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 December 31,
2010





OR





 ̈
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.
      Employerincorporation
      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 ̈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 Companyx





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 January 31,
2011 was 2,368,945.





FIRST
SAVINGS FINANCIAL GROUP, INC.





INDEX





PagePart
      I
                Financial
      InformationItem
      1.  Financial StatementsConsolidated
      Balance Sheets as of December 31, 2010 and September 30, 2010
      (unaudited)
                3Consolidated
      Statements of Income for the three months ended December 31, 2010 and 2009
      (unaudited)
                4Consolidated
      Statements of Cash Flows for the three months ended December 31, 2010 and
      2009 (unaudited)
                5Notes
      to Consolidated Financial Statements (unaudited)
                6-29Item
      2.  Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
                30-37Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk
                38-39Item
      4.  Controls and Procedures
                40Part
      II
                Other
      InformationItem
      1.  Legal Proceedings
                41Item
      1A.  Risk Factors
                41Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
                41Item
      3.  Defaults Upon Senior Securities
                42Item
      4.  Reserved
                42Item
      5.  Other Information
                42Item
      6.  Exhibits
                42Signatures
                43


-2-





PART
I - FINANCIAL INFORMATION


FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


(Unaudited)





December 31,
                
                
                September 30,(In thousands, except share and per share data)
                
                2010
                
                
                2010ASSETSCash
      and due from banks
                
                $
                8,412
                
                
                $
                10,184Interest-bearing
      deposits with banks
                
                
                3,065
                
                
                
                1,094Total
      cash and cash equivalents
                
                
                11,477
                
                
                
                11,278Securities
      available for sale, at fair value
                
                
                120,139
                
                
                
                109,976Securities
      held to maturity
                
                
                3,586
                
                
                
                3,929Loans
      held for sale
                
                
                1,539
                
                
                
                1,884Loans,
      net
                
                
                339,094
                
                
                
                343,615Federal
      Home Loan Bank stock, at cost
                
                
                4,049
                
                
                
                4,170Premises
      and equipment
                
                
                9,929
                
                
                
                9,492Foreclosed
      real estate
                
                
                1,793
                
                
                
                1,331Accrued
      interest receivable:Loans
                
                
                1,514
                
                
                
                1,646Securities
                
                
                916
                
                
                
                746Cash
      surrender value of life insurance
                
                
                8,313
                
                
                
                8,234Goodwill
                
                
                5,940
                
                
                
                5,940Core
      deposit intangible
                
                
                2,374
                
                
                
                2,447Other
      assets
                
                
                4,434
                
                
                
                3,754Total
      Assets
                
                $
                515,097
                
                
                $
                508,442LIABILITIESDeposits:Noninterest-bearing
                
                $
                30,883
                
                
                $
                28,853Interest-bearing
                
                
                343,141
                
                
                
                337,308Total
      deposits
                
                
                374,024
                
                
                
                366,161Repurchase
      agreements
                
                
                16,716
                
                
                
                16,821Borrowings
      from Federal Home Loan Bank
                
                
                67,784
                
                
                
                67,159Accrued
      interest payable
                
                
                415
                
                
                
                427Advance
      payments by borrowers for taxes and insurance
                
                
                148
                
                
                
                252Accrued
      expenses and other liabilities
                
                
                1,859
                
                
                
                2,471Total
      Liabilities
                
                
                460,946
                
                
                
                453,291STOCKHOLDERS'
      EQUITYPreferred
      stock of $.01 par value per share Authorized 1,000,000 shares; none
      issued
                
                
                -
                
                
                
                -Common
      stock of $.01 par value per share Authorized 20,000,000 shares; issued
      2,542,042 shares
                
                
                25
                
                
                
                25Additional
      paid-in capital
                
                
                24,394
                
                
                
                24,310Retained
      earnings - substantially restricted
                
                
                32,987
                
                
                
                31,889Accumulated
      other comprehensive income
                
                
                1,328
                
                
                
                2,959Unearned
      ESOP shares
                
                
                (1,452
                )
                
                
                (1,501
                )Unearned
      stock compensation
                
                
                (1,137
                )
                
                
                (1,202
                )Less
      treasury stock, at cost - 173,097 shares (127,102 shares at September 30,
      2010)
                
                
                (1,994
                )
                
                
                (1,329
                )Total
      Stockholders' Equity
                
                
                54,151
                
                
                
                55,151Total
      Liabilities and Stockholders' Equity
                
                $
                515,097
                
                
                $
                508,442





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 EndedDecember 31,(In thousands, except share and per share data)
                
                2010
                
                
                2009INTEREST
      INCOMELoans,
      including fees
                
                $
                5,254
                
                
                $
                5,667Securities:Taxable
                
                
                1,046
                
                
                
                767Tax-exempt
                
                
                169
                
                
                
                138Dividend
      income
                
                
                28
                
                
                
                17Interest-bearing
      deposits with banks
                
                
                3
                
                
                
                6Total
      interest income
                
                
                6,500
                
                
                
                6,595INTEREST
      EXPENSEDeposits
                
                
                1,061
                
                
                
                1,346Repurchase
      agreements
                
                
                80
                
                
                
                91Borrowings
      from Federal Home Loan Bank
                
                
                282
                
                
                
                230Total
      interest expense
                
                
                1,423
                
                
                
                1,667Net
      interest income
                
                
                5,077
                
                
                
                4,928Provision
      for loan losses
                
                
                352
                
                
                
                358Net
      interest income after provision for loan losses
                
                
                4,725
                
                
                
                4,570NONINTEREST
      INCOMEService
      charges on deposit accounts
                
                
                361
                
                
                
                411Net
      gain on sales of securities available for sale
                
                
                68
                
                
                
                -Unrealized
      gain on derivative contract
                
                
                45
                
                
                
                61Net
      gain on sales of mortgage loans
                
                
                106
                
                
                
                9Increase
      in cash surrender value of life insurance
                
                
                80
                
                
                
                57Commission
      income
                
                
                33
                
                
                
                28Other
      income
                
                
                161
                
                
                
                159Total
      noninterest income
                
                
                854
                
                
                
                725NONINTEREST
      EXPENSECompensation
      and benefits
                
                
                2,200
                
                
                
                2,122Occupancy
      and equipment
                
                
                445
                
                
                
                532Data
      processing
                
                
                285
                
                
                
                236Advertising
                
                
                92
                
                
                
                93Professional
      fees
                
                
                120
                
                
                
                114FDIC
      insurance premiums
                
                
                134
                
                
                
                150Net
      loss on foreclosed real estate
                
                
                42
                
                
                
                22Other
      operating expenses
                
                
                720
                
                
                
                696Total
      noninterest expense
                
                
                4,038
                
                
                
                3,965Income
      before income taxes
                
                
                1,541
                
                
                
                1,330Income
      tax expense
                
                
                457
                
                
                
                438Net
      Income
                
                $
                1,084
                
                
                $
                892OTHER
      COMPREHENSIVE INCOME (LOSS), NET OF TAXUnrealized
      gain (loss) on securities:Unrealized
      holding gains (losses) arising during the period
                
                
                (1,586
                )
                
                
                202Less:
      reclassification adjustment
                
                
                (45
                )
                
                
                -Other
      comprehensive income (loss)
                
                
                (1,631
                )
                
                
                202Comprehensive
      Income (Loss)
                
                $
                (547
                )
                
                $
                1,094Net
      Income per common share, basic
                
                $
                0.50
                
                
                $
                0.38Net
      Income per common share, diluted
                
                $
                0.50
                
                
                $
                0.38Dividends
      per common share
                
                $
                -
                
                
                $
                0.08





See notes
to consolidated financial statements.


-4-





PART
I - FINANCIAL INFORMATION


FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Unaudited)





Three Months EndedDecember 31,(In thousands)
                
                2010
                
                
                2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income
                
                $
                1,084
                
                
                $
                892Adjustments
      to reconcile net income to net cash provided by operating
      activities:Provision
      for loan losses
                
                
                352
                
                
                
                358Depreciation
      and amortization
                
                
                212
                
                
                
                292Amortization
      of premiums and accretion of discounts on securities, net
                
                
                (50
                )
                
                
                (33
                )Mortgage
      loans originated for sale
                
                
                (6,448
                )
                
                
                (1,035
                )Proceeds
      on sale of mortgage loans
                
                
                6,899
                
                
                
                841Gain
      on sale of mortgage loans
                
                
                (106
                )
                
                
                (9
                )Net
      realized and unrealized (gain) loss on foreclosed real
    estate
                
                
                8
                
                
                
                (62
                )Net
      gain on sales of securities available for sale
                
                
                (68
                )
                
                
                -Unrealized
      gain on derivative contract
                
                
                (45
                )
                
                
                (61
                )Increase
      in cash surrender value of life insurance
                
                
                (80
                )
                
                
                (57
                )Deferred
      income taxes
                
                
                221
                
                
                
                (2,263
                )ESOP
      and stock compensation expense
                
                
                195
                
                
                
                189(Increase)
      decrease in accrued interest receivable
                
                
                (38
                )
                
                
                47Increase
      (decrease) in accrued interest payable
                
                
                (12
                )
                
                
                9Change
      in other assets and liabilities, net
                
                
                (543
                )
                
                
                49Net
      Cash Provided By (Used In) Operating Activities
                
                
                1,581
                
                
                
                (843
                )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of securities available for sale
                
                
                (20,770
                )
                
                
                (16,668
                )Proceeds
      from sales of securities available for sale
                
                
                3,914
                
                
                
                191Proceeds
      from maturities of securities available for sale
                
                
                619
                
                
                
                8,050Principal
      collected on mortgage-backed securities
                
                
                3,996
                
                
                
                3,401Net
      (increase) decrease in loans
                
                
                3,416
                
                
                
                (82
                )Proceeds
      from redemption of Federal Home Loan Bank stock
                
                
                121
                
                
                
                -Investment
      in cash surrender value of life insurance
                
                
                -
                
                
                
                (1,200
                )Proceeds
      from sale of foreclosed real estate
                
                
                284
                
                
                
                860Purchase
      of premises and equipment
                
                
                (576
                )
                
                
                (95
                )Net
      Cash Used In Investing Activities
                
                
                (8,996
                )
                
                
                (5,543
                )CASH
      FLOWS FROM FINANCING ACTIVITIESNet
      increase in deposits
                
                
                7,863
                
                
                
                9,155Net
      decrease in federal funds purchased
                
                
                -
                
                
                
                (1,180
                )Net
      decrease in repurchase agreements
                
                
                (105
                )
                
                
                (104
                )Increase
      (decrease) in Federal Home Loan Bank line of credit
                
                
                (331
                )
                
                
                1,148Proceeds
      from Federal Home Loan Bank advances
                
                
                25,000
                
                
                
                39,439Repayment
      of Federal Home Loan Bank advances
                
                
                (24,044
                )
                
                
                (36,993
                )Net
      decrease in advance payments by borrowers for taxes and
      insurance
                
                
                (104
                )
                
                
                (191
                )Purchase
      of treasury stock
                
                
                (665
                )
                
                
                (1,329
                )Net
      Cash Provided By Financing Activities
                
                
                7,614
                
                
                
                9,945Net
      Increase in Cash and Cash Equivalents
                
                
                199
                
                
                
                3,559Cash
      and cash equivalents at beginning of period
                
                
                11,278
                
                
                
                10,404Cash
      and Cash Equivalents at End of Period
                
                $
                11,477
                
                
                $
                13,963





See notes
to consolidated financial statements.


-5-





FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





1.           Presentation
of Interim Information





First
Savings Financial Group, Inc. (“Company”), an Indiana corporation, was
incorporated in May 2008 to serve as the holding company for First Savings Bank,
F.S.B. (“Bank”), a federally-chartered savings bank.  On October 6,
2008, in accordance with a Plan of Conversion adopted by its board of directors
and approved by its members, the Bank converted from a mutual savings bank to a
stock savings bank and became the wholly-owned subsidiary of the
Company.  In connection with the conversion, the Company issued an
aggregate of 2,542,042 shares of common stock at an offering price of $10.00 per
share.  In addition, in connection with the conversion, First Savings
Charitable Foundation was formed, to which the Company contributed 110,000
shares of common stock and $100,000 in cash.  The Company’s common
stock began trading on the Nasdaq Capital Market on October 7, 2008 under the
symbol “FSFG”.





The Bank
has three-wholly owned subsidiaries: First Savings Investments, Inc., a Nevada
corporation that manages a securities portfolio, Southern Indiana Financial
Corporation, which sells non-deposit investment products, and FFCC, Inc., 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 December 31, 2010, and the results of operations and the cash flows for the
three-month periods ended December 31, 2010 and 2009.  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 U.S. generally accepted accounting principles
(“GAAP”) for interim financial statements 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, 2010 included in the 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.


-6-


FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





2.           Investment
Securities





Investment
securities have been classified according to management’s intent.  The
amortized cost of securities and their fair values are as follows:





Gross
                    
                    
                    GrossAmortized
                    
                    
                    Unrealized
                    
                    
                    Unrealized
                    
                    
                    FairCost
                    
                    
                    Gains
                    
                    
                    Losses
                    
                    
                    Value(In thousands)December
      31, 2010:Securities
      available for sale:Agency
      bonds and notes
                    
                    $
                    32,706
                    
                    
                    $
                    10
                    
                    
                    $
                    458
                    
                    
                    $
                    32,258Agency
      mortgage-backed
                    
                    
                    11,809
                    
                    
                    
                    253
                    
                    
                    
                    66
                    
                    
                    
                    11,996Agency
      CMO
                    
                    
                    22,117
                    
                    
                    
                    199
                    
                    
                    
                    130
                    
                    
                    
                    22,186Privately-issued
      CMO
                    
                    
                    10,149
                    
                    
                    
                    2,642
                    
                    
                    
                    74
                    
                    
                    
                    12,717Municipal
                    
                    
                    41,152
                    
                    
                    
                    543
                    
                    
                    
                    801
                    
                    
                    
                    40,894Subtotal
      – debt securities
                    
                    
                    117,933
                    
                    
                    
                    3,647
                    
                    
                    
                    1,529
                    
                    
                    
                    120,051Equity
      securities
                    
                    
                    -
                    
                    
                    
                    88
                    
                    
                    
                    -
                    
                    
                    
                    88Total
      securities available for sale
                    
                    $
                    117,933
                    
                    
                    $
                    3,735
                    
                    
                    $
                    1,529
                    
                    
                    $
                    120,139Securities
      held to maturity:Agency
      mortgage-backed
                    
                    $
                    3,283
                    
                    
                    $
                    196
                    
                    
                    $
                    -
                    
                    
                    $
                    3,479Municipal
                    
                    
                    303
                    
                    
                    
                    2
                    
                    
                    
                    -
                    
                    
                    
                    305Total
      securities held to maturity
                    
                    $
                    3,586
                    
                    
                    $
                    198
                    
                    
                    $
                    -
                    
                    
                    $
                    3,784September
      30, 2010:Securities
      available for sale:Agency
      bonds and notes
                    
                    $
                    25,510
                    
                    
                    $
                    196
                    
                    
                    $
                    1
                    
                    
                    $
                    25,705Agency
      mortgage-backed
                    
                    
                    13,944
                    
                    
                    
                    226
                    
                    
                    
                    29
                    
                    
                    
                    14,141Agency
      CMO
                    
                    
                    22,325
                    
                    
                    
                    224
                    
                    
                    
                    61
                    
                    
                    
                    22,488Privately-issued
      CMO
                    
                    
                    10,342
                    
                    
                    
                    2,418
                    
                    
                    
                    72
                    
                    
                    
                    12,688Municipal
                    
                    
                    33,109
                    
                    
                    
                    1,920
                    
                    
                    
                    152
                    
                    
                    
                    34,877Subtotal
      – debt securities
                    
                    
                    105,230
                    
                    
                    
                    4,984
                    
                    
                    
                    315
                    
                    
                    
                    109,899Equity
      securities
                    
                    
                    -
                    
                    
                    
                    77
                    
                    
                    
                    -
                    
                    
                    
                    77Total
      securities available for sale
                    
                    $
                    105,230
                    
                    
                    $
                    5,061
                    
                    
                    $
                    315
                    
                    
                    $
                    109,976Securities
      held to maturity:Agency
      mortgage-backed
                    
                    $
                    3,625
                    
                    
                    $
                    211
                    
                    
                    $
                    -
                    
                    
                    $
                    3,836Municipal
                    
                    
                    304
                    
                    
                    
                    4
                    
                    
                    
                    -
                    
                    
                    
                    308Total
      securities held to maturity
                    
                    $
                    3,929
                    
                    
                    $
                    215
                    
                    
                    $
                    -
                    
                    
                    $
                    4,144


-7-


FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





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 government-sponsored
enterprises.  Privately-issued CMO are complex securities issued by
special-purpose entities that are generally collateralized by first position
residential mortgage loans and first position residential home equity
loans.





The
amortized cost and fair value of investment securities as of December 31, 2010
by contractual maturity are shown below.  Expected maturities of
mortgage-backed securities and CMO may differ from contractual maturities
because the mortgages underlying the obligations may be prepaid without
penalty.





Available for Sale
                          
                          
                          Held to MaturityAmortized
                          
                          
                          Fair
                          
                          
                          Amortized
                          
                          
                          FairCost
                          
                          
                          Value
                          
                          
                          Cost
                          
                          
                          Value(In thousands)Due
      within one year
                          
                          $
                          1,187
                          
                          
                          $
                          1,183
                          
                          
                          $
                          303
                          
                          
                          $
                          305Due
      after one year throughfive
      years
                          
                          
                          3,335
                          
                          
                          
                          3,309
                          
                          
                          
                          -
                          
                          
                          
                          -Due
      after five years throughten
      years
                          
                          
                          7,473
                          
                          
                          
                          7,552
                          
                          
                          
                          -
                          
                          
                          
                          -Due
      after ten years
                          
                          
                          61,863
                          
                          
                          
                          61,108
                          
                          
                          
                          -
                          
                          
                          
                          -73,858
                          
                          
                          
                          73,152
                          
                          
                          
                          303
                          
                          
                          
                          305Equity
      securities
                          
                          
                          -
                          
                          
                          
                          88
                          
                          
                          
                          -
                          
                          
                          
                          -CMO
                          
                          
                          32,266
                          
                          
                          
                          34,903
                          
                          
                          
                          -
                          
                          
                          
                          -Mortgage-backed
      securities
                          
                          
                          11,809
                          
                          
                          
                          11,996
                          
                          
                          
                          3,283
                          
                          
                          
                          3,479$
                          117,933
                          
                          
                          $
                          120,139
                          
                          
                          $
                          3,586
                          
                          
                          $
                          3,784





Information
pertaining to securities with gross unrealized losses at December 31, 2010,
aggregated by investment category and the length of time that individual
securities have been in a continuous loss position, follows:





Number
                    
                    
                    
                    
                    
                    Grossof Investment
                    
                    
                    Fair
                    
                    
                    UnrealizedPositions
                    
                    
                    Value
                    
                    
                    Losses(Dollars in thousands)Securities
      available for sale:Continuous
      loss position less than twelve months:Agency
      bonds and notes
                    
                    
                    14
                    
                    
                    $
                    22,548
                    
                    
                    $
                    458Agency
      mortgage-backed
                    
                    
                    4
                    
                    
                    
                    5,895
                    
                    
                    
                    66Agency
      CMO
                    
                    
                    6
                    
                    
                    
                    6,259
                    
                    
                    
                    130Privately-issued
      CMO
                    
                    
                    6
                    
                    
                    
                    1,212
                    
                    
                    
                    74Municipal
      bonds
                    
                    
                    30
                    
                    
                    
                    16,183
                    
                    
                    
                    801Total
      securities available for sale
                    
                    
                    60
                    
                    
                    $
                    52,097
                    
                    
                    $
                    1,529


-8-


FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





At
December 31, 2010, the Company did not have any securities held to maturity with
an unrealized loss or securities that had been in a continuous loss position for
more than twelve months.  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 Bank to retain its investment in the issuer for a period of time
sufficient to allow for any anticipated recovery in fair value.





The total
available for sale debt securities in loss positions at December 31, 2010 have
depreciated approximately 2.9% from the Bank’s amortized cost basis and are
fixed and variable rate securities with a weighted-average yield of 4.14% and a
weighted-average coupon rate of 4.24%.





U.S.
government agency debt securities, including mortgage-backed securities and CMO
securities, and municipal bonds in loss positions at December 31, 2010 had
depreciated approximately 2.8% from the amortized cost basis.  All of
the U.S. government agency and municipal securities are issued by U.S.
government agencies, government-sponsored enterprises and municipal governments,
or are secured by first mortgage loans and municipal project
revenues.





At
December 31, 2010, the six privately-issued CMO securities in loss positions had
depreciated approximately 5.8% from the amortized cost basis and include
securities collateralized by home equity lines of credit or other
mortgage-related loan products.  All such investments except two
securities with fair values totaling $723,000 and unrealized losses of $11,000
at December 31, 2010 continued to be rated by a nationally recognized
statistical rating organization as investment grade assets.





The
Company evaluates the existence of a potential credit loss component related to
the decline in fair value of the privately-issued CMO portfolio each quarter
using an independent third party analysis.  At December 31, 2010, the
Company held ten privately-issued CMO securities with an aggregate amortized
cost of $2.1 million and fair value of $2.8 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.  Based on the
independent third party analysis, the Bank expects to collect the contractual
principal and interest cash flows for these securities and, as a result, no
other-than-temporary impairment has been recognized on the privately-issued CMO
portfolio.  While management does not anticipate a credit-related
impairment loss at December 31, 2010, additional deterioration in market and
economic conditions may have an adverse impact on the credit quality in the
future.





The
unrealized losses 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 three months ended December 31, 2010, the Company realized gross gains on
sales of available for sale municipal securities of $68,000.


-9-


FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





3.           Loans
and Allowance for Loan Losses





Loans at
December 31, 2010 and September 30, 2010 consisted of the
following:





December 31,
                  
                  
                  September 30,2010
                  
                  
                  2010(In thousands)Real
      estate mortgage:1-4
      family residential
                  
                  $
                  169,497
                  
                  
                  $
                  172,007Multi-family
      residential
                  
                  
                  19,480
                  
                  
                  
                  20,360Commercial
                  
                  
                  56,569
                  
                  
                  
                  53,869Residential
      construction
                  
                  
                  13,986
                  
                  
                  
                  15,867Commercial
      construction
                  
                  
                  9,944
                  
                  
                  
                  9,851Land
      and land development
                  
                  
                  8,449
                  
                  
                  
                  9,076Commercial
      business loans
                  
                  
                  30,622
                  
                  
                  
                  30,905Consumer:Home
      equity loans
                  
                  
                  16,211
                  
                  
                  
                  16,335Auto
      loans
                  
                  
                  12,297
                  
                  
                  
                  13,405Other
      consumer loans
                  
                  
                  6,708
                  
                  
                  
                  7,030Gross
      loans
                  
                  
                  343,763
                  
                  
                  
                  348,705Deferred
      loan origination fees and costs, net
                  
                  
                  754
                  
                  
                  
                  778Undisbursed
      portion of loans in process
                  
                  
                  (1,464
                  )
                  
                  
                  (2,057
                  )Allowance
      for loan losses
                  
                  
                  (3,959
                  )
                  
                  
                  (3,811
                  )Loans,
      net
                  
                  $
                  339,094
                  
                  
                  $
                  343,615





During
the three-month period ended December 31, 2010, 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, 2010.


-10-


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 class as of December 31, 2010:





Residential
                          Real Estate
                        
                        
                        Commercial
                          Real Estate
                        
                        
                        Multifamily
                        
                        
                        Construction
                        
                        
                        Land & Land
                          Development
                        
                        
                        Commercial
                          Business
                        
                        
                        Consumer
                        
                        
                        Total(In thousands)Principal
      loan balance
                        
                        $
                        169,497
                        
                        
                        $
                        56,569
                        
                        
                        $
                        19,480
                        
                        
                        $
                        22,466
                        
                        
                        $
                        8,449
                        
                        
                        $
                        30,622
                        
                        
                        $
                        35,216
                        
                        
                        $
                        342,299Accrued
      interest receivable
                        
                        
                        715
                        
                        
                        
                        292
                        
                        
                        
                        63
                        
                        
                        
                        96
                        
                        
                        
                        41
                        
                        
                        
                        163
                        
                        
                        
                        144
                        
                        
                        
                        1,514Net
      deferred loan origination fees and costs
                        
                        
                        713
                        
                        
                        
                        (21
                        )
                        
                        
                        (6
                        )
                        
                        
                        39
                        
                        
                        
                        (2
                        )
                        
                        
                        (14
                        )
                        
                        
                        45
                        
                        
                        
                        754Recorded
      investment in loans
                        
                        $
                        170,925
                        
                        
                        $
                        56,840
                        
                        
                        $
                        19,537
                        
                        
                        $
                        22,601
                        
                        
                        $
                        8,488
                        
                        
                        $
                        30,771
                        
                        
                        $
                        35,405
                        
                        
                        $
                        344,567


-11-


FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





An
analysis of the allowance for loan losses and recorded investment in loans as of
and for the three months ended December 31, 2010 is as follows:




Residential
                            Real Estate
                          
                          
                          Commercial
                            Real Estate
                          
                          
                          Multifamily
                          
                          
                          Construction
                          
                          
                          Land & Land
                            Development
                          
                          
                          Commercial
                            Business
                          
                          
                          Consumer
                          
                          
                          Unallocated
                          
                          
                          Total(In thousands)Allowance
      for Loan Losses:Beginning
      balance
                          
                          $
                          1,242
                          
                          
                          $
                          600
                          
                          
                          $
                          369
                          
                          
                          $
                          218
                          
                          
                          $
                          62
                          
                          
                          $
                          891
                          
                          
                          $
                          429
                          
                          
                          $
                          -
                          
                          
                          $
                          3,811Provisions
                          
                          
                          174
                          
                          
                          
                          301
                          
                          
                          
                          181
                          
                          
                          
                          (77
                          )
                          
                          
                          (33
                          )
                          
                          
                          (161
                          )
                          
                          
                          (33
                          )
                          
                          
                          -
                          
                          
                          
                          352Charge-offs
                          
                          
                          (213
                          )
                          
                          
                          (5
                          )
                          
                          
                          -
                          
                          
                          
                          (8
                          )
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (52
                          )
                          
                          
                          -
                          
                          
                          
                          (278
                          )Recoveries
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          57
                          
                          
                          
                          17
                          
                          
                          
                          -
                          
                          
                          
                          74Ending
      balance
                          
                          $
                          1,203
                          
                          
                          $
                          896
                          
                          
                          $
                          550
                          
                          
                          $
                          133
                          
                          
                          $
                          29
                          
                          
                          $
                          787
                          
                          
                          $
                          361
                          
                          
                          $
                          -
                          
                          
                          $
                          3,959Ending
      allowance balance attributable to loans:Individually
      evaluated for impairment
                          
                          $
                          69
                          
                          
                          $
                          249
                          
                          
                          $
                          -
                          
                          
                          $
                          59
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          23
                          
                          
                          $
                          -
                          
                          
                          $
                          400Collectively
      evaluated for impairment
                          
                          
                          1,134
                          
                          
                          
                          647
                          
                          
                          
                          550
                          
                          
                          
                          74
                          
                          
                          
                          29
                          
                          
                          
                          787
                          
                          
                          
                          338
                          
                          
                          
                          -
                          
                          
                          
                          3,559Acquired
      with deteriorated credit quality
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Ending
      balance
                          
                          $
                          1,203
                          
                          
                          $
                          896
                          
                          
                          $
                          550
                          
                          
                          $
                          133
                          
                          
                          $
                          29
                          
                          
                          $
                          787
                          
                          
                          $
                          361
                          
                          
                          $
                          -
                          
                          
                          $
                          3,959Recorded
      Investment in Loans:Individually
      evaluated for impairment
                          
                          $
                          2,674
                          
                          
                          $
                          1,482
                          
                          
                          $
                          -
                          
                          
                          $
                          613
                          
                          
                          $
                          397
                          
                          
                          $
                          162
                          
                          
                          $
                          315
                          
                          
                          
                          
                          
                          
                          $
                          5,643Collectively
      evaluated for impairment
                          
                          
                          167,474
                          
                          
                          
                          54,797
                          
                          
                          
                          19,537
                          
                          
                          
                          21,939
                          
                          
                          
                          8,091
                          
                          
                          
                          30,556
                          
                          
                          
                          35,046
                          
                          
                          
                          
                          
                          
                          
                          337,440Acquired
      with deteriorated credit quality
                          
                          
                          777
                          
                          
                          $
                          561
                          
                          
                          
                          -
                          
                          
                          
                          49
                          
                          
                          
                          -
                          
                          
                          
                          53
                          
                          
                          
                          44
                          
                          
                          
                          
                          
                          
                          
                          1,484Ending
      balance
                          
                          $
                          170,925
                          
                          
                          $
                          56,840
                          
                          
                          $
                          19,537
                          
                          
                          $
                          22,601
                          
                          
                          $
                          8,488
                          
                          
                          $
                          30,771
                          
                          
                          $
                          35,405
                          
                          
                          
                          
                          
                          
                          $
                          344,567


-12-


FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





The
following table presents impaired loans individually evaluated for impairment by
class of loans as of December 31, 2010:





Unpaid
                  
                  
                  
                  
                  
                  Average
                  
                  
                  Interest
                  
                  
                  InterestRecorded
                  
                  
                  Principal
                  
                  
                  Related
                  
                  
                  Recorded
                  
                  
                  Income
                  
                  
                  Recognized –Investment
                  
                  
                  Balance
                  
                  
                  Allowance
                  
                  
                  Investment
                  
                  
                  Recognized
                  
                  
                  Cash Method(In thousands)Loans
      with no related allowance recorded:Residential
      real estate
                  
                  $
                  2,335
                  
                  
                  $
                  2,318
                  
                  
                  $
                  -
                  
                  
                  $
                  2,348
                  
                  
                  $
                  9
                  
                  
                  $
                  10Commercial
      real estate
                  
                  
                  987
                  
                  
                  
                  981
                  
                  
                  
                  -
                  
                  
                  
                  1,078
                  
                  
                  
                  2
                  
                  
                  
                  -Multifamily
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Construction
                  
                  
                  354
                  
                  
                  
                  351
                  
                  
                  
                  -
                  
                  
                  
                  487
                  
                  
                  
                  1
                  
                  
                  
                  -Land
      and land development
                  
                  
                  397
                  
                  
                  
                  397
                  
                  
                  
                  -
                  
                  
                  
                  199
                  
                  
                  
                  -
                  
                  
                  
                  1Commercial
      business
                  
                  
                  162
                  
                  
                  
                  161
                  
                  
                  
                  -
                  
                  
                  
                  253
                  
                  
                  
                  1
                  
                  
                  
                  1Consumer
                  
                  
                  214
                  
                  
                  
                  213
                  
                  
                  
                  -
                  
                  
                  
                  242
                  
                  
                  
                  1
                  
                  
                  
                  -4,449
                  
                  
                  
                  4,421
                  
                  
                  
                  -
                  
                  
                  
                  4,607
                  
                  
                  
                  14
                  
                  
                  
                  12Loans
      with an allowance recorded:Residential
      real estate
                  
                  
                  339
                  
                  
                  
                  338
                  
                  
                  
                  69
                  
                  
                  
                  652
                  
                  
                  
                  -
                  
                  
                  
                  -Commercial
      real estate
                  
                  
                  495
                  
                  
                  
                  495
                  
                  
                  
                  249
                  
                  
                  
                  247
                  
                  
                  
                  -
                  
                  
                  
                  -Multifamily
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Construction
                  
                  
                  259
                  
                  
                  
                  259
                  
                  
                  
                  59
                  
                  
                  
                  200
                  
                  
                  
                  -
                  
                  
                  
                  -Land
      and land development
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Commercial
      business
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Consumer
                  
                  
                  101
                  
                  
                  
                  101
                  
                  
                  
                  23
                  
                  
                  
                  98
                  
                  
                  
                  -
                  
                  
                  
                  -1,194
                  
                  
                  
                  1,193
                  
                  
                  
                  400
                  
                  
                  
                  1,197
                  
                  
                  
                  -
                  
                  
                  
                  -Total:Residential
      real estate
                  
                  
                  2,674
                  
                  
                  
                  2,656
                  
                  
                  
                  69
                  
                  
                  
                  3,000
                  
                  
                  
                  9
                  
                  
                  
                  10Commercial
      real estate
                  
                  
                  1,482
                  
                  
                  
                  1,476
                  
                  
                  
                  249
                  
                  
                  
                  1,325
                  
                  
                  
                  2
                  
                  
                  
                  -Multifamily
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Construction
                  
                  
                  613
                  
                  
                  
                  610
                  
                  
                  
                  59
                  
                  
                  
                  687
                  
                  
                  
                  1
                  
                  
                  
                  -Land
      and land development
                  
                  
                  397
                  
                  
                  
                  397
                  
                  
                  
                  -
                  
                  
                  
                  199
                  
                  
                  
                  -
                  
                  
                  
                  -Commercial
      business
                  
                  
                  162
                  
                  
                  
                  161
                  
                  
                  
                  -
                  
                  
                  
                  253
                  
                  
                  
                  1
                  
                  
                  
                  1Consumer
                  
                  
                  315
                  
                  
                  
                  314
                  
                  
                  
                  23
                  
                  
                  
                  340
                  
                  
                  
                  1
                  
                  
                  
                  1$
                  5,643
                  
                  
                  $
                  5,614
                  
                  
                  $
                  400
                  
                  
                  $
                  5,804
                  
                  
                  $
                  14
                  
                  
                  $
                  12


-13-


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 by class of loans at December 31,
2010:





Nonaccrual
                  Loans
                
                
                Loans 90+
                  Days
                  Past Due
                  Still Accruing
                
                
                Total
                  Nonperforming
                  Loans(In thousands)Residential
      real estate
                
                $
                2,176
                
                
                $
                498
                
                
                $
                2,674Commercial
      real estate
                
                
                1,391
                
                
                
                91
                
                
                
                1,482Multifamily
                
                
                -
                
                
                
                -
                
                
                
                -Construction
                
                
                482
                
                
                
                131
                
                
                
                613Land
      and land development
                
                
                397
                
                
                
                -
                
                
                
                397Commercial
      business
                
                
                53
                
                
                
                109
                
                
                
                162Consumer
                
                
                263
                
                
                
                52
                
                
                
                315Total
                
                $
                4,762
                
                
                $
                881
                
                
                $
                5,643





The
following table presents the aging of the recorded investment in past
due loans at December 31, 2010 by class of loans:





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
                
                $
                5,212
                
                
                $
                2,132
                
                
                $
                1,971
                
                
                $
                9,315
                
                
                $
                161,610
                
                
                $
                170,925Commercial
      real estate
                
                
                716
                
                
                
                53
                
                
                
                1,163
                
                
                
                1,932
                
                
                
                54,908
                
                
                
                56,840Multifamily
                
                
                32
                
                
                
                -
                
                
                
                -
                
                
                
                32
                
                
                
                19,505
                
                
                
                19,537Construction
                
                
                374
                
                
                
                -
                
                
                
                613
                
                
                
                987
                
                
                
                21,614
                
                
                
                22,601Land
      and land development
                
                
                -
                
                
                
                -
                
                
                
                397
                
                
                
                397
                
                
                
                8,091
                
                
                
                8,488Commercial
      business
                
                
                116
                
                
                
                86
                
                
                
                162
                
                
                
                364
                
                
                
                30,407
                
                
                
                30,771Consumer
                
                
                916
                
                
                
                108
                
                
                
                79
                
                
                
                1,103
                
                
                
                34,302
                
                
                
                35,405Total
                
                $
                7,366
                
                
                $
                2,379
                
                
                $
                4,385
                
                
                $
                14,130
                
                
                $
                330,437
                
                
                $
                344,567


-14-





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, public information, 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.





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
December 31, 2010, and based on the most recent analysis performed, the recorded
investment in loans by risk category is as follows:





Residential
                    Real Estate
                  
                  
                  Commercial
                    Real Estate
                  
                  
                  Multi-family
                  
                  
                  Construction
                  
                  
                  Land and Land
                    Development
                  
                  
                  Commercial
                    Business
                  
                  
                  Consumer
                  
                  
                  Total(In thousands)Pass
                  
                  $
                  163,691
                  
                  
                  $
                  49,125
                  
                  
                  $
                  17,197
                  
                  
                  $
                  21,528
                  
                  
                  $
                  7,467
                  
                  
                  $
                  29,421
                  
                  
                  $
                  34,684
                  
                  
                  $
                  323,113Special
      Mention
                  
                  
                  1,189
                  
                  
                  
                  5,399
                  
                  
                  
                  336
                  
                  
                  
                  187
                  
                  
                  
                  624
                  
                  
                  
                  1,090
                  
                  
                  
                  105
                  
                  
                  
                  8,930Substandard
                  
                  
                  5,008
                  
                  
                  
                  1,503
                  
                  
                  
                  2,004
                  
                  
                  
                  837
                  
                  
                  
                  397
                  
                  
                  
                  260
                  
                  
                  
                  521
                  
                  
                  
                  10,530Doubtful
                  
                  
                  1,037
                  
                  
                  
                  813
                  
                  
                  
                  -
                  
                  
                  
                  49
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  95
                  
                  
                  
                  1,994Loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Total
                  
                  $
                  170,925
                  
                  
                  $
                  56,840
                  
                  
                  $
                  19,537
                  
                  
                  $
                  22,601
                  
                  
                  $
                  8,488
                  
                  
                  $
                  30,771
                  
                  
                  $
                  35,405
                  
                  
                  $
                  344,567





The
Company does not have any classes of loans that are considered to be
subprime.


-15-


FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





4.           Supplemental
Disclosure for Earnings Per Share





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.





Three Months EndedDecember 31,(Dollars in thousands, except per share data)
                        
                        2010
                        
                        
                        2009BasicEarnings:Net
      income
                        
                        $
                        1,084
                        
                        
                        $
                        892Shares:Weighted
      average common shares outstanding
                        
                        
                        2,156,683
                        
                        
                        
                        2,348,048Net
      income per common share, basic
                        
                        $
                        0.50
                        
                        
                        $
                        0.38DilutedEarnings:Net
      income
                        
                        $
                        1,084
                        
                        
                        $
                        892Shares:Weighted
      average common shares outstanding
                        
                        
                        2,156,683
                        
                        
                        
                        2,348,048Add:
      Dilutive effect of outstanding options
                        
                        
                        14,385
                        
                        
                        
                        -Add:
      Dilutive effect of restricted stock
                        
                        
                        9,350
                        
                        
                        
                        -Weighted
      average shares outstanding, as adjusted
                        
                        
                        2,180,418
                        
                        
                        
                        2,348,048Net
      income per common share, diluted
                        
                        $
                        0.50
                        
                        
                        $
                        0.38


-16-




FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





5.           Comprehensive
Income





Comprehensive
income is defined as the change in equity (net assets) of a business enterprise
during a period from transactions and other events and circumstances from
non-owner sources.  It includes all changes in equity during a period
except those resulting from investments by owners and distributions to
owners.  Comprehensive income for the Company includes net income and
other comprehensive income representing the net unrealized gains and losses on
securities available for sale.  The following tables set forth the
components of other comprehensive income and the allocated tax amounts for the
three-month periods ended December, 2010 and 2009:





Three Months EndedDecember 31,2010
                                
                                
                                2009(In thousands)Unrealized
      gains (losses) on securities:Unrealized
      holding gains (losses)arising
      during the period
                                
                                $
                                (2,403
                                )
                                
                                $
                                334Income
      tax (expense) benefit
                                
                                
                                817
                                
                                
                                
                                (132
                                )Net
      of tax amount
                                
                                
                                (1,586
                                )
                                
                                
                                202Less:  reclassificationadjustment
      for realized gainsincluded
      in net income
                                
                                
                                (68
                                )
                                
                                
                                -Income
      tax expense
                                
                                
                                23
                                
                                
                                
                                -Net
      of tax amount
                                
                                
                                (45
                                )
                                
                                
                                -Other
      comprehensive income (loss), net of tax
                                
                                $
                                (1,631
                                )
                                
                                $
                                202





6.           Supplemental
Disclosures of Cash Flow Information





Three Months EndedDecember 31,2010
                                
                                
                                2009(In thousands)Cash
      payments for:Interest
                                
                                $
                                1,740
                                
                                
                                $
                                2,244Taxes
                                
                                
                                75
                                
                                
                                
                                40Transfers
      from loans to foreclosed real estate
                                
                                
                                836
                                
                                
                                
                                105Proceeds
      from sales of foreclosed real estatefinanced
      through loans
                                
                                
                                83
                                
                                
                                
                                260




-17-





FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)




7.
            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; inputs to the valuation
      methodology include quoted market prices for identical or similar assets
      or liabilities in markets that are not active; or inputs to the valuation
      methodology 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 December 31, 2010 and September 30,
2010.  The Company had no liabilities measured at fair value as of
December 31, 2010 and September 30, 2010.


-18-





FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





Carrying ValueLevel 1
                      
                      
                      Level 2
                      
                      
                      Level 3
                      
                      
                      Total(In thousands)December
      31, 2010:Assets
      Measured - Recurring BasisSecurities
      available for sale:Agency
      bonds and notes
                      
                      $
                      -
                      
                      
                      $
                      32,258
                      
                      
                      $
                      -
                      
                      
                      $
                      32,258Agency
      mortgage-backed
                      
                      
                      -
                      
                      
                      
                      11,996
                      
                      
                      
                      -
                      
                      
                      
                      11,996Agency
      CMO
                      
                      
                      -
                      
                      
                      
                      22,186
                      
                      
                      
                      -
                      
                      
                      
                      22,186Privately-issued
      CMO
                      
                      
                      -
                      
                      
                      
                      12,717
                      
                      
                      
                      -
                      
                      
                      
                      12,717Municipal
                      
                      
                      -
                      
                      
                      
                      40,894
                      
                      
                      
                      -
                      
                      
                      
                      40,894Equity
      securities
                      
                      
                      88
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      88Total
      securities available for sale
                      
                      $
                      88
                      
                      
                      $
                      120,051
                      
                      
                      $
                      -
                      
                      
                      $
                      120,139Interest
      rate cap contract
                      
                      
                      -
                      
                      
                      
                      123
                      
                      
                      
                      -
                      
                      
                      
                      123Assets
      Measured - Nonrecurring BasisImpaired
      loans
                      
                      
                      -
                      
                      
                      
                      5,214
                      
                      
                      
                      -
                      
                      
                      
                      5,214Loans
      held for sale
                      
                      
                      -
                      
                      
                      
                      1,539
                      
                      
                      
                      -
                      
                      
                      
                      1,539Foreclosed
      real estate
                      
                      
                      -
                      
                      
                      
                      1,793
                      
                      
                      
                      -
                      
                      
                      
                      1,793September
      30, 2010:Assets
      Measured - Recurring BasisSecurities
      available for sale:Agency
      bonds and notes
                      
                      $
                      -
                      
                      
                      $
                      25,705
                      
                      
                      $
                      -
                      
                      
                      $
                      25,705Agency
      mortgage-backed
                      
                      
                      -
                      
                      
                      
                      14,141
                      
                      
                      
                      -
                      
                      
                      
                      14,141Agency
      CMO
                      
                      
                      -
                      
                      
                      
                      22,488
                      
                      
                      
                      -
                      
                      
                      
                      22,488Privately-issued
      CMO
                      
                      
                      -
                      
                      
                      
                      12,688
                      
                      
                      
                      -
                      
                      
                      
                      12,688Municipal
                      
                      
                      -
                      
                      
                      
                      34,877
                      
                      
                      
                      -
                      
                      
                      
                      34,877Equity
      securities
                      
                      
                      77
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      77Total
      securities available for sale
                      
                      $
                      77
                      
                      
                      $
                      109,899
                      
                      
                      $
                      -
                      
                      
                      $
                      109,976Interest
      rate cap contract
                      
                      
                      -
                      
                      
                      
                      77
                      
                      
                      
                      -
                      
                      
                      
                      77Assets
      Measured - Nonrecurring BasisImpaired
      loans
                      
                      
                      -
                      
                      
                      
                      5,637
                      
                      
                      
                      -
                      
                      
                      
                      5,637Loans
      held for sale
                      
                      
                      -
                      
                      
                      
                      1,884
                      
                      
                      
                      -
                      
                      
                      
                      1,884Foreclosed
      real estate
                      
                      
                      -
                      
                      
                      
                      1,331
                      
                      
                      
                      -
                      
                      
                      
                      1,331





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.


-19-


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.





Securities
Available for Sale.Securities classified
as 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 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 carried at the present value of
estimated future cash flows using the loan's existing rate or the fair value of
collateral if the loan is collateral dependent.  Impaired loans are
evaluated and valued at the time the loan is identified as impaired at the lower
of cost or market value.  For collateral dependent impaired loans,
market value is measured based on the value of the collateral securing these
loans and is classified as Level 2 in the fair value
hierarchy.  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.  Impaired loans are reviewed
and evaluated on at least a quarterly basis for additional impairment and
adjusted accordingly, based on the same factors identified above.





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





Foreclosed Real
Estate Held for Sale.  Foreclosed real estate held for sale is
reported at the lower of carrying value or fair value less estimated costs to
dispose of the property using Level 2 inputs.  The fair values are
determined by real estate appraisals using valuation techniques consistent with
the market approach using recent sales of comparable properties.  In
cases where such inputs are unobservable, the balance is reflected within the
Level 3 hierarchy.





There
were no transfers into or out of the Company's Level 3 financial assets for the
three-month period ended December 31, 2010.  In addition, there were
no transfers into or out of Levels 1 and 2 of the fair value hierarchy during
the three-month period ended December 31, 2010.


-20-


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 estimated fair values of the Company's financial
instruments are as follows:





December 31, 2010
                                                
                                                
                                                September 30, 2010Carrying
                                                
                                                
                                                Fair
                                                
                                                
                                                Carrying
                                                
                                                
                                                FairAmount
                                                
                                                
                                                Value
                                                
                                                
                                                Amount
                                                
                                                
                                                Value(In
      thousands)Financial
      assets:Cash
      and due from banks
                                                
                                                $
                                                8,412
                                                
                                                
                                                $
                                                8,412
                                                
                                                
                                                $
                                                10,184
                                                
                                                
                                                $
                                                10,184Interest-bearing
      deposits in banks
                                                
                                                
                                                3,065
                                                
                                                
                                                
                                                3,065
                                                
                                                
                                                
                                                1,094
                                                
                                                
                                                
                                                1,094Securities
      available for sale
                                                
                                                
                                                120,139
                                                
                                                
                                                
                                                120,139
                                                
                                                
                                                
                                                109,976
                                                
                                                
                                                
                                                109,976Securities
      held to maturity
                                                
                                                
                                                3,586
                                                
                                                
                                                
                                                3,784
                                                
                                                
                                                
                                                3,929
                                                
                                                
                                                
                                                4,144Loans,
      net
                                                
                                                
                                                339,094
                                                
                                                
                                                
                                                352,804
                                                
                                                
                                                
                                                343,615
                                                
                                                
                                                
                                                357,508Loans
      held for sale
                                                
                                                
                                                1,539
                                                
                                                
                                                
                                                1,539
                                                
                                                
                                                
                                                1,884
                                                
                                                
                                                
                                                1,884Federal
      Home Loan Bank stock
                                                
                                                
                                                4,049
                                                
                                                
                                                
                                                4,049
                                                
                                                
                                                
                                                4,170
                                                
                                                
                                                
                                                4,170Accrued
      interest receivable
                                                
                                                
                                                2,430
                                                
                                                
                                                
                                                2,430
                                                
                                                
                                                
                                                2,392
                                                
                                                
                                                
                                                2,392Financial
      liabilities:Deposits
                                                
                                                
                                                374,024
                                                
                                                
                                                
                                                379,855
                                                
                                                
                                                
                                                366,161
                                                
                                                
                                                
                                                371,869Short-term
      repurchase agreements
                                                
                                                
                                                1,314
                                                
                                                
                                                
                                                1,314
                                                
                                                
                                                
                                                1,312
                                                
                                                
                                                
                                                1,312Long-term
      repurchase agreements
                                                
                                                
                                                15,402
                                                
                                                
                                                
                                                15,468
                                                
                                                
                                                
                                                15,509
                                                
                                                
                                                
                                                15,602Borrowings
      from Federal HomeLoan
      Bank
                                                
                                                
                                                67,784
                                                
                                                
                                                
                                                68,616
                                                
                                                
                                                
                                                67,159
                                                
                                                
                                                
                                                68,531Accrued
      interest payable
                                                
                                                
                                                415
                                                
                                                
                                                
                                                415
                                                
                                                
                                                
                                                427
                                                
                                                
                                                
                                                427Advance
      payments by borrowersfor
      taxes and insurance
                                                
                                                
                                                148
                                                
                                                
                                                
                                                160
                                                
                                                
                                                
                                                252
                                                
                                                
                                                
                                                273Derivative
      financial instrumentsincluded
      in other assets:Interest
      rate cap
                                                
                                                
                                                123
                                                
                                                
                                                
                                                123
                                                
                                                
                                                
                                                77
                                                
                                                
                                                
                                                77Off-balance-sheet
      financial instruments:Asset
      related to commitmentsto
      extend credit
                                                
                                                
                                                -
                                                
                                                
                                                
                                                323
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                265





The
carrying amounts in the preceding table 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:


-21-





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 Federal
Home Loan Bank  (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 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.  The carrying amount of accrued interest
receivable approximates its fair value.





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 repurchase agreements and borrowings from the
FHLB.  Fair value for advances and long-term repurchase agreements is
estimated by discounting the future cash flows at current interest rates for
advances of similar maturities.  For short-term repurchase agreements
and FHLB line of credit borrowings, 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.





Off-Balance-Sheet
Financial Instruments





Commitments
to extend credit were evaluated and fair value was estimated using the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties.  For fixed-rate loan commitments, the fair value
estimate considers the difference between current interest rates and the
committed rates.


-22-


FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





8.           Defined
Benefit Plan





The Bank
sponsored a defined benefit pension plan (“Plan”) that covered substantially all
employees.  Contributions were intended to provide not only for
benefits attributed to service to date but also for those expected to be earned
in the future.  The Bank’s funding policy was to contribute the larger
of the amount required to fully fund the Plan’s current liability or the amount
necessary to meet the funding requirements as defined by the Internal Revenue
Code.





Effective
June 30, 2008, the Bank curtailed the accrual of benefits for active
participants in the defined benefit pension plan.    As a
result of the curtailment, each active participant’s pension benefit was
determined based on the participant’s compensation and duration of employment as
of June 30, 2008, and compensation and employment after that date was not taken
into account in determining pension benefits under the plan.  In April
2010, the Bank received approval from the Internal Revenue Service to terminate
the plan.  The termination of the plan and the settlement of the plan
obligations resulted in the allocation of excess plan assets to the active plan
participants in April 2010.  The breakdown of net periodic benefit
expense for the three months ended December 31, 2009 follows.  No net
periodic benefit expense was recognized for the three months ended December 31,
2010.





(In thousands)Net
      periodic benefit expense:Service
      cost
                        
                        $
                        -Interest
      cost on projected benefit obligation
                        
                        
                        74Expected
      return on plan assets
                        
                        
                        (35
                        )Amortization
      of unrecognized gain
                        
                        
                        -Net
      loss on settlement
                        
                        
                        (1
                        )Net
      periodic benefit expense
                        
                        $
                        38





The Bank
made no contributions to the Plan for the three-month periods ended December 31,
2010 and 2009.


-23-


FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





9.           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.  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-month periods ended December 31, 2010 and 2009
amounted to $67,000 and $189,000, respectively.  Company common stock
held by the ESOP trust at December 31, 2010 was as follows:





Allocated
      shares
                    
                    
                    58,137Unearned
      shares
                    
                    
                    145,226Total
      ESOP shares
                    
                    
                    203,363Fair
      value of unearned shares
                    
                    $
                    2,149,345





10.
            Stock
      Based Compensation Plans





In
December 2009, the Company adopted the 2010 Equity Incentive Plan (Plan), which
the Company’s shareholders approved in February 2010.  The Plan
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.


-24-





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
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
vesting period of the restricted stock is five years beginning one year after
the date of grant of the awards.  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 the three-month period ended December 31, 2010 amounted to
$65,000.  No compensation expense for restricted stock was recognized
for the comparable period in 2009.  A summary of the Company’s
nonvested restricted shares is as follows:





WeightedNumber
                    
                    
                    Averageof
                    
                    
                    Grant DateShares
                    
                    
                    Fair ValueNonvested
      at October 1, 2010
                    
                    
                    98,092
                    
                    
                    $
                    13.25Granted
                    
                    
                    -
                    
                    
                    
                    -Vested
                    
                    
                    -
                    
                    
                    
                    -Forfeited
                    
                    
                    -
                    
                    
                    
                    -Nonvested
      at December 31, 2010
                    
                    
                    98,092
                    
                    
                    $
                    13.25




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.


-25-





FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





A summary
of stock option activity under the plan as of December 31, 2010, and changes
during the three-month period then ended is presented below.





WeightedWeighted
                        
                        
                        AverageNumber
                        
                        
                        Average
                        
                        
                        Remaining
                        
                        
                        Aggregateof
                        
                        
                        Exercise
                        
                        
                        Contractual
                        
                        
                        IntrinsicShares
                        
                        
                        Price
                        
                        
                        Term
                        
                        
                        Value(Dollars
      in thousands, except per share data)Outstanding
      at October 1, 2010
                        
                        
                        254,204
                        
                        
                        $
                        13.25Granted
                        
                        
                        -
                        
                        
                        
                        -Exercised
                        
                        
                        -
                        
                        
                        
                        -Forfeited
      or expired
                        
                        
                        -
                        
                        
                        
                        -Outstanding
      at end of year
                        
                        
                        254,204
                        
                        
                        $
                        13.25
                        
                        
                        
                        9.4
                        
                        
                        $
                        394Exercisable
      at December 31, 2010
                        
                        
                        8,972
                        
                        
                        $
                        13.25
                        
                        
                        
                        0.6
                        
                        
                        $
                        14





The
Company recognized compensation expense related to stock options of $64,000 for
the three-month period ended December 31, 2010.  No compensation
expense related to stock options was recognized for the comparable period in
2009.  At December 31, 2010, there was $663,000 of unrecognized
compensation expense related to nonvested stock options, which will be
recognized over the remaining vesting period.





11.
            Income
      Taxes





Prior to
October 1, 1996, the Bank was permitted by the Internal Revenue Code to deduct
from taxable income an annual addition to a statutory bad debt reserve subject
to certain limitations.  Retained earnings at December 31, 2010 and
September 30, 2010 include $4.6 million of cumulative deductions for which no
deferred federal income tax liability has been recorded.  Reduction of
these reserves for purposes other than tax bad debt losses or adjustments
arising from carryback of net operating losses would create income for tax
purposes subject to the then current corporate income tax rate.  The
unrecorded deferred liability on these amounts was approximately $1.5 million at
December 31, 2010 and September 30, 2010.





Federal
legislation enacted in 1996 repealed the use of the qualified thrift reserve
method of accounting for bad debts for tax years beginning after December 31,
1995.  As a result, the Bank discontinued the calculation of the
annual addition to the statutory bad debt reserve using the
percentage-of-taxable-income method and adopted the experience reserve method
for banks.  Under this method, the Bank computes its federal tax bad
debt deduction based on actual loss experience over a period of
years.  The legislation also provided that the Bank will not be
required to recapture its pre-1988 statutory bad debt reserves if it ceases to
meet the qualifying thrift definitional tests and if the Bank continues to
qualify as a “bank” under existing provisions of the Internal Revenue
Code.


-26-





FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





Recapture
of the Bank’s tax bad debt reserves is triggered if the Bank meets the
definition of a “large bank” as defined in the Internal Revenue
Code.  Under the Internal Revenue Code, if a bank’s average adjusted
assets exceeds $500 million for any tax year it is considered a “large bank” and
must utilize the specific charge-off method to compute bad debt deductions. This
would result in the recapture of the Bank’s tax bad debt reserve described above
for tax purposes over one or more years. Management anticipates that the Bank
will exceed $500 million in average adjusted assets for the tax year ending
September 30, 2011, which will result in a charge against earnings of
approximately $1.5 million, representing the unrecognized federal income tax
liability, in the fourth quarter of the fiscal year.




12.
            Recent
      Accounting Pronouncements





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





In June
2009, the FASB issued two standards which change the way entities account for
securitizations and special-purpose entities:  Statement of Financial
Accounting Standards (SFAS) No. 166, Accounting for Transfers of
Financial Assets, (ASC Topic 860)and SFAS No. 167, Amendments to FASB Interpretation
No. 46(R), (ASC Topic 810).SFAS No. 166 is
a revision to SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, and
requires more information about transfers of financial assets, including
securitization transactions, and where entities have continuing exposure to the
risks related to transferred financial assets. This statement eliminates the
concept of a “qualifying special-purpose entity,” changes the requirements for
derecognizing financial assets, and requires additional
disclosures.  SFAS No. 167 is a revision to FASB Interpretation No. 46
(Revised December 2003), Consolidation of Variable Interest
Entities, and changes how a reporting entity determines when an entity
that is insufficiently capitalized or is not controlled through voting (or
similar rights) should be consolidated.  The determination of whether
a reporting entity is required to consolidate another entity is based on, among
other things, the other entity’s purpose and design and the reporting entity’s
ability to direct the activities of the other entity that most significantly
impact the other entity’s economic performance.  These new standards
require a number of new disclosures.  SFAS No. 167 requires a
reporting entity to provide additional disclosures about its involvement with
variable interest entities and any significant changes in risk exposure due to
that involvement.  A reporting entity will be required to disclose how
its involvement with a variable interest entity affects the reporting entity’s
financial statements.  SFAS No. 166 enhances information reported to
users of financial statements by providing greater transparency about transfers
of financial assets and an entity’s continuing involvement in transferred
financial assets.  These statements are effective at the beginning of
a reporting entity’s first fiscal year beginning after November 15,
2009.  Early application is not permitted.  The adoption of
these statements did not have a material effect on the Company's consolidated
financial position or results of operations.


-27-


FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





In
January 2010, the FASB issued Accounting Standards Update (ASU) No.
2010-06, Improving Disclosures
about Fair Value Measurements. This ASU amends ASC Topic 820 to provide
users of financial statements with additional information regarding fair
value.  New disclosures required by the ASU include disclosures of
significant transfers between Level 1 and Level 2 and the reasons for such
transfers, disclosure of the reasons for transfers in or out of Level 3 and that
significant transfers into Level 3 be disclosed separately from significant
transfers out of Level 3, and disclosure of the valuation techniques used in
connection with Level 2 and Level 3 valuations and the reason for any changes in
valuation methods.  This ASU will generally be effective for interim
and annual periods beginning after December 15, 2009.  However,
disclosures of purchases, sales, issuances, and settlements in the roll forward
activity in Level 3 fair value measurements will be effective for fiscal years
beginning after December 15, 2010, and for interim periods within those fiscal
years.  As this ASU applies only to disclosures, the adoption of this
ASU had no impact on the Company’s consolidated financial position or results of
operations.





In July
2010, the FASB issued ASU No. 2010-20, Disclosures about the Credit Quality
of Financing Receivables and the Allowance for Credit
Losses.  The guidance requires additional disclosure to
facilitate financial statement users’ evaluation of the following: (1) the
nature of credit risk inherent in the entity’s loan portfolio, (2) how that risk
is analyzed and assessed in arriving at the allowance for loan losses, and (3)
the changes and reasons for those changes in the allowance for loan
losses.  For public companies, increased disclosures as of the end of
a reporting period are effective for periods ending on or after December 15,
2010.  Increased disclosures about activity that occurs during a
reporting period are effective for interim and annual reporting periods
beginning on or after December 15, 2010.  ASU No. 2011-01 issued in
January 2011 delayed the effective date of the disclosures about troubled debt
restructurings required by ASU No. 2010-20 for public companies, so that the new
disclosures about troubled debt restructurings could be coordinated with
additional guidance for determining what constitutes a troubled debt
restructuring expected to be issued in 2011.  As this ASU applies only
to disclosures, the adoption of this ASU had no impact on the Company’s
consolidated financial position or results of operations.





In
December 2010, the FASB issued ASU No. 2010-28, When to Perform Step 2 of the
Goodwill Impairment Test for Reporting Units with Zero Carrying Amounts,which amended ASC Topic 350, Intangibles-Goodwill and
Other.  The guidance modifies the goodwill impairment test for
reporting units with zero or negative carrying amounts.  For those
reporting units, an entity is required to perform Step 2 of the goodwill
impairment test if it is more likely than not that a goodwill impairment
exists.  For public companies, this amendment is effective for fiscal
years, and interim periods within those fiscal years, beginning after December
15, 2010.  The adoption of this ASU is not expected to have any impact
on the Company’s consolidated financial position or results of
operations.


-28-





FIRST
SAVINGS FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





In
December 2010, the FASB issued ASU No. 2010-29, Business Combinations (Topic 805),
Disclosure of Supplementary Pro Forma Information for Business
Combinations.  The guidance specifies that if a public entity
presents comparative financial statements, the entity should disclose revenue
and earnings of the combined entity as though the business combination(s) that
occurred during the current year had occurred as of the beginning of the
comparable prior annual reporting period only.  The guidance also
expands the supplemental pro forma disclosures under Topic 805 to include a
description of the nature and amount of material, nonrecurring pro forma
adjustments directly attributable to the business combination included in the
reported pro forma revenue and earnings.  This amendment is effective
prospectively for business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2010.  Early adoption is permitted.  As this
ASU only applies to disclosures, the adoption of this ASU is not expected
to have any impact on the Company’s consolidated financial position or results
of operations.


-29-





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, 2010 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 three-month period ended December 31, 2010, 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, 2010.





Comparison
of Financial Condition at December 31, 2010 and September 30, 2010





Cash and Cash
Equivalents.  Cash and cash equivalents increased from $11.3
million at September 30, 2010 to $11.5 million at December 31, 2010, primarily
due to an increase of $2.0 million in interest-bearing deposits with banks,
which more than offset a decrease of $1.8 million in cash and due from
banks.





Loans.  Net
loans receivable decreased $4.5 million, from $343.6 million at September 30,
2010 to $339.1 million at December 31, 2010, primarily due to decreases in
residential permanent and construction loans of $4.4 million, consumer loans of
$1.6 million and multi-family residential mortgage loans of $880,000, which more
than offset an increase in nonresidential permanent loans of $2.7 million. The
decrease in residential mortgage loans is primarily due to loan payoffs that
have not been replaced by new originations as the Bank has increased its
secondary market mortgage loan sales activity. In addition, the Bank has
increased its commercial lending personnel and has continued to emphasize the
origination of commercial loans in fiscal 2011 in order to further diversify the
loan portfolio.


-30-


FIRST
SAVINGS FINANCIAL GROUP, INC.


PART
I - ITEM 2





MANAGEMENT’S
DISCUSSION AND


ANALYSIS
OF FINANCIAL CONDITION AND


RESULTS
OF OPERATIONS





Securities
Available for Sale.  Securities available for sale increased
$10.1 million from $110.0 million at September 30, 2010 to $120.1 million at
December 31, 2010 due primarily to purchases of $20.8 million, partially offset
by sales of $3.9 million, maturities and calls of $619,000 and principal
repayments of $4.0 million. The increase in securities available for sale,
primarily in U.S. government agency and sponsored enterprises securities and
municipal securities, was primarily funded by an increase in
deposits.





Securities Held
to Maturity.  Investment securities held-to-maturity decreased
$343,000 from $3.9 million at September 30, 2010 to $3.6 million at December 31,
2010 due primarily to principal repayments on mortgage-backed
securities.





Deposits.  Total
deposits increased $7.8 million from $366.2 million at September 30, 2010 to
$374.0 million at December 31, 2010 primarily due to increases in
noninterest-bearing demand deposit accounts of $2.0 million and certificates of
deposit of $7.1 million during the period. The increase in certificates of
deposit is due primarily to $6.9 million of brokered certificates of
deposit.  Management determined that utilizing a certain level of
brokered deposits with differing maturities as a funding source alternative to
local customer certificates of deposit and FHLB advances was advantageous given
the lower interest rate environment for brokered funds.





Borrowings.  Borrowings
from FHLB increased $625,000 from $67.2 million at September 30, 2010 to $67.8
million at December 31, 2010.  Management has increased the level of
FHLB advances to take advantage of historically low interest rates, provide
short-term liquidity and provide funding for purchases of available for sale
securities.





Stockholders’
Equity. Stockholders’ equity decreased $1.0 million from $55.2 million at
September 30, 2010 to $54.2 million at December 31, 2010.  The
decrease was due primarily to a $1.6 million decrease in accumulated other
comprehensive income as a result of net unrealized losses on available for sale
securities during the quarter, and the open market repurchase of $665,000 of
common stock recorded as treasury stock, which more than offset $1.1 million of
retained net earnings. During the quarter ended December 31, 2009, the Company
declared a special dividend of $0.08 per share, totaling $193,000, which was
paid to shareholders of record as of the close of business on January 4,
2010.


-31-




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 December 31, 2010 and 2009





Overview.  The
Company reported net income of $1.1 million, or $0.50 per diluted share, for the
three-month period ended December 31, 2010, compared to net income of $892,000,
or $0.38 per diluted share, for the same period in 2009.  The Company
recognized a nonrecurring pretax charge of $104,000 for severance compensation
for the early retirement of several officers during the quarter ended December
31, 2010.





Net Interest
Income.  Net interest income increased $149,000, or 3.0%, for
the three months ended December 31, 2010 compared to the same period in 2009.
Average interest-earnings assets increased $16.9 million and average
interest-bearing liabilities increased $16.3 million when comparing the two
periods, and the tax-equivalent interest rate spread was 4.38% for both
periods.





Total interest income decreased
$95,000, or 1.4%, when comparing the two periods due primarily to a decrease in
the average tax-equivalent yield on interest-earning assets from 6.04% for 2009
to 5.75% for 2010, which more than offset an increase in the average balance of
interest-earning assets of $16.9 million from $442.9 million in 2009 to $459.8
million in 2010. The average balance of investment securities increased $30.7
million while the average balance of loans decreased $14.1 million when
comparing the two periods.





Total
interest expense decreased $244,000, or 14.6%, due primarily to a decrease in
the average cost of interest-bearing liabilities from 1.66% in 2009 to 1.37% in
2010, which more than offset an increase in the average balance of
interest-bearing liabilities of $16.3 million from $400.9 million in 2009 to
$417.2 million in 2010. The average cost of interest-bearing liabilities
decreased for 2010 primarily as a result of lower market interest rates as
compared to 2009, the repricing of certificates of deposit at lower market
interest rates as they matured and the utilization of lower-cost FHLB advances
and brokered deposits as alternative sources of funding. The average balances of
deposits and borrowings increased $11.9 million and $4.4 million, respectively,
when comparing the two periods.


-32-


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.  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 December 31,2010
                          
                          
                          2009Average
                            Balance
                          
                          
                          Interest
                            and
                            Dividends
                          
                          
                          Yield/
                            Cost
                          
                          
                          Average
                            Balance
                          
                          
                          Interest
                            and
                            Dividends
                          
                          
                          Yield/
                            Cost(Dollars in thousands)Assets:Interest-bearing
      deposits with banks
                          
                          $
                          3,986
                          
                          
                          $
                          3
                          
                          
                          
                          0.30
                          %
                          
                          $
                          3,677
                          
                          
                          $
                          6
                          
                          
                          
                          0.65
                          %Loans
                          
                          
                          343,129
                          
                          
                          
                          5,273
                          
                          
                          
                          6.15
                          
                          
                          
                          357,232
                          
                          
                          
                          5,687
                          
                          
                          
                          6.37Investment
      securities
                          
                          
                          92,094
                          
                          
                          
                          1,215
                          
                          
                          
                          5.28
                          
                          
                          
                          38,265
                          
                          
                          
                          696
                          
                          
                          
                          7.28Mortgage-backed
      securities
                          
                          
                          16,486
                          
                          
                          
                          87
                          
                          
                          
                          2.11
                          
                          
                          
                          39,578
                          
                          
                          
                          280
                          
                          
                          
                          2.83Federal
      Home Loan Bank stock
                          
                          
                          4,112
                          
                          
                          
                          28
                          
                          
                          
                          2.72
                          
                          
                          
                          4,170
                          
                          
                          
                          17
                          
                          
                          
                          1.63Total
      interest-earning assets
                          
                          
                          459,807
                          
                          
                          
                          6,606
                          
                          
                          
                          5.75
                          
                          
                          
                          442,922
                          
                          
                          
                          6,686
                          
                          
                          
                          6.04Non-interest-earning
      assets
                          
                          
                          45,037
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          40,834Total
      assets
                          
                          $
                          504,844
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          483,756Liabilities
      and equity:NOW
      accounts
                          
                          $
                          68,184
                          
                          
                          $
                          94
                          
                          
                          
                          0.55
                          
                          
                          $
                          58,683
                          
                          
                          $
                          98
                          
                          
                          
                          0.67Money
      market deposit accounts
                          
                          
                          35,107
                          
                          
                          
                          66
                          
                          
                          
                          0.75
                          
                          
                          
                          33,364
                          
                          
                          
                          99
                          
                          
                          
                          1.19Savings
      accounts
                          
                          
                          38,420
                          
                          
                          
                          28
                          
                          
                          
                          0.29
                          
                          
                          
                          35,961
                          
                          
                          
                          31
                          
                          
                          
                          0.34Time
      deposits
                          
                          
                          198,524
                          
                          
                          
                          873
                          
                          
                          
                          1.76
                          
                          
                          
                          200,286
                          
                          
                          
                          1,118
                          
                          
                          
                          2.23Total
      interest-bearing deposits
                          
                          
                          340,235
                          
                          
                          
                          1,061
                          
                          
                          
                          1.25
                          
                          
                          
                          328,294
                          
                          
                          
                          1,346
                          
                          
                          
                          1.64Borrowings
      (1)
                          
                          
                          76,961
                          
                          
                          
                          363
                          
                          
                          
                          1.89
                          
                          
                          
                          72,585
                          
                          
                          
                          321
                          
                          
                          
                          1.77Total
      interest-bearing liabilities
                          
                          
                          417,196
                          
                          
                          
                          1,424
                          
                          
                          
                          1.37
                          
                          
                          
                          400,879
                          
                          
                          
                          1,667
                          
                          
                          
                          1.66Non-interest-bearing
      deposits
                          
                          
                          29,417
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          27,757Other
      non-interest-bearing liabilities
                          
                          
                          2,870
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          2,190Total
      liabilities
                          
                          
                          449,483
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          430,826Total
      equity
                          
                          
                          55,361
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          52,930Total
      liabilities and equity
                          
                          $
                          504,844
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          483,756Net
      interest income
                          
                          
                          
                          
                          
                          $
                          5,182
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          5,019Interest
      rate spread
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          4.38
                          %
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          4.38
                          %Net
      interest margin
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          4.51
                          %
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          4.53
                          %Average
      interest-earning assets to average interest-bearing
      liabilities
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          110.21
                          %
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          110.49
                          %




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




-33-


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.  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 December 31, 2010
                                Compared to
                                Three Months Ended December 31, 2009Increase (Decrease)
                                Due toVolume
                              
                              
                              Rate
                              
                              
                              Net(In thousands)Interest
      income:Interest-bearing
      deposits with banks
                              
                              $
                              (4
                              )
                              
                              $
                              1
                              
                              
                              $
                              (3
                              )Loans
                              
                              
                              (193
                              )
                              
                              
                              (221
                              )
                              
                              
                              (414
                              )Investment
      securities
                              
                              
                              (126
                              )
                              
                              
                              645
                              
                              
                              
                              519Mortgage-backed
      securities
                              
                              
                              (59
                              )
                              
                              
                              (134
                              )
                              
                              
                              (193
                              )Other
      interest-earning assets
                              
                              
                              11
                              
                              
                              
                              -
                              
                              
                              
                              11Total
      interest-earning assets
                              
                              
                              (371
                              )
                              
                              
                              291
                              
                              
                              
                              (80
                              )Interest
      expense:Deposits
                              
                              
                              (337
                              )
                              
                              
                              52
                              
                              
                              
                              (285
                              )Borrowings
      (1)
                              
                              
                              22
                              
                              
                              
                              20
                              
                              
                              
                              42Total
      interest-bearing liabilities
                              
                              
                              (315
                              )
                              
                              
                              72
                              
                              
                              
                              (243
                              )Net
      increase in net interest income
                              
                              $
                              (56
                              )
                              
                              $
                              219
                              
                              
                              $
                              163





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





Provision for
Loan Losses.  The provision for loan losses was $352,000 for
the three months ended December 31, 2010 compared to $358,000 for the same
period in 2009.





Net
charge-offs were $204,000 for the three months ended December 31, 2010 compared
to net charge-offs of $120,000 for the same period in 2009.





Nonperforming
loans decreased from $6.1 million at December 31, 2009 to $5.6 million at
December 31, 2010. The recorded investment in nonperforming loans at December
31, 2010 includes nonaccrual loans of $4.8 million and loans totaling $881,000
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.




-34-


FIRST
SAVINGS FINANCIAL GROUP, INC.


PART
I - ITEM 2





MANAGEMENT’S
DISCUSSION AND


ANALYSIS
OF FINANCIAL CONDITION AND


RESULTS
OF OPERATIONS





Gross
loans receivable decreased $15.6 million from $359.4 million at December 31,
2009 to $343.8 million at December 31, 2010, primarily due to decreases in
residential permanent and construction loans of $15.1 million, land and land
development loans of $2.7 million, commercial business loans of $6.6 million and
consumer loans of $6.7 million, which more than offset increases in
nonresidential permanent and construction loans of $9.6 million and multi-family
residential mortgage loans of $5.8 million when comparing the two periods. The
decreases in residential mortgage loans, commercial business loans and consumer
loans are primarily due to loan payoffs that have not been replaced by new
originations.





The
allowance for loan losses was $4.0 million at December 31, 2010 compared to $3.8
million at September 30, 2010 and $3.9 million at December 31,
2009.  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 $129,000 for the three months ended December 31, 2010 as compared to
the same period in 2009. The increase was due primarily to an increase in the
net gains on sales of mortgage loans of $97,000 for 2010 compared to 2009, and
gains on the sales of securities available for sale of $68,000 for 2010. There
were no sales of securities available for sale in the quarter ended December 31,
2009. These increases more than offset a decrease in service charges on deposit
accounts of $50,000, which was due primarily to a decrease in overdraft fee
income.





Noninterest
Expense.  Noninterest expenses increased $73,000 for the three
months ended December 31, 2010 as compared to the same period in 2009. The
increase was due primarily to increases in compensation and benefits and data
processing expenses of $78,000 and $49,000, respectively, which more than offset
a decrease in occupancy and equipment expense of $87,000.  The
increase in compensation and benefits was due primarily to the aforementioned
$104,000 of severance compensation for the early retirement of several officers
recorded during the quarter ended December 31, 2010 and the increase in data
processing expense is due primarily to an increase in deposit accounts. The
decrease in occupancy and equipment expense when comparing the two periods is
primarily due to depreciation expense recorded in 2009 on core operating system
assets that were disposed of in connection with Bank’s core processing
conversion during the prior fiscal year.





Income Tax
Expense.  The Company recognized income tax expense of $457,000
for the three months ended December 31, 2010, for an effective tax rate of
29.7%, compared to income tax expense of $438,000, for an effective tax rate of
32.9%, for the same period in 2009.  The effective tax rate decreased
for 2010 compared to 2009 primarily due to an increase in tax exempt income for
the 2010 period.


-35-


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 December 31, 2010, the Bank had cash and cash
equivalents of $11.5 million and securities available-for-sale with a fair value
of $120.1 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, without the receipt of prior approval
from the Office of Thrift Supervision (“OTS”) but with prior notice to OTS,
cannot exceed net income for that year to date plus retained net income (as
defined) for the preceding two calendar years.  At December 31, 2010,
the Company had liquid assets of $2.9 million.





Capital
Management.  The Bank is required to maintain specific amounts
of capital pursuant to OTS regulatory requirements.  As of December
31, 2010, the Bank was in compliance with all regulatory capital requirements
that were effective as of such date, with tangible, core and risk-based capital
ratios of 7.97%, 7.97% and 12.80%, respectively.  The regulatory
requirements at that date were 1.5%, 3.0% and 8.0%, respectively.  At
December 31, 2010, the Bank was considered “well-capitalized” under applicable
regulatory guidelines.


-36-


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,
2010.





For the
three months ended December 31, 2010, 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.


-37-


FIRST
SAVINGS FINANCIAL GROUP, INC.


PART
I – ITEM 3





QUANTITATIVE
AND QUALITATIVE DISCLOSURES


ABOUT
MARKET RISK





Qualitative Aspects of Market
Risk.  The Bank’s principal financial objective is to achieve
long-term profitability while reducing its exposure to fluctuating market
interest rates. The Bank 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 Bank 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 Bank
for its portfolio. The Bank 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.  The Bank does not maintain a trading account for any
class of financial instrument nor does the Bank engage in hedging activities or
purchase high-risk derivative instruments. Furthermore, the Bank is not subject
to foreign currency exchange rate risk or commodity price risk.





The Bank
uses interest rate sensitivity analysis to measure its interest rate risk by
computing changes in net portfolio value (“NPV”) of its cash flows from assets,
liabilities and off-balance sheet items in the event of a range of assumed
changes in market interest rates. NPV represents the market value of portfolio
equity and is equal to the market value of assets minus the market value of
liabilities, with adjustments made for off-balance sheet items. This analysis
assesses the risk of loss in market risk sensitive instruments in the event of a
sudden and sustained 100 to 300 basis point increase or a sudden and sustained
100 basis point decrease in market interest rates with no effect given to any
steps that management might take to counter the effect of that interest rate
movement. Using data compiled by the OTS, the Bank receives a report that
measures interest rate risk by modeling the change in NPV over a variety of
interest rate scenarios.


-38-


FIRST
SAVINGS FINANCIAL GROUP, INC.


PART
I – ITEM 3





QUANTITATIVE
AND QUALITATIVE DISCLOSURES


ABOUT
MARKET RISK





The
following table is provided by the OTS and sets forth the change in the Bank’s
NPV at September 30, 2010 based on OTS assumptions that would occur in the event
of an immediate change in interest rates, with no effect given to any steps that
management might take to counteract that change. Given the timing of the release
of this information by the OTS, information as of December 31, 2010 is
unavailable for inclusion in this report.




At September 30, 2010Net Portfolio Value
                
                
                Net Portfolio Value as aDollar
                
                
                Dollar
                
                
                Percent
                
                
                Percent of Present Value of AssetsChange in Rates
                
                Amount
                
                
                Change
                
                
                Change
                
                
                NPV Ratio
                
                
                Change(Dollars in thousands)300bp
                
                $
                42,325
                
                
                $
                (12,651
                )
                
                
                (23
                )%
                
                
                8.53
                %
                
                
                (202
                )bp200bp
                
                
                49,009
                
                
                
                (5,967
                )
                
                
                (11
                )
                
                
                9.67
                
                
                
                (88
                )bp100bp
                
                
                53,451
                
                
                
                (1,525
                )
                
                
                (3
                )
                
                
                10.37
                
                
                
                (18
                )bpStatic
                
                
                54,976
                
                
                
                -
                
                
                
                -
                
                
                
                10.55
                
                
                
                -
                bp(100)bp
                
                
                55,515
                
                
                
                539
                
                
                
                1
                
                
                
                10.57
                
                
                
                2
                bp





The
preceding table indicates that the Bank’s NPV would be expected to decrease in
the event of a sudden and sustained 100 to 300 basis point increase in
prevailing interest rates and increase slightly in the event of a sudden and
sustained decrease of 100 basis points in rates.  The expected
decrease in the Bank’s NPV given a larger increase in rates is primarily
attributable to the relatively high percentage of fixed-rate loans in the Bank’s
loan portfolio. At December 31, 2010, approximately 66.4% of the loan portfolio
consisted of fixed-rate loans.





Certain
assumptions utilized by the OTS in assessing the interest rate risk of savings
associations within its region were utilized in preparing the preceding tables.
These assumptions relate to interest rates, loan prepayment rates, deposit decay
rates and the market values of certain assets under differing interest rate
scenarios, among others.





As with
any method of measuring interest rate risk, certain shortcomings are inherent in
the method of analysis presented in the foregoing table. 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.


-39-


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 December 31, 2010, 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.


-40-


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 affect 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, 2010 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.




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








Period
                    
                    (a)
                      Total number ofshares (or units)purchased
                    
                    
                    (b)
                      Average price
                      paid per share
                      (or unit)
                    
                    
                    (c)
                      Total number of shares(or units) purchased aspart of publiclyannounced plans orprograms (1)
                    
                    
                    (d)
                      Maximum number (orappropriate dollar value) ofshares (or units) that may yetbe purchased under the plansor programsOctober
      1, 2010 throughOctober
      31, 2010
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    120,747November
      1, 2010 throughNovember
      30, 2010
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    120,747December
      1, 2010 throughDecember
      31, 2010
                    
                    
                    45,995
                    
                    
                    $
                    14.45
                    
                    
                    
                    45,995
                    
                    
                    
                    74,752Total
                    
                    
                    45,995
                    
                    
                    $
                    14.45
                    
                    
                    
                    45,995
                    
                    
                    
                    74,752





(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.


-41-


FIRST
SAVINGS FINANCIAL GROUP, INC.


PART
II





OTHER
INFORMATION





Item
3.          Defaults upon
Senior Securities





Not
applicable.




Item 4.          Reserved





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




-42-




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)DatedFebruary 14,
      2011
                    
                    BY:
                    /s/ Larry W.
    MyersLarry W. MyersPresident and Chief Executive OfficerDatedFebruary 14,
      2011
                    
                    BY:
                    /s/ Anthony A.
      SchoenAnthony A. SchoenChief Financial
Officer




-43-