HomeTrust Bancshares, Inc. Announces Profitability Improvement Plan and Balance Sheet Restructuring
June 15 2021 - 9:15AM
HomeTrust Bancshares, Inc. (NASDAQ: HTBI) (the “Company”), the
holding company of HomeTrust Bank (the “Bank”), today announced its
plans to further improve profitability by closing nine bank
branches and restructuring its balance sheet with the prepayment of
its remaining long-term borrowings. In addition, beginning July 1,
2021, the Bank will bring its back-office Small Business
Administration (“SBA”) loan servicing process in-house, which is
expected to provide additional servicing fee and gain on sale
income.
“We believe these strategic initiatives, along
with the continued maturity of our diversified lines of business,
will move us forward in achieving higher profitability and creating
additional shareholder value in the near term,” said Dana
Stonestreet, Chairman, President, and Chief Executive Officer.
Summary Expected Financial
Impact
Estimated Annual Pre-Tax Income Increase of
$10.1 million
- Branch closures
– $3.2 million in expense reductions
- Payoff of
remaining $275 million of longer-term borrowings, for a total of
$475 million in early retirements of long-term debt since March
2021 – $5.7 million in interest expense reductions
- Additional SBA
income – $1.2 million
Estimated Future Annual Financial Impact
- Return on assets
increase of approximately 20 basis points
- Return on equity
increase of approximately 200 basis points
- Diluted earnings
per share increase of approximately 47 cents
Branch Closures
The Bank plans to close nine branches in North
Carolina, Tennessee, and Virginia, which represents 22% of its
total branch footprint and will reduce operating expenses and
provide additional company-wide efficiencies. As a result of these
closures, the Company expects to record a total pre-tax charge of
approximately $1.5 million for costs associated with impacted
employees, impairment of an operating lease asset, the write-down
of branch facilities, and other net costs, during the fourth
quarter of fiscal year 2021.
The branch closures are expected to occur in
September 2021, subject to applicable regulatory requirements.
Employees at each of these branches will be employed until closure
and are eligible to apply for open positions with priority
consideration at other HomeTrust Bank offices.
The branch closures are part of the Company’s
ongoing strategic initiatives to respond to changing customer
preferences and to improve the financial performance of the
Company. The Bank expects to service customers of the closed
branches through its remaining network of 32 branches and digital
banking services.
Balance Sheet Restructuring and SBA
In-House Servicing
On June 14, 2021, the Company paid off its
remaining $275 million in long-term borrowings of Federal Home Loan
Bank (“FHLB”) advances. In connection therewith, the Company
incurred $19.0 million in pre-tax prepayment penalties. These
longer-term FHLB advances had a weighted average interest rate of
1.81% and maturities ranging between March and November 2028. The
Company estimates a pre-tax annual savings of approximately $4.5
million resulting from this prepayment. Including the $200 million
of FHLB advances prepaid at the end of March 2021, the Company
estimates a total pre-tax annual savings from early retirements of
long-term debt of approximately $5.7 million, which is expected to
result in a combined prepayment penalty earn-back period of
approximately 3.6 years. The Company funded most of the prepayments
using excess liquidity generated from increases in deposits.
Beginning July 1, 2021, the Bank plans to bring
its back-office SBA loan servicing process in-house, which is
designed to provide additional servicing fee and gain on sale
income. The Bank continues to grow this revenue source since
beginning its SBA lending line of business in September 2017 to
originate SBA 7(a) and USDA B&I loans and then selling the
guaranteed portion at a gain. The Company estimates additional
pre-tax net revenue of approximately $1.2 million annually with
this transition, which is expected to increase over time as the
Company’s SBA servicing portfolio grows.
About HomeTrust Bancshares,
Inc.
HomeTrust Bancshares, Inc. is the holding
company for HomeTrust Bank. As of March 31, 2021, the Company had
assets of $3.6 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, Knoxville, and Morristown) and Southwest Virginia (including
the Roanoke Valley). HomeTrust Bancshares, Inc. is the 2nd largest
publicly traded community bank holding company 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 the Company's control. Actual results may
differ, possibly materially, from those currently expected or
projected in these forward-looking statements. Factors that could
cause the Company's actual results to differ materially from those
described in the forward-looking statements include: the effect of
the COVID-19 pandemic, including on the Company's 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; the possibility that (i) the planned branch closures
discussed in this press release will not occur within the time
frame anticipated or at all, (ii) the charges incurred by the
Company in connection with the branch closures will be greater than
expected and/or (iii) the cost savings realized by the Company from
the branch closures will be lower than expected; the possibility
that the additional servicing fee and gain on sale income resulting
from the transitioning of the Bank’s back-office SBA loan servicing
process in-house will be lower than expected; the possibility that
the estimated savings from the early retirements of the Company’s
long-term debt will be lower than expected; 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 the Company'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 (the “SEC”), which are available on the
Company’s website at www.htb.com and on the SEC's website at
www.sec.gov. These risks could cause the Company's actual results
for fiscal 2021 and beyond to differ materially from those
expressed in any forward-looking statements by, or on behalf of,
the Company and could negatively affect its operating and stock
performance. Any of the forward-looking statements that the Company
makes in this press release or the documents it files with or
furnishes 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 they might make, because of the
factors described above or because of other factors that they
cannot foresee. The Company does not undertake, and specifically
disclaims, 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.
www.htb.com
www.hometrustbancshares.com
Contact: |
Dana L.
Stonestreet |
|
Chairman, President and Chief Executive Officer |
|
828.350.3045 |
|
|
|
Tony J. VunCannon |
|
Executive Vice President, Chief Financial Officer, Corporate
Secretary and Treasurer |
|
828.350.3049 |
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