Net interest income for the quarter ended September 30, 2025, improved from the prior year. Interest income from loans and investments declined but was outpaced by reductions in interest expense on deposits and borrowings. The Company's net interest margin ("NIM"), as a percentage of average interest-earning assets, was 2.86% for the quarter ended September 30, 2025, an improvement from 2.67% as reported for the quarter ended September 30, 2024. Gains on loan sales accelerated in the most recent quarter. The quarter over quarter rise in total non-interest expenses was largely attributed to increased compensation expense and to advertising costs from a deposit acquisition initiative.
The securities portfolio, which is primarily composed of investment-grade municipal bonds or obligations of US government agencies, totaled $88.8 million on September 30, 2025. No investments were added, so the modest increase was attributed to an improvement in the portfolio's fair market value.
Net loans outstanding, which totaled $448.3 million on September 30, 2025, have increased $1.9 million during the quarter. Commercial loan production increased to $14.1 million for the three-month period, which included one $1.5 million SBA-backed loan. Single-family mortgage loan production, primarily originated for sale to FNMA or the Federal Home Loan Bank, totaled $5.6 million during the same timeframe. Construction lending slowed during the quarter and accounted for 7.5% of this activity. Consumer lending originations, which included auto loans, personal loans, and home equity loans and lines of credit, totaled $5.9 million.
No provision for credit losses on loans was recorded in the three months ended September 30, 2025 or 2024. Net loan chargeoffs totaled $32,700 for the quarter, compared to $75,800 for the comparative quarter last year. The ratio of nonperforming loans 90 days or more delinquent to total loans was 0.29% on September 30, 2025, compared to 1.60% a year ago, primarily as the result of the successful restructuring of two large commercial relationships. Overall, the Allowance for Credit Losses, including reserves for investment securities and unfunded commitments, stood at $5.28 million at September 30, 2025, compared to $5.58 million on September 30, 2024. The portion of the allowance attributed to the loan portfolio represented 1.13% of at-risk loans on September 30, 2025, compared to 1.11% last year. Although management believes that the allowance is adequate, a slowing economy and persistent inflation may have an adverse effect on the credit quality of the loan portfolio. Management remains in close contact with our most vulnerable borrowers and will make additional provisions to the allowance, as necessary.
Deposit accounts, totaling $487.5 million on September 30, 2025, declined by $851,000 since the beginning of the fiscal year. Growth in local deposits during the first fiscal quarter has allowed the Bank to retire $17.2 million of higher-costing wholesale funding. Conversely, local deposit rates have moderated in recent months, resulting in the cost of deposits totaling 2.56% for the current quarter compared to 2.71% for the same quarter last fiscal year. Similarly, the Company's total cost of funds, including FHLB advances and debt of the holding company, totaled 2.70% for the quarter, compared to 2.89% for the quarter ended September 30, 2024.
As a part of the Bank's liquidity management plan, contingency funding sources are available and liquidity stress tests determine adequacy. At September 30, 2025, First Federal Savings Bank maintained lines of credit totaling $15.0 million at correspondent financial institutions and additional borrowing capacity with the Federal Reserve Bank's discount window ($12.6 million) and the Federal Home Loan Bank ($82.4 million).
Stockholders' equity totaled $35.7 million on September 30, 2025, which includes a $7.8 million fair value reduction to the available for sale securities portfolio given the rapid rise in market interest rates. This securities portfolio adjustment is not a part of the regulatory capital calculations, and gains or losses in the securities portfolio are only recognized if a security is sold. The increase in stockholders' equity is primarily due to the Company's earnings and a decrease in the unrealized loss on the Bank's available for sale investment portfolio. Based on the 1,704,992 outstanding common shares on September 30, 2025, the book value per share of FBPI stock was $20.93, compared to $20.63 on September 30, 2024.
On September 30, 2025, the Bank's Tier 1 Leverage, Tier 1 Risk Based and Total Risk Based Capital ratios were 8.92%, 12.79%, and 14.01%, respectively - improvements from 8.36%, 11.76% and 12.98% on September 30, 2024.
This press release may contain statements that are forward-looking, as that term is defined by the Private Securities Litigation Act of 1995 or the Securities and Exchange Commission in its rules, regulations and releases. The Company intends that such forward-looking statements be subject to the safe harbors created thereby. All forward-looking statements are based on current expectations regarding important risk factors including, but not limited to: general economic conditions; prices for real estate in the Company's market areas; the interest rate environment and the impact of the interest rate environment on our business, financial condition and results of operations; our ability to successfully conserve and enhance capital levels, enhance liquidity and earnings, and reduce higher funding costs; the Company's ability to pay future dividends; the Bank's ability to pay dividends to the Company to fund the payment of cash dividends on the Company's common stock, and the ability of the Bank to receive any required regulatory approval or non-objection to do so; changes in the demand for loans or in the quality or composition of our loan or investment portfolios; deposits and other financial services that we provide; the possibility that future credit losses may be higher than currently expected as a result of changes in relevant accounting or regulatory requirements, among other factors; competitive pressures among financial services companies; the ability to attract, develop and retain qualified employees; our ability to maintain the security of our data processing and information technology systems; the outcome of pending or threatened litigation, or of matters before regulatory agencies; changes in law, governmental policies and regulations; and rapidly changing technology affecting financial services. Accordingly, actual results may differ from those expressed in the forward-looking statements, and the making of such statements should not be regarded as a representation by the Company or any other person that results expressed therein will be achieved. The Company undertakes no obligation to release revisions to these forward-looking statements publicly to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported by applicable law.
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Source: First Bancorp of Indiana Inc (OTCPK:FBPI)
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