HomeTrust Bancshares, Inc. (NASDAQ: HTBI) ("Company"), the holding company of HomeTrust Bank ("Bank"), today announced preliminary net income for the second quarter of fiscal 2020 increased 14.3% to $9.2 million, or $0.52 per diluted share compared to $8.0 million, or $0.43 per diluted share for the same period a year ago. Net income increased 13.7% to $18.0 million, or $1.01 per diluted share for the six months ended December 31, 2019, compared to $15.8 million, or $0.84 per diluted share for the first six months of fiscal year 2019. Earnings for the three and six months ended December 31, 2019 included a $958,000 after tax gain from the sale of $154.9 million in one-to-four family loans previously reported as held for sale to shift the Company's loan mix and lower its loan to deposit ratio.

Highlights for the quarter ended December 31, 2019 compared to the corresponding quarter in the previous year are as follows:

  • return on assets ("ROA") increased 7.4% to 1.02% from 0.95%;
  • return on equity ("ROE") increased 13.3% to 8.87% from 7.83%;
  • noninterest income increased $4.0 million, or 78.4% to $9.1 million from $5.1 million;
  • noninterest income net of the gain on the previously discussed loan sale increased $2.7 million, or 52.9% to $7.8 million from $5.1 million;
  • organic net loan growth, which excludes one-to-four family loans transferred to held for sale and purchases of home equity lines of credit, was $41.4 million, or 6.9% annualized compared to $57.3 million, or 9.4% annualized;
  • gain on sale of Small Business Administration ("SBA") loans increased $742,000, or 251.3% to $1.0 million from $295,000;
  • 207,261 shares were repurchased during the quarter at an average price of $26.15 per share; and
  • quarterly cash dividends increased 16.7% to $0.07 per share totaling $1.2 million.

Highlights for the six months ended December 31, 2019 compared to the corresponding period in the previous year are as follows:

  • ROA increased 5.3% to 1.00% from 0.95%;
  • ROE increased 13.4% to 8.72% from 7.69%;
  • noninterest income increased $6.0 million, or 56.4% to $16.7 million from $10.7 million;
  • noninterest income net of the gain on the previously discussed loan sale increased $4.7 million, or 44.3% to $15.4 million from $10.7 million;
  • organic net loan growth was $114.4 million, or 8.8% compared to $134.1 million, or 11.4%;
  • gain on sale of SBA loans increased $871,000, or 73.0% to $2.1 million from $1.2 million;
  • total deposits increased $230.5 million, or 9.9% to $2.6 billion from $2.3 billion; and
  • 396,421 shares of common stock were repurchased during the period at an average price of $25.78 per share.

“Despite the industry wide pressure from the interest rate environment, we have continued to deliver strong results through the first half of fiscal 2020," said Dana Stonestreet, Chairman, President, and Chief Executive Officer. "I could not be prouder of our talented and dedicated HomeTrust team that continues to take all our existing and new SBA and equipment finance lines of business to higher performing levels. In the second half of fiscal 2020, we look forward to the conversion of our core technology system to improve customer experience, operational efficiencies, and scalability. Keeping our infrastructure strong is critical to our continued growth and sustainability as we execute our strategic plan to increase revenues, earnings per share and shareholder value."

Income Statement Review

Net interest income decreased slightly to $27.0 million for the quarter ended December 31, 2019, compared to $27.1 million for the comparative quarter in fiscal 2019. The $67,000, or 0.2% decrease was due to a $1.5 million increase in interest and dividend income primarily driven by an increase in average interest-earning assets, which was more than offset by a $1.6 million increase in interest expense. Average interest-earning assets increased $219.6 million, or 7.0% to $3.3 billion for the quarter ended December 31, 2019 compared to $3.1 billion for the corresponding quarter in fiscal 2019. For the quarter ended December 31, 2019, the average balance of total loans receivable increased $172.3 million, or 6.6% compared to the same quarter last year primarily due to organic loan growth. The average balance of commercial paper and deposits in other banks increased $33.2 million, or 10.6% between the periods driven by increases in commercial paper investments. The average balance in securities available for sale increased $13.8 million, or 9.1%, which was primarily driven by the purchase of shorter-term corporate bonds. These increases were mainly funded by a portion of the $204.2 million, or 7.9% increase in average interest-bearing liabilities, as compared to the same quarter last year. Net interest margin (on a fully taxable-equivalent basis) for the three months ended December 31, 2019 decreased to 3.27% from 3.51% for the same period a year ago.

Total interest and dividend income increased $1.5 million, or 4.3% for the three months ended December 31, 2019 as compared to the same period last year, which was primarily driven by a $1.6 million, or 5.2% increase in loan interest income and a $217,000, or 24.8% increase in interest income from securities available for sale which was partially offset by a $242,000, or 23.9% decrease in other investment income. The additional loan interest income was primarily driven by an increase in the average balance of loans receivable partially offset by a decrease in loan yields. Average loan yields decreased six basis points to 4.66% for the quarter ended December 31, 2019 from 4.72% in the corresponding quarter last year. For the quarters ended December 31, 2019 and 2018, average loan yields included five and 13 basis points, respectively, from the accretion of purchase discounts on acquired loans. The incremental accretion and the impact to the yield on loans may change during any period based on the volume of prepayments, but it is expected to decrease over time as the balance of the purchase discount for acquired loans decreases. The total purchase discount for acquired loans was $5.9 million at December 31, 2019, compared to $6.7 million at June 30, 2019, and $7.7 million at December 31, 2018.

Total interest expense increased $1.6 million, or 21.4% for the quarter ended December 31, 2019 compared to the same period last year. The increase was driven by a $2.7 million, or 75.2% increase in deposit interest expense partially offset by a $1.2 million, or 31.2% decrease in interest expense on borrowings. The additional deposit interest expense was a result of our continued focus on increasing deposits as the average balance of interest-bearing deposits increased $272.5 million, or 14.2% along with a 41 basis point increase in the average cost of interest-bearing deposits for the quarter ended December 31, 2019 compared to the same quarter last year. Average borrowings for the quarter ended December 31, 2019 decreased $68.3 million, or 10.1% along with a 51 basis point decrease in the average cost of borrowings compared to the same period last year. Borrowings were paid down utilizing proceeds from the previously mentioned one-to-four family loan sale. The decrease in the average cost of borrowing was driven by the lower federal funds rate during the current quarter compared to the prior year. The overall average cost of funds increased 14 basis points to 1.27% for the current quarter compared to 1.13% in the same quarter last year due primarily to the impact of the deposit market interest rate increases on our interest-bearing liabilities.

Net interest income increased to $54.1 million for the six months ended December 31, 2019, compared to $53.4 million for the comparative period in fiscal 2019. The $734,000, or 1.4% increase was due to a $5.5 million increase in interest and dividend income primarily driven by an increase in average interest-earning assets, which was partially offset by a $4.7 million increase in interest expense. Average interest-earning assets increased $220.3 million, or 7.1% to $3.3 billion for the six months ended December 31, 2019 compared to $3.1 billion for the corresponding period in fiscal 2019. For the six months ended December 31, 2019, the average balance of total loans receivable increased $181.9 million, or 7.0% compared to the same period last year primarily due to organic loan growth. The average balance of commercial paper and deposits in other banks increased $37.5 million, or 11.8% between the periods driven by increases in commercial paper investments. These increases were primarily funded by the $221.8 million, or 8.7% increase in average interest-bearing liabilities, as compared to the same six month period last year. Net interest margin (on a fully taxable-equivalent basis) for the six months ended December 31, 2019 decreased to 3.30% from 3.48% for the same period a year ago.

Total interest and dividend income increased $5.5 million, or 8.2% for the six months ended December 31, 2019 as compared to the same period last year, which was primarily driven by a $5.1 million, or 8.6% increase in loan interest income, a $257,000, or 14.8% increase in interest income from securities available for sale, and a $342,000, or 8.9% increase in interest income from commercial paper and interest-bearing deposits, which was partially offset by a $249,000, or 13.4% decrease in other investment income. The additional loan interest income was driven by increases in both the average balance of loans receivable and loan yields compared to the prior year. Average loan yields increased seven basis points to 4.70% for the six months ended December 31, 2019 from 4.63% in the corresponding period last year. For the six months ended December 31, 2019 and 2018, average loan yields included six and nine basis points, respectively, from the accretion of purchase discounts on acquired loans.

Total interest expense increased $4.7 million, or 35.5% for the six months ended December 31, 2019 compared to the same period last year. The increase was driven by a $5.8 million, or 91.5% increase in deposit interest expense partially offset by a $1.1 million, or 15.7% decrease in interest expense on borrowings. The additional deposit interest expense was a result of a $237.2 million, or 12.5% increase in the average balance of interest-bearing deposits along with a 47 basis point increase in the average cost of those deposits for the six months ended December 31, 2019 as compared to the same period last year. Average borrowings for the six months ended December 31, 2019 decreased $15.4 million, or 2.3% along with a 29 basis point decrease in the average cost of borrowings compared to the same period last year. The overall cost of funds increased 26 basis points to 1.30% for the six months ended December 31, 2019 compared to 1.04% in the corresponding period last year.

Noninterest income increased $4.0 million, or 78.4% to $9.1 million for the three months ended December 31, 2019 from $5.1 million for the same period in the previous year primarily due a $2.8 million, or 300.0% increase in the gain on sale of loans held for sale, as well as a $576,000, 195.3% increase in loan income and fees, and a $565,000, or 75.4% increase in other noninterest income. The increase in the gain on sale of loans held for sale was a result of the previously discussed one-to-four family loans sold during the quarter which resulted in a non-recurring $1.3 million gain. In addition, $57.8 million of residential mortgage loans originated for sale were sold with gains of $1.5 million compared to $24.9 million sold and gains of $649,000 in the corresponding quarter in the prior year. During the quarter ended December 31, 2019, $16.5 million of the guaranteed portion of SBA commercial loans were sold with gains of $1.0 million compared to $4.8 million sold and gains of $295,000 in the corresponding quarter in the prior year. The $576,000, 194.8% increase for the quarter in loan income and fees is primarily a result of our adjustable rate conversion program and prepayment fees on equipment finance loans. The $565,000, or 75.5% increase in other noninterest income primarily related to operating lease income from the new equipment finance line of business.

Noninterest income increased $6.0 million, or 56.4% to $16.7 million for the six months ended December 31, 2019 from $10.7 million for the same period in the previous year primarily due to a $3.5 million, or 132.4% increase in the gain on sale of loans held for sale, a $1.1 million, or 181.4% increase in loan income and fees, and a $1.2 million, or 85.9% increase in other noninterest income. In addition to the previously mentioned non-recurring gain on the sale of one-to-four family loans, $103.2 million of residential mortgage loans sold with gains of $2.8 million for the six months ended December 31, 2019, compared to $56.5 million sold and gains of $1.4 million in the corresponding period in the prior year. During the six months ended December 31, 2019, $29.2 million of SBA commercial loans were sold with recorded gains of $2.1 million compared to $17.2 million sold and gains of $1.2 million in the corresponding period in the prior year. The increase in loan income and fees is primarily a result of our adjustable rate conversion program and prepayment fees on equipment finance loans. The increase in other noninterest income primarily related to operating lease income from the equipment finance line of business.

Noninterest expense for the three months ended December 31, 2019 increased $2.2 million, or 10.0% to $24.0 million compared to $21.9 million for the three months ended December 31, 2018. The increase was primarily due to a $1.3 million, or 10.2% increase in salaries and employee benefits as a result of new positions and annual salary increases; an $891,000, or 36.7% increase in other expenses, mainly driven by depreciation from our equipment finance line of business and expenses related to our upcoming core system conversion; a $239,000, or 59.5% increase in marketing and advertising expense, which was used to promote deposit growth and other banking products; a $112,000, or 46.2% increase in real estate owned ("REO") related expenses as a result of  higher pre foreclosure expenses during the quarter, and a $90,000, or 4.7% increase in computer services. Partially offsetting these increases was a decrease of $323,000, or 96.4% in deposit insurance premiums as a result of credits issued by the Federal Deposit Insurance Corporation ("FDIC") and a $153,000, or 29.1% decrease in core deposit intangible amortization for the three months ended December 31, 2019 compared to the same period last year.

Noninterest expense for the six months ended December 31, 2019 increased $3.8 million, or 8.8% to $47.6 million compared to $43.7 million for the six months ended December 31, 2018. The increase was primarily due to a $2.5 million, or 9.9% increase in salaries and employee benefits; a $1.4 million, or 27.8% increase in other expenses, mainly driven by depreciation from our equipment finance line of business; a $501,000, or 61.2% increase in marketing and advertising expense; and a $265,000, or 7.1% increase in computer services. Partially offsetting these increases was a decrease of $627,000, or 98.1% in deposit insurance premiums and a $308,000, or 28.2% decrease in core deposit intangible amortization for the six months ended December 31, 2019 compared to the same period last year.

For the three months ended December 31, 2019, the Company's income tax expense increased $189,000, or 8.3% to $2.5 million from $2.3 million for the corresponding quarter in the previous year as a result of higher taxable income. The effective tax rate for the three months ended December 31, 2019 and 2018 was 21.2% and 22.1%, respectively.

For the six months ended December 31, 2019, the Company's income tax expense increased $373,000, or 8.3% to $4.9 million from $4.5 million for the corresponding period in the previous year as a result of higher taxable income. The effective tax rate for the three months ended December 31, 2019 and 2018 was 21.3% and 22.1%, respectively.

Balance Sheet Review

Total assets and liabilities remained relatively level at $3.5 and $3.1 billion, respectively, at December 31, 2019 compared to June 30, 2019. The funds received from the $154.9 million in one-to-four family loans sold and deposit growth of $230.5 million, or 9.9% were used to pay down $245.0 million, or 36.0% of borrowings, fund the $41.6 million, or 7.8% net increase in cash and cash equivalents, commercial paper, certificates of deposits in other banks, securities available for sale, and other investments at cost for the first six months of fiscal 2020. Loans held for sale include approximately $85.6 million in one-to-four family loans being marketed for sale. The Company is selling these lower rate one-to-four family loans to decrease its loan to deposit ratio while increasing its net interest margin over time. Excluding these one-to-four family loans, loans held for sale increased $14.3 million primarily from $17.3 million of home equity loans originated for sale during the period. Deferred income taxes decreased $4.5 million, or 16.8% to $22.1 million at December 31, 2019 from $26.5 million at June 30, 2019 due to the use of net operating loss carryforwards.

As of July 1, 2019, the Company adopted the new lease accounting standard, which drove several changes on the balance sheet. Land totaling $2.1 million related to the Company's one finance lease (f/k/a capital lease) was reclassed from premises and equipment, net to other assets as a right of use ("ROU") asset and the corresponding liability was reclassed from a separate line on the balance sheet to other liabilities as a lease liability. As of December 31, 2019, the Company has $4.8 million in ROU assets and corresponding lease liabilities, which are maintained in other assets and other liabilities, respectively.

Stockholders' equity at December 31, 2019 increased $8.1 million, or 2.0% to $417.0 million compared to $408.9 million at June 30, 2019. Changes within stockholders' equity included $18.0 million in net income and $1.6 million in stock-based compensation, partially offset by 396,421 shares of common stock repurchased at an average cost of $25.78, or approximately $10.2 million in total, and $2.2 million related to cash dividends declared. As of December 31, 2019, HomeTrust Bank and the Company were considered "well capitalized" in accordance with their regulatory capital guidelines and exceeded all regulatory capital requirements.

Asset Quality

The allowance for loan losses was $22.0 million, or 0.86% of total loans, at December 31, 2019 compared to $21.4 million, or 0.79% of total loans, at June 30, 2019. The allowance for loan losses to total gross loans excluding acquired loans was 0.92% at December 31, 2019, compared to 0.85% at June 30, 2019. The increase in the ratio of allowance for loan losses to gross loans was driven by approximately $154.9 million of one-to-four family loans being sold, $85.6 million one-to-four loans being transferred to loans held for sale from total loans, and a $602,000 increase in the allowance for loan losses from a $400,000 provision for loan losses and $202,000 in net loan recoveries. The increase in the allowance was mainly driven by one large commercial real estate loan relationship that was moved to nonaccrual during the quarter which resulted in approximately $1.1 million combination of charge-offs and impairments.

There was a $400,000 provision for loan losses for the six months ended December 31, 2019, compared to no provision for the  corresponding period in fiscal year 2019. Net loan recoveries totaled $202,000 for the six months ended December 31, 2019, compared to $359,000 for the same period in fiscal year 2019. Net recoveries as a percentage of average loans were (0.01)% and (0.03)% for the six months ended December 31, 2019 and 2018, respectively.

Nonperforming assets increased by $2.4 million, or 18.5% to $15.7 million, or 0.45% of total assets, at December 31, 2019 compared to $13.3 million, or 0.40% of total assets at June 30, 2019. Nonperforming assets included $14.3 million in nonaccruing loans and $1.5 million in REO at December 31, 2019, compared to $10.4 million and $2.9 million, in nonaccruing loans and REO, respectively, at June 30, 2019. The increase in nonaccruing loans primarily relates to the previously discussed commercial real estate loan relationship that was moved to nonaccrual during the quarter. Included in nonperforming loans are $7.3 million of loans restructured from their original terms of which $5.8 million were current at December 31, 2019, with respect to their modified payment terms. Purchased impaired loans aggregating $1.2 million obtained through prior acquisitions are excluded from nonaccruing loans due to the accretion of discounts established in accordance with the acquisition method of accounting for business combinations. Nonperforming loans to total loans was 0.56% at December 31, 2019 and 0.38% at June 30, 2019.

The ratio of classified assets to total assets increased to 0.90% at December 31, 2019 from 0.89% at June 30, 2019. Classified assets increased to $31.4 million at December 31, 2019 compared to $30.9 million at June 30, 2019. Our overall asset quality metrics continue to demonstrate our commitment to growing and maintaining a loan portfolio with a moderate risk profile.

About HomeTrust Bancshares, Inc.

HomeTrust Bancshares, Inc. is the holding company for HomeTrust Bank. As of December 31, 2019, the Company had assets of $3.5 billion. The Bank, founded in 1926, is a North Carolina state chartered, community-focused financial institution committed to providing value added relationship banking with over 40 locations as well as online/mobile channels. Locations include: North Carolina (including the Asheville metropolitan area, the "Piedmont" region, Charlotte, and Raleigh/Cary), Upstate South Carolina (Greenville), East Tennessee (including Kingsport/Johnson City/Bristol, Knoxville, and Morristown) and Southwest Virginia (including the Roanoke Valley). The Bank is the 2nd largest community bank headquartered in North Carolina.

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements often include words such as "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events, many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially, from those currently expected or projected in these forward-looking statements. Factors that could cause our actual results to differ materially from those described in the forward-looking statements, include increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and other factors described in HomeTrust's latest annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other documents filed with or furnished to the Securities and Exchange Commission - which are available on our website at www.htb.com  and on the SEC's website at www.sec.gov. Any of the forward-looking statements that we make in this press release or the documents we file with or furnish to the SEC are based upon management's beliefs and assumptions at the time they are made and may turn out to be wrong because of inaccurate assumptions we might make, because of the factors described above or because of other factors that we cannot foresee. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for fiscal 2020 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect our operating and stock performance.

WEBSITE: WWW.HOMETRUSTBANCSHARES.COM

Contact:Dana L. Stonestreet – Chairman, President and Chief Executive OfficerTony J. VunCannon – Executive Vice President, Chief Financial Officer, Corporate Secretary and Treasurer828-259-3939

Consolidated Balance Sheets (Unaudited)

(Dollars in thousands) December 31, 2019   September 30, 2019   June 30, 2019(1)   March 31, 2019   December 31, 2018
Assets                  
Cash $ 47,213     $ 52,082     $ 40,909     $ 40,633     $ 44,425  
Interest-bearing deposits 41,705     65,011     30,134     37,678     26,881  
Cash and cash equivalents 88,918     117,093     71,043     78,311     71,306  
Commercial paper 253,794     254,302     241,446     246,903     239,286  
Certificates of deposit in other banks 47,628     50,117     52,005     56,209     51,936  
Securities available for sale, at fair value 146,022     165,714     121,786     139,112     149,752  
Other investments, at cost 36,898     45,900     45,378     51,122     44,858  
Loans held for sale 118,055     289,319     18,175     14,745     13,095  
Total loans, net of deferred loan fees 2,554,541     2,508,730     2,705,190     2,660,647     2,632,231  
Allowance for loan losses (22,031 )   (21,314 )   (21,429 )   (24,416 )   (21,419 )
Net loans 2,532,510     2,487,416     2,683,761     2,636,231     2,610,812  
Premises and equipment, net 58,020     58,509     61,051     60,559     66,610  
Accrued interest receivable 9,714     10,434     10,533     10,885     10,372  
Real estate owned ("REO") 1,451     2,582     2,929     3,003     2,955  
Deferred income taxes 22,066     24,257     26,523     28,832     28,533  
Bank owned life insurance ("BOLI") 91,048     90,499     90,254     89,663     89,156  
Goodwill 25,638     25,638     25,638     25,638     25,638  
Core deposit intangibles 1,715     2,088     2,499     2,948     3,436  
Other assets 36,755     31,441     23,157     13,576     5,354  
Total Assets $ 3,470,232     $ 3,655,309     $ 3,476,178     $ 3,457,737     $ 3,413,099  
Liabilities and Stockholders' Equity                  
Liabilities                  
Deposits $ 2,557,769     $ 2,494,194     $ 2,327,257     $ 2,308,395     $ 2,258,069  
Borrowings 435,000     685,000     680,000     680,000     688,000  
Other liabilities 60,468     63,047     60,025     62,112     56,060  
Total liabilities 3,053,237     3,242,241     3,067,282     3,050,507     3,002,129  
Stockholders' Equity                  
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued or outstanding                  
Common stock, $0.01 par value, 60,000,000 shares authorized (2) 177     178     180     183     185  
Additional paid in capital 182,366     186,359     190,315     196,824     203,660  
Retained earnings 240,312     232,315     224,545     217,490     215,289  
Unearned Employee Stock Ownership Plan ("ESOP") shares (6,612 )   (6,744 )   (6,877 )   (7,009 )   (7,142 )
Accumulated other comprehensive income (loss) 752     960     733     (258 )   (1,022 )
Total stockholders' equity 416,995     413,068     408,896     407,230     410,970  
Total Liabilities and Stockholders' Equity $ 3,470,232     $ 3,655,309     $ 3,476,178     $ 3,457,737     $ 3,413,099  

_________________________________

(1) Derived from audited financial statements.
(2) Shares of common stock issued and outstanding were 17,664,384 at December 31, 2019; 17,818,145 at September 30, 2019; 17,984,105 at June 30, 2019; 18,265,535 at March 31, 2019; and 18,520,825 at December 31, 2018.

Consolidated Statement of Income (Unaudited)

  Three Months Ended   Six Months Ended
  December 31,   September 30,   December 31,   December 31,   December 31,
(Dollars in thousands) 2019   2019   2018   2019   2018
Interest and Dividend Income                  
Loans $ 32,119     $ 32,266     $ 30,544     $ 64,385     $ 59,272  
Commercial paper and interest-bearing deposits 1,912     2,253     1,966     4,165     3,823  
Securities available for sale 1,093     896     876     1,989     1,732  
Other investments 772     832     1,014     1,604     1,853  
Total interest and dividend income 35,896     36,247     34,400     72,143     66,680  
Interest Expense                  
Deposits 6,321     5,853     3,607     12,174     6,357  
Borrowings 2,541     3,321     3,692     5,862     6,950  
Total interest expense 8,862     9,174     7,299     18,036     13,307  
Net Interest Income 27,034     27,073     27,101     54,107     53,373  
Provision for Loan Losses 400             400      
Net Interest Income after Provision for Loan Losses 26,634     27,073     27,101     53,707     53,373  
Noninterest Income                  
Service charges and fees on deposit accounts 2,605     2,443     2,577     5,048     4,978  
Loan income and fees 871     882     295     1,753     623  
Gain on sale of loans held for sale 3,775     2,299     944     6,074     2,614  
BOLI income 509     697     520     1,206     1,056  
Other, net 1,314     1,339     749     2,653     1,427  
Total noninterest income 9,074     7,660     5,085     16,734     10,698  
Noninterest Expense                  
Salaries and employee benefits 14,170     13,912     12,857     28,082     25,542  
Net occupancy expense 2,384     2,342     2,425     4,726     4,751  
Computer services 1,985     2,024     1,895     4,009     3,744  
Telephone, postage, and supplies 798     802     743     1,600     1,512  
Marketing and advertising 641     679     402     1,320     819  
Deposit insurance premiums 12         335     12     639  
Loss (gain) on sale and impairment of REO 122     (19 )   75     103     254  
REO expense 238     258     173     496     348  
Core deposit intangible amortization 373     411     526     784     1,092  
Other 3,318     3,124     2,427     6,442     5,040  
Total noninterest expense 24,041     23,533     21,858     47,574     43,741  
Income Before Income Taxes 11,667     11,200     10,328     22,867     20,330  
Income Tax Expense 2,476     2,396     2,287     4,872     4,499  
Net Income $ 9,191     $ 8,804     $ 8,041     $ 17,995     $ 15,831  
                                       

Per Share Data

  Three Months Ended   Six months ended
  December 31,   September 30,   December 31,   December 31,   December 31,
  2019   2019   2018   2019   2018
Net income per common share:(1)                  
Basic $ 0.54     $ 0.51     $ 0.45     $ 1.05     $ 0.88  
Diluted $ 0.52     $ 0.49     $ 0.43     $ 1.01     $ 0.84  
Average shares outstanding:                  
Basic 16,906,457     17,097,647     17,797,553     17,002,052     17,961,465  
Diluted 17,567,680     17,753,657     18,497,334     17,660,687     18,689,584  
Book value per share at end of period $ 23.61     $ 23.18     $ 22.19     $ 23.61     $ 22.19  
Tangible book value per share at end of period (2) $ 22.08     $ 21.65     $ 20.66     $ 22.08     $ 20.66  
Cash dividends declared per common share $ 0.07     $ 0.06     $ 0.06     $ 0.13     $ 0.06  
Total shares outstanding at end of period 17,664,384     17,818,145     18,520,825     17,664,384     18,520,825  

_________________________________

(1) Basic and diluted net income per common share have been prepared in accordance with the two-class method.
(2) See Non-GAAP reconciliation tables below for adjustments.
   

Selected Financial Ratios and Other Data

  Three Months Ended   Six Months Ended
  December 31,   September 30,   December 31,   December 31,   December 31,
  2019   2019   2018   2019   2018
Performance ratios: (1)          
Return on assets (ratio of net income to average total assets) 1.02 %   0.99 %   0.95 %   1.00 %   0.95 %
Return on equity (ratio of net income to average equity) 8.87     8.57     7.83     8.72     7.69  
Tax equivalent yield on earning assets(2) 4.34     4.43     4.45     4.38     4.34  
Rate paid on interest-bearing liabilities 1.27     1.33     1.13     1.30     1.04  
Tax equivalent average interest rate spread (2) 3.07     3.10     3.32     3.08     3.30  
Tax equivalent net interest margin(2) (3) 3.27     3.32     3.51     3.30     3.48  
Average interest-earning assets to average interest-bearing liabilities 119.53     119.41     120.48     119.47     121.22  
Operating expense to average total assets 2.66     2.64     2.59     2.65     2.61  
Efficiency ratio 66.58     67.75     67.91     67.16     68.27  
Efficiency ratio - adjusted (4) 66.05     67.20     67.32     66.62     67.67  

_________________________________

(1) Ratios are annualized where appropriate.
(2) The weighted average rate for municipal leases is adjusted for a 24% combined federal and state tax rate, respectively since the interest from these leases is tax exempt.
(3) Net interest income divided by average interest-earning assets.
(4) See Non-GAAP reconciliation tables below for adjustments.
   
   
                   
                   
                   
                             
                             
                             
                             
                             
                             
                             
                   
                             
                             
                             
  At or For the Three Months Ended
   
                   
                   
                   
                             
                             
                             
                             
                             
                             
                             
                   
                             
                             
                             
  December 31,   September 30,   June 30,   March 31,   December 31,
   
                   
                   
                   
                             
                             
                             
                             
                             
                             
                             
                   
                             
                             
                             
  2019   2019   2019   2019   2018
   
                   
                   
                   
                             
                             
                             
                             
                             
                             
                             
                   
                             
                             
                             
Asset quality ratios:                  
   
                   
                   
                   
                             
                             
                             
                             
                             
                             
                             
                   
                             
                             
                             
Nonperforming assets to total assets(1) 0.45 %   0.37 %   0.38 %   0.41 %   0.37 %
   
                   
                   
                   
                             
                             
                             
                             
                             
                             
                             
                   
                             
                             
                             
Nonperforming loans to total loans(1) 0.56     0.43     0.38     0.43     0.37  
   
                   
                   
                   
                             
                             
                             
                             
                             
                             
                             
                   
                             
                             
                             
Total classified assets to total assets 0.90     0.84     0.89     1.00     0.97  
   
                   
                   
                   
                             
                             
                             
                             
                             
                             
                             
                   
                             
                             
                             
Allowance for loan losses to nonperforming loans(1) 154.48     195.88     206.90     215.46     221.45  
   
                   
                   
                   
                             
                             
                             
                             
                             
                             
                             
                   
                             
                             
                             
Allowance for loan losses to total loans 0.86     0.85     0.79     0.92     0.81  
   
                   
                   
                   
                             
                             
                             
                             
                             
                             
                             
                   
                             
                             
                             
Allowance for loan losses to total gross loans excluding acquired loans(2) 0.92     0.92     0.85     0.99     0.89  
   
                   
                   
                   
                             
                             
                             
                             
                             
                             
                             
                   
                             
                             
                             
Net charge-offs (recoveries) to average loans (annualized) (0.05 )   0.02     0.47     0.38     (0.07 )
   
                   
                   
                   
                             
                             
                             
                             
                             
                             
                             
                   
                             
                             
                             
Capital ratios:                  
   
                   
                   
                   
                             
                             
                             
                             
                             
                             
                             
                   
                             
                             
                             
Equity to total assets at end of period 12.02 %   11.30 %   11.76 %   11.78 %   12.04 %
   
                   
                   
                   
                             
                             
                             
                             
                             
                             
                             
                   
                             
                             
                             
Tangible equity to total tangible assets(2) 11.33     10.63     11.06     11.06     11.31  
   
                   
                   
                   
                             
                             
                             
                             
                             
                             
                             
                   
                             
                             
                             
Average equity to average assets 11.52     11.54     11.72     11.93     12.20  

_________________________________

(1) Nonperforming assets include nonaccruing loans, consisting of certain restructured loans, and REO. There were no accruing loans more than 90 days past due at the dates indicated. At December 31, 2019, there were $7.3 million of restructured loans included in nonaccruing loans and $7.6 million, or 53.0% of nonaccruing loans were current on their loan payments. Purchased impaired loans acquired through bank acquisitions are excluded from nonaccruing loans due to the accretion of discounts in accordance with the acquisition method of accounting for business combinations.
(2) See Non-GAAP reconciliation tables below for adjustments.
   

Average Balance Sheet Data

  For the Three Months Ended December 31,
  2019   2018
  Average Balance Outstanding   Interest Earned/ Paid(2)   Yield/ Rate(2)   Average Balance Outstanding   Interest Earned/ Paid(2)   Yield/ Rate(2)
(Dollars in thousands)  
Assets:                      
Interest-earning assets:                      
Loans receivable(1) $ 2,782,412     $ 32,409     4.66 %   $ 2,610,117     $ 30,826     4.72 %
Commercial paper and deposits in other banks 346,376     1,912     2.21 %   313,158     1,965     2.51 %
Securities available for sale 165,577     1,093     2.64 %   151,788     876     2.31 %
Other interest-earning assets(3) 44,398     772     6.95 %   44,147     1,015     9.20 %
Total interest-earning assets 3,338,763     36,186     4.34 %   3,119,210     34,682     4.45 %
Other assets 269,679             250,516          
Total assets $ 3,608,442             $ 3,369,726          
Liabilities and equity:                      
Interest-bearing deposits:                      
Interest-bearing checking accounts 455,747     375     0.33 %   465,418     302     0.26 %
Money market accounts 785,374     2,083     1.06 %   689,335     1,265     0.73 %
Savings accounts 168,022     50     0.12 %   196,434     63     0.13 %
Certificate accounts 778,664     3,813     1.96 %   564,112     1,977     1.40 %
Total interest-bearing deposits 2,187,807     6,321     1.16 %   1,915,299     3,607     0.75 %
Borrowings 605,489     2,541     1.68 %   673,783     3,692     2.19 %
Total interest-bearing liabilities 2,793,296     8,862     1.27 %   2,589,082     7,299     1.13 %
Noninterest-bearing deposits 334,732             309,012          
Other liabilities 65,812             60,689          
Total liabilities 3,193,840             2,958,783          
Stockholders' equity 414,602             410,943          
Total liabilities and stockholders' equity $ 3,608,442             $ 3,369,726          
                       
Net earning assets $ 545,467             $ 530,128          
Average interest-earning assets to                      
average interest-bearing liabilities 119.53 %           120.48 %        
Tax-equivalent:                      
Net interest income     $ 27,324             $ 27,383      
Interest rate spread         3.07 %           3.32 %
Net interest margin(4)         3.27 %           3.51 %
Non-tax-equivalent:                      
Net interest income     $ 27,034             $ 27,101      
Interest rate spread         3.03 %           3.28 %
Net interest margin(4)         3.24 %           3.48 %

_________________________________

(1) The average loans receivable, net balances include loans held for sale and nonaccruing loans.
(2) Interest income used in the average interest earned and yield calculation includes the tax equivalent adjustment of $290 and $282 for the three months ended December 31, 2019 and 2018, respectively, calculated based on a combined federal and state tax rate of 24%.
(3) The average other interest-earning assets consists of FRB stock, FHLB stock, and SBIC investments.
(4) Net interest income divided by average interest-earning assets.
   
  For the Six Months Ended December 31,
  2019   2018
  AverageBalanceOutstanding   InterestEarned/Paid(2)   Yield/Rate(2)   AverageBalanceOutstanding   InterestEarned/Paid(2)   Yield/Rate(2)
(Dollars in thousands)  
Assets:                      
Interest-earning assets:                      
Loans receivable(1) $ 2,766,022     $ 64,960     4.70 %   $ 2,584,145     $ 59,837     4.63 %
Commercial paper and deposits in other banks 354,750     4,165     2.35 %   317,219     3,823     2.41 %
Securities available for sale 152,143     1,989     2.61 %   153,019     1,732     2.26 %
Other interest-earning assets(3) 45,054     1,604     7.12 %   43,302     1,853     8.56 %
Total interest-earning assets 3,317,969     72,718     4.38 %   3,097,685     67,245     4.34 %
Other assets 267,028             248,084          
Total assets $ 3,584,997             $ 3,345,769          
Liabilities and equity:                      
Interest-bearing liabilities:                      
Interest-bearing checking accounts 448,636     694     0.31 %   462,657     571     0.25 %
Money market accounts 752,178     3,844     1.02 %   683,332     2,222     0.65 %
Savings accounts 170,207     103     0.12 %   202,362     131     0.13 %
Certificate accounts 761,810     7,533     1.98 %   547,310     3,433     1.25 %
Total interest-bearing deposits 2,132,831     12,174     1.14 %   1,895,661     6,357     0.67 %
Borrowings 644,451     5,862     1.82 %   659,821     6,950     2.11 %
 Total interest-bearing liabilities 2,777,282     18,036     1.30 %   2,555,482     13,307     1.04 %
Noninterest-bearing deposits 330,418             316,397          
Other liabilities 64,456             61,985          
Total liabilities 3,172,156             2,933,864          
Stockholders' equity 412,841             411,905          
Total liabilities and stockholders' equity $ 3,584,997             $ 3,345,769          
                       
Net earning assets $ 540,687             $ 542,203          
Average interest-earning assets to                      
average interest-bearing liabilities 119.47 %           121.22 %        
Tax-equivalent:                      
Net interest income     $ 54,682             $ 53,938      
Interest rate spread         3.08 %           3.30 %
Net interest margin(4)         3.30 %           3.48 %
Non-tax-equivalent:                      
Net interest income     $ 54,108             $ 53,373      
Interest rate spread         3.05 %           3.26 %
Net interest margin(4)         3.26 %           3.45 %

_________________________________

(1) The average loans receivable, net balances include loans held for sale and nonaccruing loans.
(2) Interest income used in the average interest earned and yield calculation includes the tax equivalent adjustment of $574 and $565 for the six months ended December 31, 2019 and 2018, respectively, calculated based on a combined federal and state tax rate of 24%.
(3) The average other interest-earning assets consists of FRB stock, FHLB stock, and SBIC investments.
(4) Net interest income divided by average interest-earning assets.
   

Loans

(Dollars in thousands) December 31, 2019   September 30, 2019   June 30, 2019   March 31, 2019   December 31, 2018
Retail consumer loans:                  
One-to-four family $ 417,255     $ 396,649     $ 660,591     $ 658,723     $ 661,374  
HELOCs - originated 142,989     141,129     139.435     133,203     135,430  
HELOCs - purchased 92,423     104,324     116,972     128,832     138,571  
Construction and land/lots 71,901     85,319     80,602     76,153     74,507  
Indirect auto finance 142,533     147,808     153,448     162,127     170,516  
Consumer 11,102     11,400     11.416     19,374     13,520  
Total retail consumer loans 878,203     886,629     1,162,464     1,178,412     1,193,918  
Commercial loans:                  
Commercial real estate 998,019     990,787     927,261     892,383     904,357  
Construction and development 223,839     203,494     210,916     214,511     198,738  
Commercial and industrial 152,727     158,706     160,471     154,471     143,201  
Equipment finance 185,427     154,479     132,058     109.175     81,380  
Municipal leases 115,240     114,382     112,016     112,067     111,135  
Total commercial loans 1,675,252     1,621,848     1,542,722     1,482,607     1,438,812  
Total loans 2,553,455     2,508,477     2,705,186     2,661,019     2,632,730  
Deferred loan costs (fees), net 1,086     253     4     (372 )   (499 )
Total loans, net of deferred loan fees 2,554,541     2,508,730     2,705,190     2,660,647     2,632,231  
Allowance for loan losses (22,031 )   (21,314 )   (21,429 )   (24,416 )   (21,419 )
Loans, net $ 2,532,510     $ 2,487,416     $ 2,683,761     $ 2,636,231     $ 2,610,812  
                                       

Deposits

(Dollars in thousands) December 31, 2019   September 30, 2019   June 30, 2019   March 31, 2019   December 31, 2018
Core deposits:                  
Noninterest-bearing accounts $ 327,320     $ 327,371     $ 294,322     $ 301,083     $ 300,031  
NOW accounts 457,428     449,623     452,295     477,637     474,080  
Money market accounts 815,949     769,000     691,172     692,102     703,445  
Savings accounts 167,520     169,872     177,278     192,754     192,954  
Total core deposits 1,768,217     1,715,866     1,615,067     1,663,576     1,670,510  
Certificates of deposit 789,552     778,328     712,190     644,819     587,559  
Total deposits $ 2,557,769     $ 2,494,194     $ 2,327,257     $ 2,308,395     $ 2,258,069  
                                       

Non-GAAP Reconciliations

In addition to results presented in accordance with generally accepted accounting principles utilized in the United States ("GAAP"), this earnings release contains certain non-GAAP financial measures, which include: the efficiency ratio; tangible book value; tangible book value per share; tangible equity to tangible assets ratio; and the ratio of the allowance for loan losses to total loans excluding acquired loans. The Company believes these non-GAAP financial measures and ratios as presented are useful for both investors and management to understand the effects of certain items and provides an alternative view of the Company's performance over time and in comparison to the Company's competitors. These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for total stockholders' equity or operating results determined in accordance with GAAP.  These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

Set forth below is a reconciliation to GAAP of our efficiency ratio:

       
  Three Months Ended   Six Months Ended
(Dollars in thousands) December 31,   September 30,   December 31,   December 31,   December 31,
  2019   2019   2018   2019   2018
Noninterest expense $ 24,041     $ 23,533     $ 21,858     $ 47,574     $ 43,741  
                   
Net interest income $ 27,034     $ 27,073     $ 27,101     $ 54,107     $ 53,373  
Plus noninterest income 9,074     7,660     5,085     16,734     10,698  
Plus tax equivalent adjustment 290     285     282     574     565  
Net interest income plus noninterest income – as adjusted $ 36,398     $ 35,018     $ 32,468     $ 71,415     $ 64,636  
Efficiency ratio - adjusted 66.05 %   67.20 %   67.32 %   66.62 %   67.67 %
Efficiency ratio 66.58 %   67.75 %   67.91 %   67.16 %   68.27 %
                             

Set forth below is a reconciliation to GAAP of tangible book value and tangible book value per share:

   
  As of
(Dollars in thousands, except per share data) December 31,   September 30,   June 30,   March 31,   December 31,
  2019   2019   2019   2019   2018
Total stockholders' equity $ 416,995     $ 413,068     $ 408,896     $ 407,230     $ 410,970  
Less: goodwill, core deposit intangibles, net of taxes 26,959     27,246     27,562     27,908     28,284  
Tangible book value (1) $ 390,036     $ 385,822     $ 381,334     $ 379,322     $ 382,686  
Common shares outstanding 17,664,384     17,818,145     17,984,105     18,265,535     18,520,825  
Tangible book value per share $ 22.08     $ 21.65     $ 21.20     $ 20.77     $ 20.66  
Book value per share $ 23.61     $ 23.18     $ 22.74     $ 22.29     $ 22.19  
(1) Tangible book value is equal to total stockholders' equity less goodwill and core deposit intangibles, net of related deferred tax liabilities.
   

Set forth below is a reconciliation to GAAP of tangible equity to tangible assets:

   
  As of
  December 31,   September 30,   June 30,   March 31,   December 31,
  2019   2019   2019   2019   2018
  (Dollars in thousands)
Tangible equity(1) $ 390,036     $ 385,822     $ 381,334     $ 379,322     $ 382,686  
Total assets 3,470,232     3,655,309     3,476,178     3,457,737     3,413,099  
Less: goodwill, core deposit intangibles, net of taxes 26,959     27,246     27,562     27,908     28,284  
Total tangible assets(2) $ 3,443,273     $ 3,628,063     $ 3,448,616     $ 3,429,829     $ 3,384,815  
Tangible equity to tangible assets 11.33 %   10.63 %   11.06 %   11.06 %   11.31 %
(1) Tangible equity (or tangible book value) is equal to total stockholders' equity less goodwill and core deposit intangibles, net of related deferred tax liabilities.
(2) Total tangible assets is equal to total assets less goodwill and core deposit intangibles, net of related deferred tax liabilities.
   

Set forth below is a reconciliation to GAAP of the allowance for loan losses to total loans (excluding net deferred loan fees) and the allowance for loan losses as adjusted to exclude acquired loans:

   
  As of
(Dollars in thousands) December 31,   September 30,   June 30,   March 31,   December 31,
  2019   2019   2019   2019   2018
Total gross loans receivable (GAAP) $ 2,553,455     $ 2,508,477     $ 2,705,186     $ 2,661,019     $ 2,632,730  
Less: acquired loans 186,970     206,937     214,046     223,101     236,389  
Adjusted loans (non-GAAP) $ 2,366,485     $ 2,301,540     $ 2,491,140     $ 2,437,918     $ 2,396,341  
                   
Allowance for loan losses (GAAP) $ 22,031     $ 21,314     $ 21,429     $ 24,416     $ 21,419  
Less: allowance for loan losses on acquired loans 152     194     201     201     199  
Adjusted allowance for loan losses $ 21,879     $ 21,120     $ 21,228     $ 24,215     $ 21,220  
Adjusted allowance for loan losses / Adjusted loans (non-GAAP) 0.92 %   0.92 %   0.85 %   0.99 %   0.89 %
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