, the Company expects to obtain more cash or other value from the debtor, or to increase the probability of receipt, than would be expected by not granting the concession. The concession may include, but is not limited to, reduction of the stated interest rate of the loan, reduction of accrued interest, extension of the maturity date or reduction of the face amount or maturity amount of the debt. A concession will be granted when, as a result of the restructuring, the Company does not expect to collect all amounts due, including interest at the original stated rate. A concession may also be granted if the debtor is not able to access funds elsewhere at a market rate for debt with similar risk characteristics as the restructured debt. The Company’s determination of whether a loan modification is a TDR considers the individual facts and circumstances surrounding each modification.

Loans modified in a TDR may be retained in accrual status if the borrower has maintained a period of performance in which the borrower’s lending relationship was not greater than ninety days delinquent at the time of restructuring and the Company determines the future collection of principal and interest is reasonably assured. Loans modified in a TDR that are placed on nonaccrual status at the time of restructuring will continue in nonaccrual status until the Company determines the future collection of principal and interest is reasonably assured, which generally requires that the borrower demonstrate a period of performance according to the restructured terms of at least six consecutive months.

The following table summarizes the Company’s recorded investment in TDRs by class of loan and accrual status at June 30, 2013 and September 30, 2012:

	Accruing		Nonaccrual		Total		Related Allowance For Loan Losses
	(In thousands)
June 30, 2013:
Residential real estate	$	2,197	$	778	$	2,975	$	-
Commercial real estate		1,276		-		1,276		-
Multifamily		2,318		-		2,318		-
Commercial business		19		13		32		-
Consumer		154		-		154		-

Total	$	5,964	$	791	$	6,755	$	-

September 30, 2012:
Residential real estate	$	2,993	$	-	$	2,993	$	-
Commercial real estate		1,290		-		1,290		-
Multifamily		2,356		-		2,356		-
Commercial business		14		-		14		-
Consumer		158		-		158		-

Total	$	6,811	$	-	$	6,811	$	-

-26-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table summarizes information in regard to TDRs that were restructured during the three- and nine-month periods ended June 30, 2013 and 2012:

	Number of Loans		Pre- Modification Principal Balance		Post- Modification Principal Balance
	(In thousands)
June 30, 2013:
Nine Months Ended June 30, 2013:
Residential real estate		2	$	143	$	143
Commercial business		1		18		20
Consumer		1		5		5

Total		4	$	166	$	168

June 30, 2012:
Three Months Ended June 30, 2012:
Residential real estate		6	$	830	$	883
Consumer		1		159		160

Total		7	$	989	$	1,043

Nine Months Ended June 30, 2012:
Residential real estate		13	$	1,620	$	1,672
Commercial real estate		1		772		506
Multifamily		1		1,797		2,313
Consumer		1		159		160

Total		16	$	4,348	$	4,651

There were no loans modified in a TDR during the three months ended June 30, 2013.

For the TDRs listed above, the terms of modification included reduction of the stated interest rate and extension of the maturity date where the debtor was unable to access funds elsewhere at a market interest rate for debt with similar risk characteristics.

The Company had not committed to lend any additional amounts as of June 30, 2013 and September 30, 2012 to customers with outstanding loans classified as TDRs.

During the nine-month period ended June 30, 2013, the Company had three TDRs totaling $218,000 that were modified within the previous twelve months for which there was a payment default (defined as more than 90 days past due or in the process of foreclosure). As of June 30, 2013, two loans totaling $143,000 were on nonaccrual status and one loan of $75,000 was accruing and performing in agreement with its modified terms. During the nine-month period ended June 30, 2012, the Company had one TDR with a balance of $262,000 that was modified within the previous twelve months for which there was a payment default. The Company recognized a net charge-off of $42,000 for this TDR during the nine-month period ended June 30, 2012.

-27-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Real Estate Development and Construction

On March 22, 2011, the Company acquired a parcel of land in New Albany, Indiana for $2.97 million. On April 5, 2012, the Bank received approval from the Office of the Comptroller of the Currency (“OCC”) to develop the land for retail purposes through its subsidiary, FFCC. On July 27, 2012, the Company transferred ownership of the property to FFCC. The retail development will include a future branch office location of the Bank, which is expected to open in August 2013. The total cost of the development is expected to be approximately $7.8 million, including the $7.2 million paid as of June 30, 2013. The development costs will be partially funded by a loan from another financial institution. The loan has a maximum commitment of $5.0 million and FFCC had borrowed $5.0 million under the loan as of June 30, 2013. The development is partially completed with five tenants that have commenced occupancy as of June 30, 2013 and it is expected to be substantially completed by July 31, 2013, with the exception of certain tenant improvements in a multi-tenant retail building for current and future lessees.

Development and construction period interest of $37,000 and $79,000 was capitalized as part of the real estate carrying value during the three and nine months ended June 30, 2013, respectively.

-28-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Supplemental Disclosure for Earnings Per Share

When presented, basic earnings per share are computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Earnings per share information is presented below for the three-month and nine-month periods ended June 30, 2013 and 2012.

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
	(Dollars in thousands, except per share data)

Basic:
Earnings:
Net income	$	1,141		$	1,272		$	3,327		$	3,146
Less: Preferred stock dividends declared		(43	)		(43	)		(129	)		(128	)

Net income available to common shareholders	$	1,098		$	1,229		$	3,198		$	3,018

Shares:
Weighted average common shares outstanding		2,173,914			2,167,488			2,164,281			2,159,515

Net income per common share, basic	$	0.51		$	0.57		$	1.48		$	1.40

Diluted:
Earnings:
Net income	$	1,141		$	1,272		$	3,327		$	3,146
Less: Preferred stock dividends declared		(43	)		(43	)		(129	)		(128	)

Net income available to common shareholders	$	1,098		$	1,229		$	3,198		$	3,018

Shares:
Weighted average common shares outstanding		2,173,914			2,167,488			2,164,281			2,159,515
Add: Dilutive effect of outstanding options		88,106			54,523			80,677			48,783
Add: Dilutive effect of restricted stock		15,804			15,119			16,863			15,624
Weighted average common shares outstanding as adjusted		2,277,824			2,237,130			2,261,821			2,223,922

Net income per common share, diluted	$	0.48		$	0.55		$	1.41		$	1.36

Unearned ESOP and nonvested restricted Unearned ESOP and nonvested restricted stock shares are not considered as outstanding for purposes of computing weighted average common shares outstanding.

-29-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Supplemental Disclosures of Cash Flow Information

	Nine Months Ended
	June 30,
	2013		2012
	(In thousands)
Cash payments for:
Interest	$	3,489	$	3,966
Taxes		1,219		578

Transfers from loans to foreclosed real estate		691		1,306

Proceeds from sales of foreclosed real estate financed through loans		655		655

Fair Value Measurements and Disclosures about Fair Value of Financial Instruments

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements, provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC Topic 820 are described as follows:

Level 1:

Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets. A quoted market price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.

Level 2:

Inputs to the valuation methodology include quoted market prices for similar assets or liabilities in active markets; quoted market prices for identical or similar assets or liabilities in markets that are not active; or inputs that are derived principally from or can be corroborated by observable market data by correlation or other means.

Level 3:

Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets carried at fair value or the lower of cost or fair value. The table below presents the balances of financial assets measured at fair value on a recurring and nonrecurring basis as of June 30, 2013 and September 30, 2012. The Company had no liabilities measured at fair value as of June 30, 2013 or September 30, 2012.

-30-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Carrying Value
	Level 1		Level 2		Level 3		Total
	(In thousands)
June 30, 2013:
Assets Measured - Recurring Basis:
Trading account securities	$	-	$	2,277	$	-	$	2,277

Securities available for sale:
Agency bonds and notes	$	-	$	15,345	$	-	$	15,345
Agency mortgage-backed		-		42,848		-		42,848
Agency CMO		-		24,630		-		24,630
Privately-issued CMO		-		4,702		-		4,702
Privately-issued ABS		-		8,122				8,122
SBA certificates		-		2,162				2,162
Municipal		-		67,151		-		67,151
Equity securities		91		-		-		91
Total securities available for sale	$	91	$	164,960	$	-	$	165,051

Interest rate cap contract	$	-	$	17	$	-	$	17

Assets Measured - Nonrecurring Basis:
Impaired loans:
Residential real estate	$	-	$	-	$	4,296	$	4,296
Commercial real estate		-		-		794		794
Construction		-		-		177		177
Commercial business		-		-		218		218
Consumer		-		-		241		241
Total impaired loans	$	-	$	-	$	5,726	$	5,726

Loans held for sale	$	-	$	233	$	-	$	233

Foreclosed real estate:
Residential real estate	$	-	$	-	$	323	$	323
Commercial real estate		-		-		321		321
Land and land development		-		-		27		27
Total foreclosed real estate	$	-	$	-	$	671	$	671

-31-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Carrying Value
	Level 1		Level 2		Level 3		Total
	(In thousands)
September 30, 2012:
Assets Measured - Recurring Basis:
Trading account securities	$	-	$	3,562	$	-	$	3,562

Securities available for sale:
Agency bonds and notes	$	-	$	16,064	$	-	$	16,064
Agency mortgage-backed		-		43,420		-		43,420
Agency CMO		-		17,541		-		17,541
Privately-issued CMO		-		5,289		-		5,289
Privately-issued ABS		-		7,227		-		7,227
Municipal		-		62,933		-		62,933
Equity securities		69		-		-		69
Total securities available for sale	$	69	$	152,474	$	-	$	152,543

Interest rate cap contract	$	-	$	11	$	-	$	11

Assets Measured - Nonrecurring Basis:
Impaired loans:
Residential real estate	$	-	$	-	$	2,775	$	2,775
Commercial real estate		-		-		839		839
Construction		-		-		174		174
Commercial business		-		-		66		66
Consumer		-		-		161		161
Total impaired loans	$	-	$	-	$	4,015	$	4,015

Loans held for sale	$	-	$	643	$	-	$	643

Foreclosed real estate:
Residential real estate	$	-	$	-	$	487	$	487
Commercial real estate		-		-		231		231
Multifamily		-		-		357		357
Land and land development		-		-		406		406
Total foreclosed real estate	$	-	$	-	$	1,481	$	1,481

Fair value is based upon quoted market prices where available. If quoted market prices are not available, fair value is based on internally developed models or obtained from third parties that primarily use, as inputs, observable market-based parameters or a matrix pricing model that employs the Bond Market Association’s standard calculations for cash flow and price/yield analysis and observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value, or the lower of cost or fair value. These adjustments may include unobservable parameters. Any such valuation adjustments have been applied consistently over time.

-32-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. There were no changes in the valuation techniques and related inputs used for assets measured at fair value during the nine-month periods ended June 30, 2013 and 2012.

Trading Account Securities and Securities Available for Sale. Securities classified as trading and available for sale are reported at fair value on a recurring basis. These securities are classified as Level 1 of the valuation hierarchy where quoted market prices from reputable third-party brokers are available in an active market. If quoted market prices are not available, the Company obtains fair value measurements from an independent pricing service. These securities are reported using Level 2 inputs and the fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, U.S. government and agency yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other factors. Changes in fair value of trading account securities are reported in noninterest income. Changes in fair value of securities available for sale are recorded in other comprehensive income, net of income tax effect.

Derivative Financial Instruments. Derivative financial instruments consist of an interest rate cap contract. As such, significant fair value inputs can generally be verified by counterparties and do not involve significant management judgments (Level 2 inputs).

Impaired Loans. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly. The fair value of impaired loans is classified as Level 3 in the fair value hierarchy.

Impaired loans are measured at the present value of estimated future cash flows using the loan's effective interest rate or the fair value of the collateral if the loan is a collateral-dependent loan. Collateral may be real estate and/or business assets, including equipment, inventory and/or accounts receivable, and its fair value is generally determined based on real estate appraisals or other independent evaluations by qualified professionals. The appraisals are then discounted to reflect management’s estimate of the fair value of the collateral given the current market conditions and the condition of the collateral. At June 30, 2013, the significant unobservable inputs used in the fair value measurement of impaired loans included a discount from appraised value ranging from 0.0% to 15.0% and estimated costs to sell the collateral ranging from 0.0% to 6.0%. During the nine-month period ended June 30, 2013, the Company recognized provisions for loan losses of $416,000 for impaired loans. No provisions for loan losses were recognized for the three months ended June 30, 2013 for impaired loans.

Loans Held for Sale. Loans held for sale are carried at the lower of cost or market value. The portfolio comprised of residential real estate loans and fair value is based on specific prices of underlying contracts for sales to investors. These measurements are carried at Level 2.

-33-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Foreclosed Real Estate. Foreclosed real estate is reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly. Fair value of foreclosed real estate is classified as Level 3 in the fair value hierarchy.

Foreclosed real estate is reported at fair value less estimated costs to dispose of the property. The fair values are determined by real estate appraisals which are then discounted to reflect management’s estimate of the fair value of the property given current market conditions and the condition of the collateral. At June 30, 2013, the significant unobservable inputs used in the fair value measurement of foreclosed real estate included a discount from appraised value ranging from 0.0% to 15.0% and estimated costs to sell the property ranging from 0.0% to 6.0%. The Company recognized charges of $112,000 and $94,000 to write down foreclosed real estate to fair value for the nine months ended June 30, 2013 and 2012, respectively. The Company recognized changes of $41,000 and $76,000 to write down foreclosed real estate to fair value for the three months ended June 30, 2013 and 2012, respectively.

Transfers Between Categories. There were no transfers into or out of the Company's Level 3 financial assets for the nine-month periods ended June 30, 2013 and 2012. In addition, there were no transfers into or out of Levels 1 and 2 of the fair value hierarchy during the nine-month periods ended June 30, 2013 and 2012.

-34-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

GAAP requires disclosure of fair value information about financial instruments for interim reporting periods, whether or not recognized in the consolidated balance sheet. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The carrying amounts and estimated fair values of the Company's financial instruments are as follows:

	Carrying		Fair Value Measurements Using:
June 30, 2013:	Amount		Level 1		Level 2		Level 3
	(In thousands)

Financial assets:
Cash and due from banks	$	7,903	$	7,903	$	-	$	-
Interest-bearing deposits with banks		13,212		13,212		-		-
Trading account securities		2,277		-		2,277		-
Securities available for sale		165,051		91		164,960		-
Securities held to maturity		6,772		-		6,795		-

Loans, net		404,482		-		-		410,460

Loans held for sale		233		-		233		-
Federal Home Loan Bank stock		5,400		-		5,400		-
Accrued interest receivable		2,708		-		2,708		-

Financial liabilities:
Deposits		484,383		-		-		473,590
Short-term repurchase agreements		1,334		-		1,334		-
Borrowings from Federal Home Loan Bank		76,365		-		73,843		-
Other long-term debt		4,962		-		4,962		-
Accrued interest payable		186		-		186		-
Advance payments by borrowers for taxes and insurance		464		-		464		-

Derivative financial instruments included in other assets:
Interest rate cap		17		-		17		-

-35-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Carrying		Fair Value Measurements Using:
September 30, 2012:	Amount		Level 1		Level 2		Level 3
	(In thousands)

Financial assets:
Cash and due from banks	$	27,569	$	27,569	$	-	$	-
Interest-bearing deposits with banks		11,222		11,222		-		-
Trading account securities		3,562		-		3,562		-
Securities available for sale		152,543		69		152,474		-
Securities held to maturity		7,848		-		8,314		-

Loans, net		389,067		-		-		388,790

Loans held for sale		643		-		643		-
Federal Home Loan Bank stock		5,400		-		5,400		-
Accrued interest receivable		2,412		-		2,412		-

Financial liabilities:
Deposits		494,234		-		-		492,161
Short-term repurchase agreements		1,329		-		1,329		-
Borrowings from Federal Home Loan Bank		53,062		-		53,752		-
Other long-term debt		2,132		-		2,132		-
Accrued interest payable		236		-		236		-
Advance payments by borrowers for taxes and insurance		622		-		622		-

Derivative financial instruments included in other assets:
Interest rate cap		11		-		11		-

The carrying amounts in the preceding tables are included in the consolidated balance sheets under the applicable captions. The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value:

-36-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Cash and Cash Equivalents

For cash and short-term instruments, including cash and due from banks and interest-bearing deposits with banks, the carrying amount is a reasonable estimate of fair value.

Debt and Equity Securities

For marketable equity securities, the fair values are based on quoted market prices. For debt securities, the Company obtains fair value measurements from an independent pricing service and the fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, U.S. government and agency yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other factors. For FHLB stock, a restricted equity security, the carrying amount is a reasonable estimate of fair value because it is not marketable.

Loans

The fair value of loans, excluding loans held for sale, is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and terms. Impaired loans are valued at the lower of their carrying value or fair value, as previously described. The carrying amount of accrued interest receivable approximates its fair value.

The fair value of loans held for sale is estimated based on specific prices of underlying contracts for sales to investors, as previously described.

Deposits

The fair value of demand and savings deposits and other transaction accounts is the amount payable on demand at the balance sheet date. The fair value of fixed-maturity time deposits is estimated by discounting the future cash flows using the rates currently offered for deposits with similar remaining maturities. The carrying amount of accrued interest payable approximates its fair value.

Borrowed Funds

Borrowed funds include borrowings from the FHLB, repurchase agreements and other long-term debt. Fair value for FHLB advances and long-term repurchase agreements is estimated by discounting the future cash flows at current interest rates for FHLB advances of similar maturities. For short-term repurchase agreements, FHLB line of credit borrowings and other debt, the carrying value is a reasonable estimate of fair value.

Derivative Financial Instruments

For derivative financial instruments, the fair values generally represent an estimate of the amount the Company would receive or pay upon termination of the agreement at the reporting date, taking into account the current interest rates, and exclusive of any accrued interest.

-37-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Employee Stock Ownership Plan

On October 6, 2008, the Company established a leveraged employee stock ownership plan (“ESOP”) covering substantially all employees. The ESOP trust acquired 203,363 shares of Company common stock at a cost of $10.00 per share financed by a term loan with the Company. The employer loan and the related interest income are not recognized in the consolidated financial statements as the debt is serviced from Company contributions. Dividends payable on allocated shares are charged to retained earnings and are satisfied by the allocation of cash dividends to participant accounts or by utilizing the dividends as additional debt service on the ESOP loan. Dividends payable on unallocated shares are not considered dividends for financial reporting purposes. Shares held by the ESOP trust are allocated to participant accounts based on the ratio of the current year principal and interest payments to the total of the current year and future years’ principal and interest to be paid on the employer loan. Compensation expense is recognized based on the average fair value of shares released for allocation to participant accounts during the year with a corresponding credit to stockholders’ equity. Compensation expense recognized for the three- and nine-month periods ended June 30, 2013 amounted to $85,000 and $562,000, respectively. Compensation expense recognized for the three- and nine-month periods ended June 30, 2012 amounted to $64,000 and $186,000, respectively. Company common stock held by the ESOP trust at June 30, 2013 was as follows:

Allocated shares		99,287
Unearned shares		90,338
Total ESOP shares		189,625

Fair value of unearned shares	$	2,108,000

10.

Stock Based Compensation Plans

The Company’s 2010 Equity Incentive Plan (“Plan”), which the Company’s shareholders approved in February 2010, provides for the award of stock options, restricted shares and performance shares. The aggregate number of shares of the Company’s common stock available for issuance under the Plan may not exceed 355,885 shares. The Company may grant both non-statutory and statutory (i.e., incentive) stock options that may not have a term exceeding ten years. An award of a performance share is a grant of a right to receive shares of the Company’s common stock contingent upon the achievement of specific performance criteria or other objectives set at the grant date. Awards granted under the Plan may be granted either alone, in addition to, or in tandem with any other award granted under the Plan. The terms of the Plan include a provision whereby all unearned options and shares become immediately exercisable and fully vested upon a change in control.

-38-

FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In April 2010, the Company funded a trust, administered by an independent trustee, which acquired 101,681 common shares in the open market at a price per share of $13.60 for a total cost of $1.4 million. These acquired common shares were later granted to directors, officers and key employees in the form of restricted stock in May 2010 at a price per share of $13.25 for a total of $1.3 million. The difference between the purchase price and grant price of the common shares issued as restricted stock, totaling $41,000, was recognized by the Company as a reduction of additional paid in capital. The restricted stock vests ratably over a five-year period from the grant date. Compensation expense is measured based on the fair market value of the restricted stock at the grant date and is recognized ratably over the period during which the shares are earned (the vesting period). Compensation expense related to restricted stock recognized for both the three- and nine-month periods ended June 30, 2013 and 2012 amounted to $65,000 and $195,000, respectively. A summary of the Company’s nonvested restricted shares activity under the Plan as of June 30, 2013 and changes during the nine-month period then ended is presented below.

				Weighted
	Number			Average
	of			Grant Date
	Shares			Fair Value

Nonvested at October 1, 2012		58,850		$	13.25
Granted		-			-
Vested		(19,620	)	$	13.25
Forfeited		-			-

Nonvested at June 30, 2013		39,230		$	13.25

At June 30, 2013, there was $487,000 of total unrecognized compensation expense related to nonvested restricted shares. The compensation expense is expected to be recognized over the remaining vesting period of 1.9 years.

In May 2010, the Company awarded 177,549 incentive and 76,655 non-statutory stock options to directors, officers and key employees. The options granted vest ratably over five years and are exercisable in whole or in part for a period up to ten years from the date of the grant. Compensation expense is measured based on the fair market value of the options at the grant date and is recognized ratably over the period during which the shares are earned (the vesting period). The weighted average fair value at the grant date for options granted in 2010 was $3.09, as determined at the date of grant using the Binomial option pricing model.

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FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A summary of stock option activity under the Plan as of June 30, 2013, and changes during the nine-month period then ended is presented below.

			Weighted		Weighted
	Number		Average		Average
	Exercise		Exercise		Remaining		Aggregate
	of		Price		Contractual		Intrinsic
	Shares		Per Share		Term		Value
	(Dollars in thousands, except per share data)

Outstanding at October 1, 2012		245,232	$	13.25
Granted		-		-
Exercised		-		-
Forfeited or expired		-		-

Outstanding at June 30, 2013		245,232	$	13.25		6.9	$	2,474

Exercisable at June 30, 2013		147,141	$	13.25		6.9	$	1,485

The Company recognized compensation expense related to stock options of $38,000 and $114,000 for both the three- and nine-month periods ended June 30, 2013 and 2012, respectively. At June 30, 2013, there was $284,000 of unrecognized compensation expense related to nonvested stock options, which will be recognized over the remaining vesting period of 1.9 years.

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FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

11.

Preferred Stock

On August 11, 2011, the Company entered into a Securities Purchase Agreement (“Purchase Agreement”) with the United States Department of the Treasury, pursuant to which the Company issued 17,120 shares of the its Senior Non-Cumulative Perpetual Preferred Stock, Series A (“Series A Preferred Stock”), having a liquidation amount per share equal to $1,000, for a total purchase price of $17,120,000. The Purchase Agreement was entered into, and the Series A Preferred Stock was issued, pursuant to the Small Business Lending Fund (“SBLF”) program, a $30 billion fund established under the Small Business Jobs Act of 2010, that encourages lending to small businesses by providing Tier 1 capital to qualified community banks with assets of less than $10 billion.

Holders of the Series A Preferred Stock are entitled to receive non-cumulative dividends, payable quarterly, on each January 1, April 1, July 1 and October 1, beginning October 1, 2011. The dividend rate, as a percentage of the liquidation amount, can fluctuate on a quarterly basis during the first ten quarters during which the Series A Preferred Stock is outstanding and may be adjusted between 1.0% and 5.0% per annum, to reflect the amount of change in the Bank’s level of Qualified Small Business Lending (“QSBL”) (as defined in the Purchase Agreement) over the baseline level calculated under the terms of the Purchase Agreement (“Baseline”). In addition to the dividend, in the event the Bank’s level of QSBL has not increased relative to the Baseline, at the beginning of the tenth calendar quarter, the Company will be subject to an additional lending incentive fee equal to 2.0% per annum. For the eleventh dividend period through the eighteenth dividend period, inclusive, and that portion of the nineteenth dividend period before, but not including, the four and one half (4½) year anniversary of the date of issuance, the dividend rate will be fixed at between 1.0% and 7.0% per annum based upon the increase in QSBL as compared to the Baseline. After four and one half (4½) years from issuance, the dividend rate will increase to nine 9.0%. Based upon the Bank’s level of QSBL over the Baseline for purposes of calculating the dividend rate for the initial dividend period, the dividend rate for the initial dividend period ended September 30, 2011 was 4.84%. The dividend rate for the eighth dividend period ended June 30, 2013 was 1.0% and the weighted average dividend rate for the nine-month period ended June 30, 2013 was 1.0%.

The Series A Preferred Stock is non-voting, except in limited circumstances. In the event that the Company fails to timely make five dividend payments, whether or not consecutive, the holder of the Series A Preferred Stock will have the right, but not the obligation, to appoint a representative as an observer on the Company’s board of directors.

The Series A Preferred Stock may be redeemed at any time at the Company’s option, at a redemption price of one hundred percent (100%) of the liquidation amount plus accrued but unpaid dividends to the date of redemption for the current period, subject to the approval of its federal banking regulator.

The Series A Preferred Stock was issued in a private placement exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended. The Company has agreed to register the Series A Preferred Stock under certain circumstances set forth in the Purchase Agreement. The Series A Preferred Stock is not subject to any contractual restrictions on transfer.

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FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

12.

Recent Accounting Pronouncements

The following are summaries of recently issued accounting pronouncements that impact the accounting and reporting practices of the Company:

In December 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-11, Balance Sheet (Topic 210). The update requires an entity to disclose information about offsetting and related arrangements to enable users of the financial statements to understand the effect of netting arrangements on the entity’s financial position. The scope includes derivatives, sale and repurchase agreements and reverse sale and repurchase agreements, and securities borrowing and securities lending arrangements. ASU No. 2013-01 was issued in January 2013 to address implementation issues and clarify the scope of ASU No. 2011-11. The amendments in the updates are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods, with disclosures required by the amendments provided retrospectively for all comparative periods presented. The adoption of these updates is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

In October 2012, the FASB issued ASU No. 2012-06, Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution. The update indicates that when a reporting entity initially recognizes an indemnification asset as a result of a government-assisted acquisition of a financial institution and subsequently a change in the cash flows expected to be collected on the indemnification asset occurs, the reporting entity should subsequently account for the change in the measurement of the indemnification asset on the same basis as the change in the assets subject to indemnification. Any amortization of changes in value should be limited to the contractual term of the indemnification agreement (that is, the lesser of the term of the indemnification agreement and the remaining life of the indemnified assets). The amendments in the update are effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2012, and should be applied prospectively to any new indemnification assets acquired after the date of adoption and to indemnification assets existing as of the date of adoption. Early adoption is permitted. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

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FIRST SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The update does not change the current requirements for reporting net income or other comprehensive income in financial statements. The amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. For public entities, the amendments in the update are effective prospectively for reporting periods beginning after December 15, 2012. Early adoption is permitted. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Safe Harbor Statement for Forward-Looking Statements

This report may contain forward-looking statements within the meaning of the federal securities laws. These statements are not historical facts; rather they are statements based on the Company’s current expectations regarding its business strategies and their intended results and its future performance. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions.

Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties could cause or contribute to the Company's actual results, performance and achievements being materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, general economic conditions, including changes in market interest rates and changes in monetary and fiscal policies of the federal government; legislative and regulatory changes; the quality and composition of the loan and investment securities portfolio; loan demand; deposit flows; competition; the ability to successfully integrate the operations of Community First; and changes in accounting principles and guidelines. Additional factors that may affect our results are discussed herein and in our Annual Report on Form 10-K for the year ended September 30, 2012 under “Part II, Item 1A. Risk Factors.” These factors should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, the Company assumes no obligation and disclaims any obligation to update any forward-looking statements.

Critical Accounting Policies

During the nine-month period ended June 30, 2013, there was no significant change in the Company's critical accounting policies or the application of critical accounting policies as disclosed in the Company's Annual Report on Form 10-K for the year ended September 30, 2012.

Comparison of Financial Condition at June 30, 2013 and September 30, 2012

Cash and Cash Equivalents. Cash and cash equivalents decreased $17.7 million, from $38.8 million at September 30, 2012 to $21.1 million at June 30, 2013, due primarily to a decrease in cash and due from banks of $19.7 million. The decrease in cash and cash equivalents was primarily used to fund purchases of securities available for sale and new loan originations.

Loans. Net loans receivable increased $15.4 million, from $389.1 million at September 30, 2012 to $404.5 million at June 30, 2013, primarily due to increases in commercial real estate and multi-family residential loans of $25.3 million and $3.3 million, respectively, which more than offset decreases in residential permanent loans and commercial business loans of $6.3 million and $4.3 million, respectively. The decreases in residential mortgage and commercial business loans are primarily due to loan payoffs that have not been replaced by new originations.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Trading Account Securities. Trading account securities decreased by $1.3 million from $3.6 million at September 30, 2012 to $2.3 million at June 30, 2013. Trading account securities are comprised of investment grade municipal bonds.

Securities Available for Sale. Securities available for sale increased $12.6 million from $152.5 million at September 30, 2012 to $165.1 million at June 30, 2013 due primarily to purchases of $45.9 million, partially offset by maturities and calls of $12.1 million, principal repayments of $14.7 million and sales of $801,000. The increase in securities available for sale, primarily in U.S. government agency and sponsored enterprises securities, including mortgage-backed securities and CMOs, and municipal bonds was primarily funded by the decrease in cash and cash equivalents and the increase in borrowings from the FHLB.

Securities Held to Maturity. Investment securities held-to-maturity decreased $1.0 million from $7.8 million at September 30, 2012 to $6.8 million at June 30, 2013 due primarily to principal repayments on mortgage-backed securities.

Cash Surrender Value of Life Insurance. Cash surrender value of life insurance increased $4.3 million, from $8.5 million at September 30, 2012 to $12.8 million at June 30, 2013 primarily as the result of an investment in bank-owned life insurance of $4.0 million in December 2012.

Deposits. Total deposits decreased $9.8 million from $494.2 million at September 30, 2012 to $484.4 million at June 30, 2013 primarily due to a decrease in certificates of deposit of $37.0 million, which more than offset an increase in noninterest bearing demand deposit accounts of $1.4 million, savings accounts of $5.3 million, interest-bearing demand deposit accounts of $9.7 million and money market deposit accounts of $10.6 million during the period. The decrease in certificates of deposit occurred in various maturity classes and is primarily attributed to maturities that customers are investing in more liquid accounts given the low interest rate environment.

Borrowings. Borrowings from the FHLB increased $23.3 million from $53.1 million at September 30, 2012 to $76.4 million at June 30, 2013. Management has increased the level of FHLB advances in order to take advantage of historically low interest rates, provide short-term liquidity and provide funding for the loan portfolio growth, purchases of available for sale securities and the investment in additional bank-owned life insurance.

Stockholders’ Equity. Stockholders’ equity decreased $899,000 from $82.9 million at September 30, 2012 to $82.0 million at June 30, 2013. The decrease is due primarily to a $3.4 million decrease in other comprehensive income as a result of a decrease in net unrealized gains on securities available for sale, which is due to changes in the yield curve and long-term rate forecasts, and which more than offset retained net income of $1.9 million.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Results of Operations for the Nine Months Ended June 30, 2013 and 2012

Overview. The Company reported net income of $3.3 million and net income available to common shareholders of $3.2 million, or $1.41 per diluted share, for the nine-month period ended June 30, 2013 compared to net income of $3.1 million and net income available to common shareholders of $3.0 million, or $1.36 per diluted share, for the nine-month period ended June 31, 2012. The annualized return on average assets, average equity and average common stockholders’ equity were 0.68%, 5.28% and 6.64%, respectively, for the nine-month period ended June 30, 2013.

Net Interest Income. Net interest income increased $1.8 million, or 11.6%, for the nine-month period ended June 30, 2013 compared to the same period in 2012. Average interest-earnings assets increased $84.0 million and average interest-bearing liabilities increased $77.9 million when comparing the two periods. The tax-equivalent interest rate spread was 4.01% for 2013 as compared to 4.12% for 2012.

Total interest income increased $1.3 million, or 7.0%, when comparing the two periods due primarily to an increase in the average balance of interest-earning assets of $84.0 million from $503.2 million for 2012 to $587.2 million for 2013, which more than offset the change in interest income due to a decrease in the average tax-equivalent yield on interest-earning assets from 5.20% for 2012 to 4.80% for 2013. The average balance of loans and investment securities increased $36.9 million and $41.5 million, respectively, when comparing the two periods.

Total interest expense decreased $475,000, or 13.6%, due primarily to a decrease in the average cost of interest-bearing liabilities from 1.08% for 2012 to 0.79% for 2013, which more than offset the change in interest expense due to an increase in the average balance of interest-bearing liabilities of $77.9 million from $432.1 million for 2012 to $510.0 million for 2013. The average cost of interest-bearing liabilities decreased for 2013 primarily as a result of lower market interest rates as compared to 2012 and the repricing of certificates of deposit at lower market interest rates as they matured. The average balance of deposits increased $85.1 million while the average balance of borrowings decreased $7.2 million when comparing the two periods. The increase in the average balance of deposits is due primarily to the acquisition of the First Federal branches.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Average Balance Sheets. The following table presents 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 for the nine-month periods ended June 30, 2013 and 2012. 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 are not material. Tax exempt income on loans and investment securities has been calculated on a tax equivalent basis using a federal marginal tax rate of 34%.

	Nine Months Ended June 30,
	2013							2012
	Average Balance		Interest and Dividends		Yield/ Cost			Average Balance		Interest and Dividends		Yield/ Cost
	(Dollars in thousands)
Assets:
Interest-bearing deposits with banks	$	10,292	$	21		0.27	%	$	5,241	$	10		0.25	%
Loans		399,145		16,021		5.35			362,288		15,293		5.63
Investment securities		128,562		4,298		4.46			102,401		3,675		4.78
Agency mortgage-backed securities		43,812		634		1.93			28,430		550		2.58
Federal Home Loan Bank stock		5,400		151		3.73			4,819		110		3.04
Total interest-earning assets		587,211		21,125		4.80			503,179		19,638		5.20

Non-interest-earning assets		62,015							46,103
Total assets	$	649,226						$	549,282

Liabilities and equity:
NOW accounts	$	107,709	$	254		0.31	%	$	73,455	$	307		0.56	%
Money market deposit accounts		68,077		214		0.42			44,966		246		0.73
Savings accounts		65,366		49		0.10			43,460		85		0.26
Time deposits		199,684		1,655		1.11			193,828		1,946		1.34
Total interest-bearing deposits		440,836		2,172		0.66			355,709		2,584		0.97

Borrowings (1)		69,162		842		1.62			76,368		905		1.58
Total interest-bearing liabilities		509,998		3,014		0.79			432,077		3,489		1.08

Non-interest-bearing deposits		49,799							36,289
Other non-interest-bearing liabilities		5,482							2,827
Total liabilities		565,279							471,193

Total equity		83,947							78,089
Total liabilities and equity	$	649,226						$	549,282
Net interest income			$	18,111						$	16,149
Interest rate spread						4.01	%						4.12	%
Net interest margin						4.11	%						4.28	%
Average interest-earning assets to average interest-bearing liabilities						115.14	%						116.46	%

(1) Includes Federal Home Loan Bank borrowings, repurchase agreements and other long-term debt.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Rate/Volume Analysis. The following table sets forth the effects of changing rates and volumes on our net interest income for the nine-month period ended June 30, 2013 and 2012. 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.

	Nine Months Ended June 30, 2013 Compared to Nine Months Ended June 30, 2012
	Increase (Decrease) Due to
	Rate			Volume			Net
				(In thousands)
Interest income:
Interest-bearing deposits with banks	$	1		$	10		$	11
Loans		(696	)		1,424			728
Investment securities		(222	)		845			623
Agency mortgage-backed securities		(73	)		157			84
Other interest-earning assets		27			14			41
Total interest-earning assets		(963	)		2,450			1,487

Interest expense:
Deposits		(1,641	)		1,229			(412	)
Borrowings (1)		24			(87	)		(63	)
Total interest-bearing liabilities		(1,617	)		1,142			(475	)
Net increase in net interest income	$	654		$	1,308		$	1,962

(1) Includes Federal Home Loan Bank borrowings and repurchase agreements.

Provision for Loan Losses. The provision for loan losses was $1.6 million for the nine-month period ended June 30, 2013 compared to $897,000 for the same period in 2012. The increase in the provision for loans losses for 2013 as compared to the prior period was in order to increase the level of allowance for loan losses as a result of increases in net charge-offs and nonperforming loans when comparing the two periods.

Net charge-offs were $1.1 million for the nine-month period ended June 30, 2013 compared to net charge-offs of $674,000 for the same period in 2012.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The recorded investment in nonperforming loans was $6.4 million at June 30, 2013 compared to $5.8 million at September 30, 2012 and $6.1 million at June 30, 2012. Nonperforming loans at June 30, 2013 include nonaccrual loans of $5.8 million and loans totaling $657,000 that are over 90 days past due, but still accruing interest. These loans are still accruing interest because the estimated value of the collateral and collection efforts are deemed sufficient to ensure their full recovery. The increase in nonperforming loans from September 30, 2012 to June 30, 2013 is due primarily to a commercial business loan of $205,000 that is secured by stock of a publicly traded company and which was on nonaccrual status at June 30, 2013, and a commercial loan relationship totaling $592,000 that is secured by three non-owner occupied, one-to-four family investment properties and which was on nonaccrual status and in foreclosure at June 30, 2013.

Gross loans receivable increased $40.5 million from $375.7 million at June 30, 2012 to $416.2 million at June 30, 2013, primarily due to increases in residential permanent and commercial real estate $20.5 million and $24.7 million, respectively. The increases in residential permanent loans and commercial real estate are due primarily to the acquisition of the First Federal branches, and new commercial real estate loans originated.

The allowance for loan losses was $5.3 million at June 30, 2013 compared to $4.9 million at both September 30, 2012 and June 30, 2012. Management has deemed these amounts as adequate on those dates based on its best estimate of probable known and inherent loan losses. The consistent application of management’s allowance for loan losses methodology resulted in an increase in the level of the allowance for loan losses consistent with changes in the loan portfolio and overall economic conditions.

Noninterest Income. Noninterest income increased $589,000 for the nine-month period ended June 30, 2013 as compared to the same period in 2012. The increase was due primarily increased net gains on the trading account securities portfolio of $170,000 for 2013 and increases in net gain on sales of loans and real estate lease income of $300,000 and $190,000, respectively, which more than offset the $321,000 gain on life insurance that was recognized on a life insurance policy during 2012. The increase in real estate lease income is due to the commencement of rents for five of the tenants in the real estate development that is described above in Note 5 of the Notes to Consolidated Financial Statements.

Noninterest Expense. Noninterest expenses increased $1.3 million for the nine-month period ended June 30, 2013 as compared to the same period in 2012. The increase was due primarily to increases in compensation and benefits expense, occupancy and equipment expense and other operating expenses of $1.2 million, $245,000 and $206,000, respectively, which more than offset a decrease in data processing and advertising expense of $187,000 and $169,000, respectively. The increase in compensation and benefits expense is due primarily to normal salary, wages and benefits increases and the addition of employees as a result of the acquisition of the First Federal branches, and increased ESOP compensation expense of approximately $333,000 due to the accelerated repayment of the ESOP loan during the December 2012 quarter. The increase in occupancy and equipment expense is due primarily to the $71,000 replacement of the main office roof, $66,000 relating to the replacement of obsolete phone systems, and the operation of the branches acquired from First Federal. The increase in other operating expenses is due primarily to $294,000 in expenses related to the Company’s debit card reward points program for which no expense was recognized in the 2012 period. The decrease in data processing is due primarily to expenses recognized in 2012 for the acquisition of the First Federal branches. The decrease in advertising expense was due primarily to expenses recognized in the 2012 period that were associated with the rebranding and advertising campaign for the Bank’s new look and logo that was launched in September 2011.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Income Tax Expense. The Company recognized income tax expense of $1.2 million for the nine months ended June 30, 2013, for an effective tax rate of 27.1%, compared to income tax expense of $1.0 million, for an effective tax rate of 24.5%, for the same period in 2012. The lower effective tax rate for the period ended June 30, 2012 was primarily due to a higher level of tax exempt income for 2012.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Results of Operations for the Three Months Ended June 30, 2013 and 2012

Overview. The Company reported net income and net income available to common shareholders of $1.1 million, or $0.48 per diluted share, for the quarter ended June 30, 2013 compared to net income of $1.3 million and net income available to common shareholders of $1.2 million, or $0.55 per diluted share, for the quarter ended June 30, 2012. The annualized return on average assets, average equity and average common stockholders’ equity were 0.70%, 5.39% and 6.76%, respectively, for the three-month period ended June 30, 2013.

Net Interest Income. Net interest income increased $345,000, or 6.4%, for the three months ended June 30, 2013 compared to the same period in 2012. Average interest-earnings assets increased $68.8 million and average interest-bearing liabilities increased $61.0 million when comparing the two periods. The tax-equivalent interest rate spread was 3.93% for 2013 as compared to 4.12% for 2012.

Total interest income increased $130,000, or 2.0%, when comparing the two periods due primarily to an increase in the average balance of interest-earning assets of $68.8 million from $526.6 million for 2012 to $595.4 million for 2013, which more than offset the change in interest income due to a decrease in the average tax-equivalent yield on interest-earning assets from 5.12% for 2012 to 4.64% for 2013. The average balance of loans and investment securities increased $38.0 million and $24.7 million, respectively, when comparing the two periods.

Total interest expense decreased $215,000, or 19.5%, due primarily to a decrease in the average cost of interest-bearing liabilities from 1.00% for 2012 to 0.71% for 2013, which more than offset the change in interest expense due to an increase in the average balance of interest-bearing liabilities of $61.0 million from $450.4 million for 2012 to $511.4 million for 2013. The average cost of interest-bearing liabilities decreased for 2013 primarily as a result of lower market interest rates as compared to 2012 and the repricing of certificates of deposit at lower market interest rates as they matured. The average balance of deposits increased $74.6 million and the average balance of borrowings decreased $13.7 million when comparing the two periods. The increase in the average balance of deposits is due primarily to the acquisition of the First Federal branches.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Average Balance Sheets. The following table presents 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 for the three-month periods ended June 30, 2013 and 2012. 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 are not material. Tax exempt income on loans and investment securities has been calculated on a tax equivalent basis using a federal marginal tax rate of 34%.

	Three Months Ended June 30,
	2013							2012
	Average Balance		Interest and Dividends		Yield/ Cost			Average Balance		Interest and Dividends		Yield/ Cost
	(Dollars in thousands)
Assets:
Interest-bearing deposits with banks	$	12,385	$	10		0.32	%	$	6,635	$	4		0.24	%
Loans		404,913		5,207		5.14			366,905		5,106		5.57
Investment securities		129,741		1,427		4.40			108,119		1,345		4.98
Agency mortgage-backed securities		42,919		210		1.96			39,805		252		2.53
Federal Home Loan Bank stock		5,400		48		3.56			5,134		38		2.96
Total interest-earning assets		595,358		6,902		4.64			526,598		6,745		5.12

Non-interest-earning assets		58,629							46,070
Total assets	$	653,987						$	573,347

Liabilities and equity:
NOW accounts	$	112,904	$	59		0.21	%	$	79,736	$	116		0.58	%
Money market deposit accounts		71,719		60		0.33			48,235		82		0.68
Savings accounts		67,536		10		0.06			45,755		30		0.26
Time deposits		187,176		513		1.10			190,973		589		1.23
Total interest-bearing deposits		439,335		642		0.58			364,699		817		0.90

Borrowings (1)		72,016		267		1.48			85,687		307		1.43
Total interest-bearing liabilities		511,351		909		0.71			450,386		1,124		1.00

Non-interest-bearing deposits		52,233							39,565
Other non-interest-bearing liabilities		5,772							3,515
Total liabilities		569,356							493,466

Total equity		84,631							79,881
Total liabilities and equity	$	653,987						$	573,347
Net interest income			$	5,993						$	5,621
Interest rate spread						3.93	%						4.12	%
Net interest margin						4.03	%						4.27	%
Average interest-earning assets to average interest-bearing liabilities						116.43	%						116.92	%

(1) Includes Federal Home Loan Bank borrowings, repurchase agreements and other long-term debt.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Rate/Volume Analysis. The following table sets forth the effects of changing rates and volumes on our net interest income for the three-month periods ended June 30, 2013 and 2012. 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.

	Three Months Ended June 30, 2013 Compared to Three Months Ended June 30, 2012
	Increase (Decrease) Due to
	Rate			Volume			Net
				(In thousands)
Interest income:
Interest-bearing deposits with banks	$	2		$	4		$	6
Loans		(296	)		397			101
Investment securities		(114	)		196			82
Agency mortgage-backed securities		(64	)		22			(42	)
Other interest-earning assets		8			2			10
Total interest-earning assets		(464	)		621			157

Interest expense:
Deposits		(413	)		238			(175	)
Borrowings (1)		11			(51	)		(40	)
Total interest-bearing liabilities		(402	)		187			(215	)
Net increase (decrease) in net interest income	$	(62	)	$	434		$	372

(1) Includes Federal Home Loan Bank borrowings and repurchase agreements.

Provision for Loan Losses. The provision for loan losses was $560,000 for the three-month period ended June 30, 2013 compared to $308,000 for the same period in 2012. The increase in the provision for loans losses for 2013 as compared to the prior period was in order to increase the level of allowance for loan losses as a result of increases in net charge-offs and nonperforming loans when comparing the two periods.

Net charge-offs were $614,000 for the three-month period ended June 30, 2013 compared to net charge-offs of $336,000 for the same period in 2012.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Noninterest Income. Noninterest income decreased $10,000 for the three-month period ended June 30, 2013 as compared to the same period in 2012. The decrease was due primarily to a gain of $321,000 on a life insurance policy during 2012, which more than offset increases in net gain on sales of loans of $194,000 and real estate lease income of $86,000. The increase in the net gain on sale of loans was due primarily to a $109,000 gain on the sale of the SBA-guaranteed portion of a commercial real estate loan.

Noninterest Expense. Noninterest expenses increased $104,000 for the three-month period ended June 30, 2013 as compared to the same period in 2012. The increase was due primarily to increases in compensation and benefits expense and occupancy and equipment expense of $189,000 and $183,000, respectively, which more than offset decreases in data processing expense and professional fees expense of $190,000 and $138,000, respectively. The increase in compensation and benefits expense is due primarily to normal salary, wages and benefits increases and the addition of employees as a result of the acquisition of the First Federal branches. The increase in occupancy and equipment expense is due primarily to the operation of the branches acquired from First Federal and the aforementioned expenses related to the main office roof and phone systems replacement. The decreases in data processing expense and professional fees expense are due primarily to expenses recognized in 2012 for the acquisition of the First Federal branches.

Income Tax Expense. The Company recognized income tax expense of $441,000 for the three months ended June 30, 2013, for an effective tax rate of 27.9%, compared to income tax expense of $331,000, for an effective tax rate of 20.6%, for the same period in 2012. The lower effective tax rate for the quarter ended June 30, 2012 was primarily due to a higher level of tax exempt income for 2012.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Liquidity and Capital Resources

Liquidity Management. Liquidity is the ability to meet current and future financial obligations of a short-term nature. The Bank’s primary sources of funds are customer deposits, proceeds from loan repayments, maturing securities and FHLB advances. While loan repayments and maturities are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by market interest rates, general economic conditions and competition. At June 30, 2013, the Bank had cash and cash equivalents of $21.1 million, trading account securities with a fair value of $2.3 million and securities available-for-sale with a fair value of $165.1 million. If the Bank requires funds beyond its ability to generate them internally, it has additional borrowing capacity with the FHLB, borrowing capacity on a federal funds purchased line of credit facility with another financial institution and additional collateral eligible for repurchase agreements.

The Bank’s primary investing activity is the origination of one-to-four family mortgage loans and, to a lesser extent, consumer, multi-family, commercial real estate, commercial business and residential construction loans. The Bank also invests in U.S. government agency and sponsored enterprises securities, mortgage backed securities and collateralized mortgage obligations issued by U.S. government agencies and sponsored enterprises, and municipal bonds.

The Bank must maintain an adequate level of liquidity to ensure the availability of sufficient funds to support loan growth and deposit withdrawals, to satisfy financial commitments and to take advantage of investment opportunities. Historically, the Bank has been able to retain a significant amount of its deposits as they mature.

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 cannot exceed net income for that year to date plus retained net income (as defined) for the preceding two calendar years. The Bank must also file prior notice with the Federal Reserve Board before the Bank may declare and pay dividends to the Company. During the three months ended June 30, 2013 the Bank declared and paid dividends to the Company totaling $1.0 million. At June 30, 2013, the Company had liquid assets of $1.3 million.

Capital Management. The Bank is required to maintain specific amounts of capital pursuant to regulatory requirements. As of June 30, 2013, the Bank was in compliance with all regulatory capital requirements that were effective as of such date, with Tier 1 capital (to adjusted total assets), Tier 1 capital (to risk-weighted assets) and total capital (to risk-weighted assets) ratios of 10.40 %, 15.95% and 17.21%, respectively. The regulatory requirements at that date were 5.0%, 6.0% and 10.0%, respectively, in order to be categorized as “well capitalized” under applicable regulatory guidelines. At June 30, 2013, the Bank was considered “well-capitalized” under applicable regulatory guidelines.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Off-Balance Sheet Arrangements

In the normal course of operations, the Company engages in a variety of financial transactions that, in accordance with GAAP, are not recorded on the Company's financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are primarily used to manage customers’ requests for funding and take the form of loan commitments and letters of credit. A further presentation of the Company’s off-balance sheet arrangements is presented in the Company’s Annual Report on Form 10-K for the year ended September 30, 2012.

For the nine months ended June 30, 2013, the Company did not engage in any off-balance sheet transactions reasonably likely to have a material effect on the Company's financial condition, results of operations or cash flows.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART I – ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

Qualitative Aspects of Market Risk. Market risk is the risk that the estimated fair value of our assets, liabilities, and derivative financial instruments will decline as a result of changes in interest rates or financial market volatility, or that our net income will be significantly reduced by interest rate changes.

The Company’s principal financial objective is to achieve long-term profitability while reducing its exposure to fluctuating market interest rates by operating within acceptable limits established for interest rate risk and maintaining adequate levels of funding and liquidity. The Company has sought to reduce the exposure of its earnings to changes in market interest rates by attempting to manage the mismatch between asset and liability maturities and interest rates. In order to reduce the exposure to interest rate fluctuations, the Company has developed strategies to manage its liquidity, shorten its effective maturities of certain interest-earning assets and decrease the interest rate sensitivity of its asset base. Management has sought to decrease the average maturity of its assets by emphasizing the origination of short-term residential mortgage, commercial mortgage and commercial business loans, all of which are retained by the Company for its portfolio. The Company relies on retail deposits as its primary source of funds. Management believes the primary use of retail deposits, complimented with a modest allocation of brokered deposits and FHLB borrowings, reduce the effects of interest rate fluctuations because they generally represent a more stable source of funds.

Quantitative Aspects of Market Risk. Potential cash flows, sales, or replacement value of many of our assets and liabilities, especially those that earn or pay interest, are sensitive to changes in the general level of interest rates. This interest rate risk arises primarily from our normal business activities of gathering deposits and extending loans. Many factors affect our exposure to changes in interest rates, such as general economic and financial conditions, customer preferences, historical pricing relationships, and re-pricing characteristics of financial instruments. Our earnings can also be affected by the monetary and fiscal policies of the U.S. Government and its agencies, particularly the Federal Reserve Board. Furthermore, the Company does not engage in hedging activities or purchase high-risk derivative instruments and also is not subject to foreign currency exchange rate risk or commodity price risk.

An element in our ongoing 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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FIRST SAVINGS FINANCIAL GROUP, INC.

PART I – ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

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.

	At June 30, 2013					At September 30, 2012
Immediate Change	One Year Horizon					One Year Horizon
in the Level of Interest Rates	Dollar Change		Percent Change			Dollar Change		Percent Change
	(Dollars in thousands)
300bp	$	537		2.33	%	$	411		1.80	%
200bp		293		1.27			274		1.20
100bp		133		0.58			107		0.47
Static		-		-			-		-
(100)bp		192		0.83			6		0.03

At June 30, 2013, our simulated exposure to an increase in interest rates shows that an immediate and sustained increase in rates of 1.00% will increase our net interest income by $133,000 or 0.58% 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 increase by 1.27% and 2.33%, respectively.

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.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART I – ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

Results of our simulation modeling, which assumes an immediate and sustained parallel shift in market interest rates, project that Company’s EVE could change as follows, relative to our base case scenario.

	At June 30, 2013
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)
300bp	$	81,650	$	(21,171	)		(20.59	)%		13.85	%		(181	)bp
200bp		89,299		(13,522	)		(13.15	)		14.60			(106	)bp
100bp		97,803		(5,018	)		(4.88	)		15.39			(27	)bp
Static		102,821		-			-			15.66			-	bp
(100)bp		96,108		(6,713	)		(6.53	)		14.44			(122	)bp

	At September 30, 2012
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)
300bp	$	69,309	$	(14,990	)		(17.78	)%		11.99	%		(120	)bp
200bp		76,110		(8,189	)		(9.71	)		12.70			(49	)bp
100bp		82,119		(2,180	)		(2.59	)		13.23			4	bp
Static		84,299		-			-			13.19			-	bp
(100)bp		82,060		(2,239	)		(2.66	)		12.67			(52	)bp

The previous table indicates that at June 30, 2013, the Company would expect a decrease in its EVE in the event of a sudden and sustained 100 to 300 basis point increase and/or 100 basis point decrease in prevailing interest rates. The expected decrease in the Company’s EVE given a larger increase in rates is primarily attributable to the relatively high percentage of fixed-rate loans in the Company’s loan portfolio, which at June 30, 2013 comprised approximately 56.5% of the loan portfolio.

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’s 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 certificates of deposit could deviate significantly from those assumed in calculating the table.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART I - ITEM 4

CONTROLS AND PROCEDURES

Controls and Procedures

The Company’s management, including the Company’s principal executive officer and the Company’s principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended. Based on their evaluation, the principal executive officer and the principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that information required to be disclosed in reports that the Company files or submits under the Exchange Act with the SEC (1) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s Rules and Forms and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

During the quarter ended June 30, 2013, there were no changes in the Company's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

The Company is not a party to any legal proceedings. Periodically, there have been various claims and lawsuits involving the Bank, mainly as a plaintiff, such as claims to enforce liens, condemnation proceedings on properties in which the Bank holds security interests, claims involving the making and servicing of real property loans and other issues incident to the Bank’s business. The Bank is not a party to any pending legal proceedings that it believes would have a material adverse effect on its financial condition or operations.

Item 1A.

Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2012 which could materially affect our business, financial condition or future results. There have been no material changes to the risk factors described in our Annual Report on Form 10-K, however, these are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART II

OTHER INFORMATION

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents information regarding the Company’s stock repurchase activity during the quarter ended June 30, 2013:

Period	(a) Total number of shares (or units) purchased		(b) Average price paid per share (or unit)		(c) Total number of shares (or units) purchased as part of publicly announced plans or programs (1)		(d) Maximum number (or appropriate dollar value) of shares (or units) that may yet be purchased under the plans or programs
April 1, 2013 through April 30, 2013		—		—		—		14,650
May 1, 2013 through May 31, 2013		4,578	$	22.48		4,578		10,072
June 1, 2013 through June 30, 2013		—		—		—		10,072
Total		4,578	$	22.48		4,578		—

(1) On October 20, 2010, the Company announced that its Board of Directors authorized a stock repurchase program to acquire up to 120,747 shares, or 5.0% of the Company’s outstanding common stock. Under the program, repurchases are to be conducted through open market purchases or privately negotiated transactions, and were to be made from time to time depending on market conditions and other factors.

New Stock Repurchase Program

On November 16, 2012, the Company authorized a new stock repurchase program to acquire up to 230,217 shares, or approximately 10%, of the Company’s outstanding common stock that will be outstanding upon completion of the current stock repurchase program. The Company’s current repurchase program has 10,072 shares remaining to be purchased as of the close of trading on June 30, 2013. The new repurchases will commence upon completion of the current repurchase program. Repurchases, which will be conducted through open market purchases or privately negotiated transactions, will be made from time to time depending on market conditions and other factors. There is no guarantee as to the exact number of shares to be repurchased by the Company. Repurchased shares will be held in treasury.

Item 3.

Defaults upon Senior Securities

Not applicable.

Item 4.

Mine Safety Disclosures

Not applicable.

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FIRST SAVINGS FINANCIAL GROUP, INC.

PART II

OTHER INFORMATION

Item 5.

Other Information

None.

Item 6.

Exhibits

31.1

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32.1

Section 1350 Certification of Chief Executive Officer

32.2

Section 1350 Certification of Chief Financial Officer

101*

The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statement of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) related notes

* Furnished, not filed.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FIRST SAVINGS FINANCIAL GROUP, INC.
	(Registrant)

Dated August 14, 2013	BY:	/s/ Larry W. Myers
		Larry W. Myers
		President and Chief Executive Officer

Dated August 14, 2013	BY:	/s/ Anthony A. Schoen
		Anthony A. Schoen
		Chief Financial Officer

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