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First Savings Financial Group in Jeffersonville, Indiana, is reaping the benefits of hanging tough.
The $2.4 billion-asset company’s retooled SBA lending subsidiary just posted its best three-month performance since the spring of 2022. CEO Larry Myers said he anticipates similar results for the remainder of 2025. If he’s right, First Savings will put a period on a three-year downward spiral that saw its SBA loan production drop sharply after several key executives and loan officers left the bank.
SBA guaranteed loan origination volume, which had totaled $76.9 million in 2021, plunged to $34.8 million in 2022. The nosedive prompted talk, both inside the bank and externally, of leaving the SBA market altogether, Myers told American Banker.
First Savings Financial Group
“Those discussions did come up,” Myers said. “Management was always firmly behind it, [but] the question was asked by the board. Questions were asked by shareholders. You always evaluate. You want to make sure the world hasn’t changed around you.”
Myers decided to hang tough. First Savings hired a new group president and began rebuilding its team. Guaranteed loan volume picked up steam in 2023 and 2024. It’s on pace to top $60 million this year.
“We knew the model,” Myers said. “We knew the formula. We knew what it would take to get us back to where we needed to be.”
Ron Shevlin, chief research officer at Cornerstone Advisors, credited Myers with sensing the direction the small-business loan market was heading.
“I think the bank made a smart decision,” Shevlin told American Banker. “If you start looking at it from this point out or even a few years back out, you see a huge demand for small-business lending.”
“A lot of banks don’t want to touch [SBA] loans,” Shevlin added, noting that some lenders prefer much larger loans or have greater competency in real estate lending. “It’s a testament to [First Savings’] ability to understand its strengths and stay committed to a market opportunity that was out there.”
Under the 7(a) program, the SBA provides guarantees ranging from 50% to 85% on loans made by banks and other private lenders. Many community banks, including First Savings, employ an originate-and-sell model, offloading their 7(a) loans in the secondary market to generate noninterest income.
First Savings
First Savings punched above its weight in the PPP, making loans totaling $183.4 million. In 2021, its regular SBA 7(a) lending hit new heights, with loan sale income topping $9 million.
But it was around this time the unit’s descent began. Both managing partners of Q2 Business Capital left after First Savings, following years of solid production, acquired their minority ownership stake in 2020. Next came the departures of four business development officers, who quit to pursue opportunities in Florida.
The turn of events prevented First Savings, at least initially, from capitalizing on the
With the trend continuing — 7(a) originations totaled $18.8 billion through the first six months of SBA’s 2025 fiscal year, up 41% over the same period in fiscal 2024 — the company appears well positioned to play catch-up. SBA’s fiscal years run from Oct. 1 through Sept. 30.
Last week, First Savings reported net income totaling $5.5 million, or 79 cents per share. Analysts were expecting 59 cents.
During the first quarter, First Savings exhibited “net interest margin momentum with more in store,” plus “credit cleanliness” and “emerging fee momentum,” Brendan Nosal, an analyst at Hovde, wrote in a research note.
“If things go according to plan,” Nosal wrote, “we see the bank printing 1% returns on average assets in the next two years, up significantly from 76 basis points in 2024.”
Nosal boosted his full-year 2025 earnings estimate, as did Michael Diana, who covers First Savings for Maxim Group. Diana wrote that he expects the company’s profitability in SBA banking to increase.
For First Savings, the SBA resurgence comes at an opportune moment. The company has slowed the growth of its two other fee-income business lines — single-tenant commercial real estate and first-lien home equity lines of credit — to guard against overconcentration. First Savings relies on noninterest income to diversify its earnings, allowing the bank to limit the risk it takes in its core community banking operation.
First Savings Financial Group
“One of the things that being in these other business lines has afforded us to do with the core bank is be very selective [in lending],” Myers said last month during a presentation at the Under the Radar Virtual Bank Conference. “When you look at our core bank credit quality, it is pristine.”
First Savings’ first-quarter charge-offs totaled just $110,000. Nonperforming assets of $12.7 million were 0.67% of gross loans.
“We take very little risk in our in-market core banking because we don’t have to,” Chief Financial Officer Tony Schoen said at the conference.