HTBI HomeTrust Bancshares Inc

HomeTrust Bancshares, Inc. (NASDAQ: HTBI) ("Company"), the holding company of HomeTrust Bank ("Bank"), today announced preliminary net income for the third quarter of fiscal 2020, approval of its quarterly cash dividend, and its response to the COVID-19 pandemic.

For the quarter ended March 31, 2020 compared to the corresponding quarter in the previous year:

• net income was $1.2 million, compared to $3.3 million;
• diluted earnings per share ("EPS") was $0.07, compared to $0.18;
• return on assets ("ROA") was 0.14%, compared to 0.39%;
• return on equity ("ROE") was 1.15%, compared to 3.24%;
• provision for loan losses was $5.4 million, compared to $5.5 million;
• noninterest income increased $1.0 million, or 18.1% to $6.4 million from $5.4 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 $33.6 million, or 5.5% annualized compared to $38.5 million, or 6.2% annualized;
• 635,800 shares were repurchased during the quarter at an average price of $20.45 per share completing the most recent buyback program; and
• quarterly cash dividends continued at $0.07 per share totaling $1.2 million.

For the nine months ended March 31, 2020 compared to the corresponding period in the previous year:

• net income was $19.2 million, compared to $19.1 million;
• EPS was $1.08, compared to $1.02;
• ROA was 0.72%, compared to 0.76%;
• ROE was 6.19%, compared to 6.21%;
• provision for loan losses was $5.8 million, compared to $5.5 million;
• noninterest income increased $7.0 million, or 43.6% to $23.1 million from $16.1 million;
• total deposits increased $246.4 million, or 10.7% to $2.6 billion from $2.3 billion; and
• 1,032,221 shares of common stock were repurchased during the period at an average price of $22.50 per share.

Earnings during the three and nine months ended March 31, 2020 were negatively impacted by a significant increase in the provision for loan losses based on the Company's initial assessment of COVID-19 on various macroeconomic factors. In addition, earnings for the nine months ended March 31, 2020 included a $958,000 after-tax gain from the sale of $154.9 million in one-to-four family loans in December 2019.

The Company also announced today that its Board of Directors declared a quarterly cash dividend of $0.07 per common share payable on June 4, 2020 to shareholders of record as of the close of business on May 21, 2020.

"We could not be more proud of our team members for their courage, dedication and focus on taking care of our customers' needs during these unprecedented times. Their health and safety as well as the health and safety of our customers and communities is our primary concern," said Dana Stonestreet, Chairman, President, and Chief Executive Officer. "We understand that everyone is facing their own set of challenges relating to COVID-19 and we remain committed to helping our customers navigate through whatever financial challenges they may face. At the onset of the pandemic, we announced multiple relief programs for both individual and business customers, including payment deferrals, waiving late fees, suspension of foreclosures and repossessions, providing access to government sponsored lending programs as well as various other tailored solutions. Our retail banking team has proactively reached out to many of our customers by phone while continuing to service them through our branch office drive-thrus, in our lobbies by appointment, and online. All of these activities have taken place just a few short weeks after our very successful core systems technology conversion in late February."

Response to COVID-19

Loan Programs.  In response to the current global situation surrounding the COVID-19 pandemic, the Company is offering a variety of relief options designed to support our customers and communities, including participating in the U.S. Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”). As of April 24, 2020, we had received PPP applications totaling $89.0 million with confirmed allocation from the SBA for 243 applications totaling $76.9 million. Net origination fees on these loans are approximately $1.9 million which will be deferred and amortized into interest income as the loans are repaid or forgiven. Due to demand exceeding our capacity, on April 9, 2020 we partnered with a third party to process and fund additional PPP applications for our customers and communities. With the recent approval by Congress of additional funds for this program, applications will continue to be processed through our third party relationship. We are also working with our clients to assist them with accessing other borrowing options, including the Main Street Lending Program and other government sponsored lending programs, as appropriate. 

Loan Modifications.  The Company is closely monitoring the effects of COVID-19 on our loan portfolio and will continue to monitor all the associated risks to minimize any potential losses. HomeTrust Bank is offering payment and financial relief programs for borrowers impacted by COVID-19. These programs include loan payment deferrals for up to 90 days, waived late fees, and suspension of foreclosure proceedings and repossessions. We have received numerous requests from borrowers for some type of payment relief.  As of April 24, 2020, we have processed and approved payment deferrals on loans totaling $510.4 million, or 19.2% of total loans. The breakout by loan type is as follows:

Payment Deferrals by Loan Types
(dollars in thousands)
		Outstanding Loan Balance				Percent of Total Loan Portfolio
Commercial real estate, construction and development, and commercial and industrial		$	412,525			15.5	%
Equipment finance		38,975				1.5	%
One-to-four family		47,062				1.8	%
Other consumer loans		11,876				0.4	%
Total		$	510,438			19.2	%

We believe the steps we are taking are necessary to effectively manage our portfolio and assist our customers through the ongoing uncertainty surrounding the duration, impact and government response to the COVID-19 pandemic.

Allowance for Loan Losses. The Company recorded a provision for loan losses of $5.4 million for the third quarter of 2020, compared to a $400,000 provision in the preceding quarter and $5.5 million in the third quarter a year ago, which was related to one commercial customer relationship. The provision for the current quarter reflects expected credit losses based upon the conditions that existed as of March 31, 2020 including consideration for the recent downturn in certain leading economic indicators, such as the weaker stock market, lower manufacturing activity and retail sales, consumer confidence, and increases in unemployment. Specifically, the Company’s management has evaluated its loan portfolio and identified the following loan categories as potentially the most impacted by the COVID-19 pandemic:

Loan Segments (as of March 31, 2020)
(dollars in thousands)		Loan Risk Grade
		Pass(1)				Criticized(2)				Outstanding Loan Balance				Percent of Total Loan Portfolio
Lodging		$	108,864			$	2,069			$	110,933			4.2	%
Restaurants		47,780				71				47,851				1.8	%
Shopping centers		76,723				1,441				78,164				2.9	%
Other retail businesses		130,341				295				130,635				4.9	%
Equipment finance		197,651				1,311				198,862				7.5	%
Total		$	561,359			$	5,187			$	566,445			21.3	%
Percent of total		99.1		%		0.9		%		100.0		%		—

(1) A pass rated loan is not adversely classified because it does not display any of the characteristics for adverse classification.

(2) Includes loans that are graded special mention or substandard. These loans have weaknesses (or potential weaknesses) that may result in deterioration of the repayment prospects or collateral position at some future date.

The Company does not have any exposure to oil/gas or credit cards at March 31, 2020.

Branch Operations and Support Personnel.  We have taken various steps to ensure the safety of our customers and our team members by limiting branch activities to appointment only and use of our drive-up facilities, and by encouraging the use of our digital and electronic banking channels, all the while adjusting for evolving State and Federal guidelines. Many of our employees are working remotely or have flexible work schedules, and we have established protective measures within our offices to help ensure the safety of those employees who must work on-site.

Capital.  At March 31, 2020, the Company’s tangible equity to total tangible assets ratio was 10.76% and HomeTrust Bank’s capital was well in excess of all regulatory requirements. Our strong capital level positions us well in the face of the challenges of the COVID-19 pandemic. As part of the Company’s risk management process, we have maintained strong capital ratios in the latter part of the longest economic recovery in U.S. history.

Income Statement Review

Net interest income decreased to $25.3 million for the quarter ended March 31, 2020, compared to $26.6 million for the comparative quarter in fiscal 2019. The $1.3 million, or 4.7% decrease was due to a $1.7 million decrease in interest and dividend income primarily driven by lower rates on loans and commercial paper as a result of lower federal funds and other market interest rates, which was partially offset by a $417,000 decrease in interest expense. Average interest-earning assets increased $65.7 million, or 2.1% to $3.2 billion for the quarter ended March 31, 2020. The average balance of total loans receivable increased by $19.6 million, or 0.7% compared to the same quarter last year due to organic loan growth offset by the previously disclosed one-to-four family loans sold in December 2019. The average balance of commercial paper and deposits in other banks increased $40.8 million, or 12.1% between the periods driven by increases in commercial paper investments. Our investments in commercial paper have short-term maturities and limited exposure of $15.0 million or less per each highly-rated company. The average balance in securities available for sale increased $14.2 million, or 10.2%, which was primarily driven by the purchase of shorter-term corporate bonds. These increases were partially funded by a cumulative $52.9 million, or 1.8% increase in average interest-bearing liabilities and noninterest bearing deposits and the $8.9 million, or 19.0% decrease in other interest earning assets as compared to the same quarter last year. Net interest margin (on a fully taxable-equivalent basis) for the three months ended March 31, 2020 decreased to 3.16% from 3.39% for the same period a year ago.

Total interest and dividend income decreased $1.7 million, or 4.8% for the three months ended March 31, 2020 as compared to the same period last year, which was primarily driven by a $1.0 million, or 3.2% decrease in loan interest income, a $489,000, or 21.4% decrease in interest income from commercial paper and deposits in other banks, and a $261,000, or 32.2% decrease in other investment income which was partially offset by a $62,000, or 7.3% increase in interest income from securities available for sale. The lower interest income from loans and commercial paper and deposits in other banks was primarily driven by the decrease in yields. Average loan yields decreased 18 basis points to 4.51% for the quarter ended March 31, 2020 from 4.69% in the corresponding quarter last year. For the quarters ended March 31, 2020 and 2019, average loan yields included six and seven 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 $5.5 million at March 31, 2020, compared to $6.7 million at June 30, 2019, and $7.1 million at March 31, 2019.

Total interest expense decreased $417,000, or 5.1% for the quarter ended March 31, 2020 compared to the same period last year. The decrease was driven by a $2.0 million, or 53.0% decrease in interest expense on borrowings partially offset by a $1.6 million, or 35.6% increase in interest expense on deposits. The additional deposit interest expense was a result of our continued focus on increasing deposits as the average balance of interest-bearing deposits increased $205.3 million, or 10.4% along with a 20 basis point increase in the average cost of interest-bearing deposits for the quarter ended March 31, 2020 compared to the same quarter last year. Average borrowings for the quarter ended March 31, 2020 decreased $196.8 million, or 29.4% along with a 75 basis point decrease in the average cost of borrowings compared to the same period last year. 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 decreased seven basis points to 1.16% for the current quarter compared to 1.23% in the same quarter last year due primarily to the impact of the lower amount of borrowings and rates.

Net interest income decreased slightly to $79.4 million for the nine months ended March 31, 2020, compared to $79.9 million for the comparative period in fiscal 2019. The $526,000, or 0.7% decrease was due to a $3.8 million increase in interest and dividend income primarily driven by an increase in average interest-earning assets, which was offset by a $4.3 million increase in interest expense. Average interest-earning assets increased $166.8 million, or 5.3% to $3.3 billion for the nine months ended March 31, 2020 compared to $3.1 billion for the corresponding period in fiscal 2019. For the nine months ended March 31, 2020, the average balance of total loans receivable increased $125.8 million, or 4.8% 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 $38.6 million, or 11.9% between the periods driven by increases in commercial paper investments. These increases were primarily funded by the $151.5 million, or 5.9% increase in average interest-bearing liabilities, as compared to the same nine month period last year. Net interest margin (on a fully taxable-equivalent basis) for the nine months ended March 31, 2020 decreased to 3.25% from 3.45% for the same period a year ago.

Total interest and dividend income increased $3.8 million, or 3.7% for the nine months ended March 31, 2020 as compared to the same period last year, which was primarily driven by a $4.1 million, or 4.6% increase in loan interest income, and a $319,000, or 12.4% increase in interest income from securities available for sale, which was partially offset by a $147,000, or 2.4% decrease in interest income from commercial paper and interest-bearing deposits and a $510,000, or 19.1% decrease in other investment income. The additional loan interest income was driven by the increase in the average balance of loans receivable compared to the prior year. Average loan yields decreased slightly by two basis points to 4.63% for the nine months ended March 31, 2020 from 4.65% in the corresponding period last year. For the nine months ended March 31, 2020 and 2019, average loan yields included six and eight basis points, respectively, from the accretion of purchase discounts on acquired loans.

Total interest expense increased $4.3 million, or 20.1% for the nine months ended March 31, 2020 compared to the same period last year. The increase was driven by a $7.4 million, or 68.6% increase in deposit interest expense partially offset by a $3.1 million, or 28.7% decrease in interest expense on borrowings. The additional deposit interest expense was a result of a $226.9 million, or 11.8% increase in the average balance of interest-bearing deposits along with a 37 basis point increase in the average cost of those deposits for the nine months ended March 31, 2020 as compared to the same period last year. Average borrowings for the nine months ended March 31, 2020 decreased $75.3 million, or 11.4% along with a 42 basis point decrease in the average cost of borrowings compared to the same period last year. The overall cost of funds increased 14 basis points to 1.25% for the nine months ended March 31, 2020 compared to 1.11% in the corresponding period last year.

Noninterest income increased $1.0 million, or 18.1% to $6.4 million for the three months ended March 31, 2020 from $5.4 million for the same period in the previous year primarily due a $160,000, 119.4% increase in loan income and fees and a $749,000, or 74.4% increase in other noninterest income. The $160,000 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 $749,000 increase in other noninterest income primarily related to operating lease income from the new equipment finance line of business. There were $32.2 million of residential mortgage loans originated for sale which were sold with gains of $852,000 compared to $24.7 million sold and gains of $628,000 in the corresponding quarter in the prior year. During the quarter ended March 31, 2020, $6.8 million of the guaranteed portion of SBA commercial loans were sold with gains of $469,000 compared to $11.5 million sold and gains of $843,000 in the corresponding quarter in the prior year. In addition, $18.0 million of home equity loans were sold during the quarter for a gain of $183,000.

Noninterest income increased $7.0 million, or 43.6% to $23.1 million for the nine months ended March 31, 2020 from $16.1 million for the same period in the previous year primarily due to a $3.5 million, or 85.4% increase in the gain on sale of loans held for sale, a $1.3 million, or 170.4% increase in loan income and fees, and a $2.0 million, or 81.1% 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 period which resulted in a non-recurring $1.3 million gain. In addition to this non-recurring gain, $135.4 million of residential mortgage loans sold with gains of $3.6 million for the nine months ended March 31, 2020, compared to $81.3 million sold and gains of $2.0 million in the corresponding period in the prior year. During the nine months ended March 31, 2020, $36.0 million of SBA commercial loans were sold with recorded gains of $2.5 million compared to $28.7 million sold and gains of $2.0 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 $2.0 million 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 March 31, 2020 increased $1.9 million, or 8.4% to $24.9 million compared to $23.0 million for the three months ended March 31, 2019. The increase was primarily due to a $1.0 million, or 7.4% increase in salaries and employee benefits as a result of new positions and annual salary increases; a $1.0 million, or 34.6% increase in other expenses, mainly driven by depreciation from our equipment finance line of business and expenses related to our recent core system conversion; a $164,000, or 23.5% increase in telephone, postage, and supplies as a result of our core conversion; and a $142,000, or 44.4% increase in deposit insurance premiums as a result of our growth and changing loan portfolio mix. Partially offsetting these increases was a cumulative decrease of $365,000, or 39.1% in real estate owned ("REO") related expenses and core deposit intangible amortization for the three months ended March 31, 2020 compared to the same period last year.

Noninterest expense for the nine months ended March 31, 2020 increased $5.8 million, or 8.6% to $72.5 million compared to $66.7 million for the nine months ended March 31, 2019. The increase was primarily due to a $3.5 million, or 9.1% increase in salaries and employee benefits; a $2.4 million, or 30.3% increase in other expenses, mainly driven by depreciation from our equipment finance line of business and expenses related to our core conversion; a $497,000, or 40.8% increase in marketing and advertising expense; a $308,000, or 5.4% increase in computer services; and a $252,000, or 11.4% increase in telephone, postage, and supplies. Partially offsetting these increases was a decrease of $485,000, or 50.6% in deposit insurance premiums related to credit from the Federal Deposit Insurance Corporation in the first and second quarter; a $462,000, or 29.2% decrease in core deposit intangible amortization; and a $214,000, or 20.4% decrease in REO related expenses for the nine months ended March 31, 2020 compared to the same period last year.

For the three months ended March 31, 2020, the Company's income tax expense increased $3,000, or 1.6% to $188,000 from $185,000. The effective tax rate for the three months ended March 31, 2020 and 2019 was 13.6% and 5.3%, respectively. These lower rates were due to the effects of $1.0 million in each quarter of tax-free income from municipal leases in the Company's loan portfolio.

For the nine months ended March 31, 2020, the Company's income tax expense increased $376,000, or 8.0% to $5.1 million from $4.7 million for the corresponding period in the previous year as a result of higher taxable income. The effective tax rate for the nine months ended March 31, 2020 and 2019 was 20.9% and 19.7%, respectively.

Balance Sheet Review

Total assets and liabilities remained relatively level at $3.5 billion and $3.1 billion, respectively, at March 31, 2020 compared to June 30, 2019. The funds received from the $154.9 million in one-to-four family loans sold and deposit growth of $227.5 million, or 9.8% were used to pay down $145.0 million, or 21.3% of borrowings, fund the $114.4 million, or 22.7% net increase in cash and cash equivalents, commercial paper, certificates of deposit in other banks, securities available for sale, and loans held for sale for the first nine months of fiscal 2020. Approximately $85.6 million one-to-four family loans being marketed for sale at December 31, 2019 were moved from loans held for sale and back into the loan portfolio during the current quarter as market conditions changed management's intent to sell these loans. The increase in loans held for sale relates to home equity loans originated for sale during the period. Deferred income taxes decreased $4.8 million, or 18.0% to $21.8 million at March 31, 2020 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 March 31, 2020, the Company has $4.6 million in ROU assets and corresponding lease liabilities, which are maintained in other assets and other liabilities, respectively.

Stockholders' equity at March 31, 2020 decreased $3.5 million, or 0.8% to $405.4 million compared to $408.9 million at June 30, 2019. Changes within stockholders' equity included $19.2 million in net income and $2.3 million in stock-based compensation, offset by 1,032,221 shares of common stock repurchased at an average cost of $22.50, or approximately $23.2 million in total, and $3.4 million related to cash dividends declared. As of March 31, 2020, 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 $26.9 million, or 1.01% of total loans, at March 31, 2020 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 1.07% at March 31, 2020, compared to 0.85% at June 30, 2019. The overall increase was primarily driven by additional allowance stemming from the initial assessment of COVID-19 on the loan portfolio.

There was a $5.8 million provision for loan losses for the nine months ended March 31, 2020, compared to $5.5 million for the  corresponding period in fiscal year 2019. The current year provision included significant adjustments relating to COVID-19 as a result of changes in qualitative factors based on our perceived increase in at risk loan sub-categories, which include: lodging, restaurants, shopping centers, other retail, and equipment finance. The provision in the corresponding period in the prior year related to one commercial loan relationship. Net loan charge offs totaled $379,000 for the nine months ended March 31, 2020, compared to $2.1 million for the same period in fiscal year 2019. Net charge offs as a percentage of average loans were 0.02% and 0.11% for the nine months ended March 31, 2020 and 2019, respectively.

Nonperforming assets increased by $3.4 million, or 20.6% to $16.7 million, or 0.47% of total assets, at March 31, 2020 compared to $13.3 million, or 0.38% of total assets at June 30, 2019. Nonperforming assets included $15.6 million in nonaccruing loans and $1.1 million in REO at March 31, 2020, 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 one commercial real estate loan relationship that was moved to nonaccrual during the second quarter. Included in nonperforming loans are $7.2 million of loans restructured from their original terms of which $5.8 million were current at March 31, 2020, with respect to their modified payment terms. Purchased impaired loans aggregating $1.0 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 0.59% at March 31, 2020 and 0.38% at June 30, 2019.

The ratio of classified assets to total assets decreased to 0.86% at March 31, 2020 from 0.89% at June 30, 2019. Classified assets decreased to $30.7 million at March 31, 2020 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, however we will remain diligent in our review of the portfolio and overall economy as we continue to maneuver through the uncertainty surrounding COVID-19.

About HomeTrust Bancshares, Inc.

HomeTrust Bancshares, Inc. is the holding company for HomeTrust Bank. As of March 31, 2020, 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: the effect of the COVID-19 pandemic, including on our credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID-19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate customers, including economic activity, employment levels and market liquidity; 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.COMContact: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)	March 31, 2020				December 31, 2019				September 30, 2019				June 30, 2019(1)				March 31, 2019
Assets
Cash	$	41,206			$	47,213			$	52,082			$	40,909			$	40,633
Interest-bearing deposits	40,855				41,705				65,011				30,134				37,678
Cash and cash equivalents	82,061				88,918				117,093				71,043				78,311
Commercial paper	281,955				253,794				254,302				241,446				246,903
Certificates of deposit in other banks	57,544				47,628				50,117				52,005				56,209
Securities available for sale, at fair value	158,621				146,022				165,714				121,786				139,112
Other investments, at cost	41,201				36,898				45,900				45,378				51,122
Loans held for sale	38,682				118,055				289,319				18,175				14,745
Total loans, net of deferred loan fees	2,663,524				2,554,541				2,508,730				2,705,190				2,660,647
Allowance for loan losses	(26,850		)		(22,031		)		(21,314		)		(21,429		)		(24,416		)
Net loans	2,636,674				2,532,510				2,487,416				2,683,761				2,636,231
Premises and equipment, net	58,738				58,020				58,509				61,051				60,559
Accrued interest receivable	9,501				9,714				10,434				10,533				10,885
Real estate owned ("REO")	1,075				1,451				2,582				2,929				3,003
Deferred income taxes	21,750				22,066				24,257				26,523				28,832
Bank owned life insurance ("BOLI")	91,612				91,048				90,499				90,254				89,663
Goodwill	25,638				25,638				25,638				25,638				25,638
Core deposit intangibles	1,381				1,715				2,088				2,499				2,948
Other assets	41,600				36,755				31,441				23,157				13,576
Total Assets	$	3,548,033			$	3,470,232			$	3,655,309			$	3,476,178			$	3,457,737
Liabilities and Stockholders' Equity
Liabilities
Deposits	$	2,554,787			$	2,557,769			$	2,494,194			$	2,327,257			$	2,308,395
Borrowings	535,000				435,000				685,000				680,000				680,000
Other liabilities	52,806				60,468				63,047				60,025				62,112
Total liabilities	3,142,593				3,053,237				3,242,241				3,067,282				3,050,507
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)	171				177				178				180				183
Additional paid in capital	170,368				182,366				186,359				190,315				196,824
Retained earnings	240,325				240,312				232,315				224,545				217,490
Unearned Employee Stock Ownership Plan ("ESOP") shares	(6,480		)		(6,612		)		(6,744		)		(6,877		)		(7,009		)
Accumulated other comprehensive income (loss)	1,056				752				960				733				(258		)
Total stockholders' equity	405,440				416,995				413,068				408,896				407,230
Total Liabilities and Stockholders' Equity	$	3,548,033			$	3,470,232			$	3,655,309			$	3,476,178			$	3,457,737

_________________________________

1. Derived from audited financial statements.
2. Shares of common stock issued and outstanding were 17,101,954 at March 31, 2020; 17,664,384 at December 31, 2019; 17,818,145 at September 30, 2019; 17,984,105 at June 30, 2019; and 18,265,535 at March 31, 2019.

Consolidated Statement of Income (Unaudited)

	Three Months Ended												Nine Months Ended
	March 31,				December 31,				March 31,				March 31,				March 31,
(Dollars in thousands)	2020				2019				2019				2020				2019
Interest and Dividend Income
Loans	$	29,781			$	32,119			$	30,770			$	94,166			$	90,042
Commercial paper and interest-bearing deposits	1,794				1,912				2,283				5,959				6,106
Securities available for sale	912				1,093				850				2,901				2,582
Other investments	550				772				811				2,154				2,664
Total interest and dividend income	33,037				35,896				34,714				105,180				101,394
Interest Expense
Deposits	5,971				6,321				4,404				18,145				10,761
Borrowings	1,757				2,541				3,741				7,619				10,691
Total interest expense	7,728				8,862				8,145				25,764				21,452
Net Interest Income	25,309				27,034				26,569				79,416				79,942
Provision for Loan Losses	5,400				400				5,500				5,800				5,500
Net Interest Income after Provision for Loan Losses	19,909				26,634				21,069				73,616				74,442
Noninterest Income
Service charges and fees on deposit accounts	2,304				2,605				2,265				7,352				7,243
Loan income and fees	294				871				134				2,047				757
Gain on sale of loans held for sale	1,503				3,775				1,472				7,577				4,086
BOLI income	518				509				518				1,724				1,574
Other, net	1,756				1,314				1,007				4,409				2,434
Total noninterest income	6,375				9,074				5,396				23,109				16,094
Noninterest Expense
Salaries and employee benefits	14,455				14,170				13,463				42,537				39,005
Net occupancy expense	2,246				2,384				2,294				6,972				7,046
Computer services	2,023				1,985				1,980				6,032				5,724
Telephone, postage, and supplies	862				798				698				2,462				2,210
Marketing and advertising	396				641				400				1,716				1,219
Deposit insurance premiums	462				12				320				474				959
Loss (gain) on sale and impairment of REO	(15		)		122				246				88				500
REO expense	250				238				200				746				548
Core deposit intangible amortization	334				373				488				1,118				1,580
Other	3,890				3,318				2,889				10,332				7,928
Total noninterest expense	24,903				24,041				22,978				72,477				66,719
Income Before Income Taxes	1,381				11,667				3,487				24,248				23,817
Income Tax Expense	188				2,476				185				5,060				4,684
Net Income	$	1,193			$	9,191			$	3,302			$	19,188			$	19,133

Per Share Data

		Three Months Ended									Nine Months Ended
		March 31,			December 31,			March 31,			March 31,			March 31,
		2020			2019			2019			2020			2019
Net income per common share:(1)
Basic		$	0.07		$	0.54		$	0.19		$	1.12		$	1.07
Diluted		$	0.07		$	0.52		$	0.18		$	1.08		$	1.02
Average shares outstanding:
Basic		16,688,646			16,906,457			17,506,018			16,898,391			17,811,962
Diluted		17,258,428			17,567,680			18,197,429			17,524,252			18,528,161
Book value per share at end of period		$	23.71		$	23.61		$	22.29		$	23.71		$	22.29
Tangible book value per share at end of period (2)		$	22.15		$	22.08		$	20.77		$	22.15		$	20.77
Cash dividends declared per common share		$	0.07		$	0.07		$	0.06		$	0.20		$	0.12
Total shares outstanding at end of period		17,101,954			17,664,384			18,265,535			17,101,954			18,265,535

__________________________________________________

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									Nine Months Ended
		March 31,			December 31,			March 31,			March 31,			March 31,
		2020			2019			2019			2020			2019
Performance ratios: (1)
Return on assets (ratio of net income to average total assets)		0.14	%		1.02	%		0.39	%		0.72	%		0.76	%
Return on equity (ratio of net income to average equity)		1.15			8.87			3.24			6.19			6.21
Tax equivalent yield on earning assets(2)		4.12			4.34			4.42			4.30			4.36
Rate paid on interest-bearing liabilities		1.16			1.27			1.23			1.25			1.11
Tax equivalent average interest rate spread (2)		2.96			3.07			3.19			3.05			3.25
Tax equivalent net interest margin(2) (3)		3.16			3.27			3.39			3.25			3.45
Average interest-earning assets to average interest-bearing liabilities		121.79			119.53			119.70			120.22			120.81
Operating expense to average total assets		2.84			2.66			2.69			2.72			2.64
Efficiency ratio		78.60			66.58			71.88			70.69			69.47
Efficiency ratio - adjusted (4)		77.85			66.05			71.19			70.09			68.84

_____________________________

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 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
	March 31,			December 31,			September 30,			June 30,			March 31,
	2020			2019			2019			2019			2019
Asset quality ratios:
Nonperforming assets to total assets(1)	0.47	%		0.45	%		0.37	%		0.38	%		0.41	%
Nonperforming loans to total loans(1)	0.59			0.56			0.43			0.38			0.43
Total classified assets to total assets	0.86			0.90			0.84			0.89			1.00
Allowance for loan losses to nonperforming loans(1)	171.40			154.48			195.88			206.90			215.46
Allowance for loan losses to total loans	1.01			0.86			0.85			0.79			0.92
Allowance for loan losses to total gross loans excluding acquired loans(2)	1.07			0.92			0.92			0.85			0.99
Net charge-offs (recoveries) to average loans (annualized)	0.09			(0.05	)		0.02			0.47			0.38
Capital ratios:
Equity to total assets at end of period	11.43	%		12.02	%		11.30	%		11.76	%		11.78	%
Tangible equity to total tangible assets(2)	10.76			11.33			10.63			11.06			11.06
Average equity to average assets	11.80			11.52			11.54			11.72			11.93

__________________________________________

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 March 31, 2020, there were $7.2 million of restructured loans included in nonaccruing loans and $7.7 million, or 49.3% 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 March 31,
	2020											2019
	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)	$	2,669,796			$	30,086			4.51	%		$	2,650,155			$	31,083			4.69	%
Commercial paper and deposits in other banks	378,296				1,794				1.90	%		337,522				2,283				2.71	%
Securities available for sale	154,108				912				2.37	%		139,898				850				2.43	%
Other interest-earning assets(3)	37,877				550				5.81	%		46,756				811				6.94	%
Total interest-earning assets	3,240,077				33,342				4.12	%		3,174,331				35,027				4.42	%
Other assets	265,139											246,858
Total assets	$	3,505,216										$	3,421,189
Liabilities and equity:
Interest-bearing deposits:
Interest-bearing checking accounts	451,335				412				0.36	%		463,807				332				0.29	%
Money market accounts	792,313				1,916				0.97	%		701,692				1,408				0.80	%
Savings accounts	159,641				50				0.12	%		188,848				58				0.12	%
Certificate accounts	783,758				3,593				1.83	%		627,444				2,606				1.66	%
Total interest-bearing deposits	2,187,047				5,971				1.09	%		1,981,791				4,404				0.89	%
Borrowings	473,319				1,757				1.48	%		670,142				3,741				2.23	%
Total interest-bearing liabilities	2,660,366				7,728				1.16	%		2,651,933				8,145				1.23	%
Noninterest-bearing deposits	342,581											298,118
Other liabilities	88,725											63,015
Total liabilities	3,091,672											3,013,066
Stockholders' equity	413,544											408,123
Total liabilities and stockholders' equity	$	3,505,216										$	3,421,189
Net earning assets	$	579,711										$	522,398
Average interest-earning assets to
average interest-bearing liabilities	121.79		%									119.70		%
Tax-equivalent:
Net interest income					$	25,614										$	26,882
Interest rate spread									2.96	%										3.19	%
Net interest margin(4)									3.16	%										3.39	%
Non-tax-equivalent:
Net interest income					$	25,309										$	26,569
Interest rate spread									2.92	%										3.14	%
Net interest margin(4)									3.12	%										3.35	%

__________________(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 $305 and $313 for the three months ended March 31, 2020 and 2019, respectively, calculated based on a combined federal and state tax rate of 24%.(3) The average other interest-earning assets consist of FRB stock, FHLB stock, and SBIC investments. (4) Net interest income divided by average interest-earning assets.

	For the Nine Months Ended March 31,
	2020											2019
	Average Balance Outstanding				InterestEarned/Paid(2)				Yield/Rate(2)			Average Balance Outstanding				InterestEarned/Paid(2)				Yield/Rate(2)
(Dollars in thousands)
Assets:
Interest-earning assets:
Loans receivable(1)	$	2,734,249			$	95,045			4.63	%		$	2,608,485			$	90,918			4.65	%
Commercial paper and deposits in other banks	362,598				5,959				2.19	%		323,966				6,106				2.51	%
Securities available for sale	152,798				2,901				2.53	%		148,645				2,582				2.32	%
Other interest-earning assets(3)	42,662				2,154				6.73	%		44,453				2,664				8.02	%
Total interest-earning assets	3,292,307				106,059				4.30	%		3,125,549				102,270				4.36	%
Other assets	266,097											245,360
Total assets	$	3,558,404										$	3,370,909
Liabilities and equity:
Interest-bearing liabilities:
Interest-bearing checking accounts	449,560				1,105				0.33	%		463,035				903				0.26	%
Money market accounts	765,492				5,760				1.00	%		689,363				3,630				0.70	%
Savings accounts	166,711				153				0.12	%		197,929				189				0.13	%
Certificate accounts	769,073				11,127				1.93	%		573,647				6,039				1.40	%
Total interest-bearing deposits	2,150,836				18,145				1.12	%		1,923,974				10,761				0.75	%
Borrowings	587,822				7,619				1.73	%		663,157				10,691				2.15	%
Total interest-bearing liabilities	2,738,658				25,764				1.25	%		2,587,131				21,452				1.11	%
Noninterest-bearing deposits	336,496											310,304
Other liabilities	70,175											62,830
Total liabilities	3,145,329											2,960,265
Stockholders' equity	413,075											410,645
Total liabilities and stockholders' equity	$	3,558,404										$	3,370,910
Net earning assets	$	553,649										$	538,418
Average interest-earning assets to
average interest-bearing liabilities	120.22		%									120.81		%
Tax-equivalent:
Net interest income					$	80,295										$	80,818
Interest rate spread									3.05	%										3.25	%
Net interest margin(4)									3.25	%										3.45	%
Non-tax-equivalent:
Net interest income					$	79,416										$	79,942
Interest rate spread									3.01	%										3.22	%
Net interest margin(4)									3.22	%										3.41	%

__________________(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 $879 and $876 for the nine months ended March 31, 2020 and 2019, respectively, calculated based on a combined federal and state tax rate of 24%.(3) The average other interest-earning assets consist of FRB stock, FHLB stock, and SBIC investments. (4) Net interest income divided by average interest-earning assets.

Loans

(Dollars in thousands)	March 31, 2020				December 31, 2019				September 30, 2019				June 30, 2019				March 31, 2019
Retail consumer loans:
One-to-four family	$	487,777			$	417,255			$	396,649			$	660,591			$	658,723
HELOCs - originated	144,804				142,989				141,129				139.435				133,203
HELOCs - purchased	82,232				92,423				104,324				116,972				128,832
Construction and land/lots	80,765				71,901				85,319				80,602				76,153
Indirect auto finance	135,449				142,533				147,808				153,448				162,127
Consumer	11,576				11,102				11,400				11.416				19,374
Total retail consumer loans	942,603				878,203				886,629				1,162,464				1,178,412
Commercial loans:
Commercial real estate	990,693				998,019				990,787				927,261				892,383
Construction and development	249,714				223,839				203,494				210,916				214,511
Commercial and industrial	164,539				152,727				158,706				160,471				154,471
Equipment finance	198,962				185,427				154,479				132,058				109.175
Municipal leases	115,992				115,240				114,382				112,016				112,067
Total commercial loans	1,719,900				1,675,252				1,621,848				1,542,722				1,482,607
Total loans	2,662,503				2,553,455				2,508,477				2,705,186				2,661,019
Deferred loan costs (fees), net	1,021				1,086				253				4				(372		)
Total loans, net of deferred loan fees	2,663,524				2,554,541				2,508,730				2,705,190				2,660,647
Allowance for loan losses	(26,850		)		(22,031		)		(21,314		)		(21,429		)		(24,416		)
Loans, net	$	2,636,674			$	2,532,510			$	2,487,416			$	2,683,761			$	2,636,231

Deposits

(Dollars in thousands)	March 31, 2020				December 31, 2019				September 30, 2019				June 30, 2019				March 31, 2019
Core deposits:
Noninterest-bearing accounts	$	322,812			$	327,320			$	327,371			$	294,322			$	301,083
NOW accounts	496,561				457,428				449,623				452,295				477,637
Money market accounts	801,424				815,949				769,000				691,172				692,102
Savings accounts	169,792				167,520				169,872				177,278				192,754
Total core deposits	1,790,589				1,768,217				1,715,866				1,615,067				1,663,576
Certificates of deposit	764,198				789,552				778,328				712,190				644,819
Total deposits	$	2,554,787			$	2,557,769			$	2,494,194			$	2,327,257			$	2,308,395

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												Nine Months Ended
(Dollars in thousands)		March 31,				December 31,				March 31,				March 31,				March 31,
		2020				2019				2019				2020				2019
Noninterest expense		$	24,903			$	24,041			$	22,978			$	72,477			$	66,719
Net interest income		$	25,309			$	27,034			$	26,569			$	79,416			$	79,942
Plus noninterest income		6,375				9,074				5,396				23,109				16,094
Plus tax equivalent adjustment		305				290				313				879				877
Net interest income plus noninterest income – as adjusted		$	31,989			$	36,398			$	32,278			$	103,404			$	96,913
Efficiency ratio - adjusted		77.85		%		66.05		%		71.19		%		70.09		%		68.84		%
Efficiency ratio		78.60		%		66.58		%		71.88		%		70.69		%		69.47		%

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)		March 31,				December 31,				September 30,				June 30,				March 31,
		2020				2019				2019				2019				2019
Total stockholders' equity		$	405,440			$	416,995			$	413,068			$	408,896			$	407,230
Less: goodwill, core deposit intangibles, net of taxes		26,701				26,959				27,246				27,562				27,908
Tangible book value (1)		$	378,739			$	390,036			$	385,822			$	381,334			$	379,322
Common shares outstanding		17,101,954				17,664,384				17,818,145				17,984,105				18,265,535
Tangible book value per share		$	22.15			$	22.08			$	21.65			$	21.20			$	20.77
Book value per share		$	23.71			$	23.61			$	23.18			$	22.74			$	22.29

(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
		March 31,				December 31,				September 30,				June 30,				March 31,
		2020				2019				2019				2019				2019
		(Dollars in thousands)
Tangible equity(1)		$	378,739			$	390,036			$	385,822			$	381,334			$	379,322
Total assets		3,548,033				3,470,232				3,655,309				3,476,178				3,457,737
Less: goodwill, core deposit intangibles, net of taxes		26,701				29,959				27,246				27,562				27,908
Total tangible assets(2)		$	3,521,332			$	3,443,273			$	3,628,063			$	3,448,616			$	3,429,829
Tangible equity to tangible assets		10.76		%		11.33		%		10.63		%		11.06		%		11.06		%

(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)		March 31,				December 31,				September 30,				June 30,				March 31,
		2020				2019				2019				2019				2019
Total gross loans receivable (GAAP)		$	2,662,503			$	2,553,455			$	2,508,477			$	2,705,186			$	2,661,019
Less: acquired loans		176,971				186,970				206,937				214,046				223,101
Adjusted loans (non-GAAP)		$	2,485,532			$	2,366,485			$	2,301,540			$	2,491,140			$	2,437,918
Allowance for loan losses (GAAP)		$	26,850			$	22,031			$	21,314			$	21,429			$	24,416
Less: allowance for loan losses on acquired loans		182				152				194				201				201
Adjusted allowance for loan losses		$	26,668			$	21,879			$	21,120			$	21,228			$	24,215
Adjusted allowance for loan losses / Adjusted loans (non-GAAP)		1.07		%		0.92		%		0.92		%		0.85		%		0.99		%