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HomeTrust Bancshares, Inc. Reports Financial Results For The Second Quarter Of Fiscal 2019

Company Release - 1/29/2019 8:30 AM ET

ASHEVILLE, N.C., Jan. 29, 2019 (GLOBE NEWSWIRE) -- HomeTrust Bancshares, Inc. (NASDAQ: HTBI) ("Company"), the holding company of HomeTrust Bank ("Bank"), today announced record net income and diluted earnings per share for the second quarter of fiscal 2019.

Highlights for the second quarter of fiscal 2019:

For the quarter ended December 31, 2018 compared to the corresponding quarter in the previous year:

  • net income was $8.0 million, compared to a net loss of $10.7 million;
  • diluted earnings per share ("EPS") was $0.43, compared to a diluted loss per share of $0.59;
  • return on assets ("ROA") increased to 0.95% from (1.31)%;
  • net interest income increased $1.7 million, or 6.9% to $27.1 million from $25.4 million;
  • noninterest income increased $626,000, or 14.0% to $5.1 million from $4.5 million;
  • organic net loan growth, which excludes purchases of home equity lines of credit, was $57.3 million, or 9.4% annualized compared to $23.6 million, or 4.2% annualized for the same quarter last year;
  • first ever cash dividend of $0.06 per share totaling $1.1 million; and
  • repurchased 431,855 shares of common stock at an average share price of $27.61.

Earnings for the three months ended December 31, 2017 included an approximately $17.7 million write-down of deferred tax assets as a result of the enactment of the Tax Cuts and Jobs Act (the "Tax Act") with no comparable charge in the same 2018 period.

For the quarter ended December 31, 2018 compared to the corresponding quarter in the previous year and before the write-down of deferred tax assets from the change in the federal tax rate (non-GAAP):

  • net income increased 14.4% to $8.0 million from $7.0 million;
  • diluted EPS increased 13.2% to $0.43 from $0.38; and
  • ROA increased 10.5% to 0.95% from 0.86%.

“I am extremely proud of how hard our team members work to meet the needs of our customers and have produced consistently improving financial results for our shareholders," said Dana Stonestreet, Chairman, President, and Chief Executive Officer. “They achieved double digit percentage gains in non-GAAP net income, EPS, and ROA over the same quarter last year. Our new equipment finance line of business continues to gain momentum with $46.0 million in new originations for the quarter and $78.7 million year to date. Our continued improvements in financial performance resulted in our first cash dividend paid in December along with the adoption of a new stock repurchase program. The HomeTrust team is excited about all they will accomplish in the second half of fiscal 2019 to make it our best year ever," stated Stonestreet.

Income Statement Review

Net interest income increased to $27.1 million for the quarter ended December 31, 2018 compared to $25.4 million for the comparative quarter in fiscal 2018. The $1.7 million or 6.9% increase was primarily due to a $5.4 million increase in interest and dividend income driven by an increase in average interest-earning assets, which was partially offset by a $3.7 million increase in interest expense. Average interest-earning assets increased $145.0 million, or 4.9% to $3.1 billion for the quarter ended December 31, 2018 compared to $3.0 billion for the corresponding quarter in fiscal 2018. For the quarter ended December 31, 2018, the average balance of total loans receivable increased $204.1 million, or 8.5% primarily due to organic loan growth. The average balance of other interest-earning assets increased $32.7 million, or 13.5% primarily due to increases in commercial paper investments. These increases were mainly funded by the cumulative decrease of $91.8 million, or 28.1% in average interest-earning deposits in other banks and securities available for sale, and an increase in average interest-bearing deposits of $122.5 million, or 6.8% as compared to the same quarter last year. Net interest margin (on a fully taxable-equivalent basis) for the three months ended December 31, 2018 increased to 3.51% from 3.46% for the same period a year ago.

Total interest and dividend income increased $5.4 million, or 18.7% for the three months ended December 31, 2018 as compared to the same period last year, which was primarily driven by a $4.4 million, or 16.8% increase in loan interest income and a $663,000, or 50.9% increase in interest income from commercial paper and interest-bearing deposits in other banks. The additional loan interest income was driven by the increase in both the average balance of loans receivable and loan yields compared to the prior year quarter. Average loan yields increased 31 basis points to 4.72% for the quarter ended December 31, 2018 from 4.41% in the corresponding quarter from last year primarily due to the impact of the increases in the targeted federal funds rate over the past year. Partially offsetting the increase in loan interest income was a $96,000, or 10.4% decrease in the accretion of purchase discounts on acquired loans as a result of reduced prepayments as compared to the same quarter last year. For the quarters ended December 31, 2018 and 2017, average loan yields included 13 and 15 basis points, respectively, from the accretion of purchase discounts on acquired loans.

Total interest expense increased $3.7 million, or 101.7% for the quarter ended December 31, 2018 compared to the same period last year. The increase was primarily driven by a $2.1 million, or 134.1% increase in deposit interest expense and a $1.6 million, or 77.8% increase in interest expense on borrowings. The additional deposit interest expense was a result of our focus on increasing deposits as the average balance of interest-bearing deposits increased $122.5 million along with a 42 basis point increase in the average cost of interest-bearing deposits for the quarter ended December 31, 2018 compared to the same quarter last year. Average borrowings decreased $3.2 million or 0.5% for the quarter ended December 31, 2018 compared to the same period last year, however, interest expense from borrowings increased $1.6 million due to the 97 basis point increase in the average cost of borrowings between the periods. The overall average cost of funds increased 55 basis points to 1.13% for the current quarter compared to 0.58% in the same quarter last year due primarily to the impact of the previously mentioned interest rate increases on our interest-bearing liabilities.

Net interest income increased $3.3 million or 6.6% to $53.4 million for the six months ended December 31, 2018 compared to $50.1 million for the six months ended December 31, 2017. Average interest-earning assets increased $151.1 million, or 5.1% to $3.1 billion for the six months ended December 31, 2018 compared to $2.9 billion in the same period in 2017. The $200.4 million, or 8.4% increase in the average balance of loans receivable for the six months ended December 31, 2018 was due primarily to organic loan growth, which was mainly funded by the cumulative decrease of $97.0 million, or 28.7% in average interest-earning deposits in other banks and securities available for sale, and an increase in average interest-bearing deposits of $123.8 million, or 7.0%. Net interest margin (on a fully taxable-equivalent basis) for the six months ended December 31, 2018 increased three basis points to 3.48% from 3.45% for last year.

Total interest and dividend income increased $9.7 million, or 17.0% for the six months ended December 31, 2018 as compared to the same period last year. The increase was primarily driven by an $7.9 million, or 15.3% increase in loan interest income, a $1.4 million, or 54.7% increase in interest income from commercial paper and interest-bearing deposits in other banks, and a $596,000, or 47.4% increase in other investment income. The additional loan interest income was primarily due to the increase in the average balance of loans receivable, which was partially offset by a $500,000, or 29.5% decrease in the accretion of purchase discounts on acquired loans to $1.2 million for the six months ended December 31, 2018 from $1.7 million for the same period in fiscal 2018, as a result of reduced prepayments as compared to the same period last year. For the six months ended December 31, 2018 and 2017, average loan yields included nine and 15 basis points, respectively, from the accretion of purchase discounts on acquired loans.

Total interest expense increased $6.4 million, or 91.9% for the six months ended December 31, 2018 compared to the same period last year. This increase was primarily related to the increase in average interest-bearing deposits and the corresponding 34 basis point increase in the average cost of those deposits, resulting in additional deposit interest expense of $3.5 million for the six months ended December 31, 2018 as compared to the same period in the prior year. The average cost of borrowings increased 91 basis points, more than offsetting a $12.7 million decline in average borrowings resulting in an additional $2.9 million in interest expense from borrowings for the six months ended December 31, 2018 as compared to the same period in the prior year. The overall cost of funds increased 48 basis points to 1.04% for the six months ended December 31, 2018 compared to 0.56% in the corresponding period last year.

Noninterest income increased $626,000, or 14.0% to $5.1 million for the three months ended December 31, 2018 from $4.5 million for the same period in the previous year. The leading factors of the increase included a $590,000, or 29.7% increase in service charges on deposit accounts as a result of an increase in deposit accounts and related fees; and an $156,000, or 26.3% increase in other noninterest income primarily related to operating lease income from the new equipment finance line of business. Partially offsetting these increases was a $220,000, decline in gains from the sale of loans for the three months ended December 31, 2018 compared to the same period last year primarily related to decreasing residential mortgage banking activity.

Noninterest income increased $2.0 million, or 22.7% to $10.7 million for the six months ended December 31, 2018 from $8.7 million for the same period in the previous year, primarily due to a $1.1 million, or 29.9% increase in service charges on deposit accounts; a $731,000, or 38.8% increase on gain on sale of loans primarily due to originations and sales of the guaranteed portion of U.S. Small Business Administration (“SBA”) commercial loans; and a $244,000, or 20.6% increase in other noninterest income. Partially offsetting these increases was a $164,000 decline in gains from the sale of premises and equipment for the six months ended December 31, 2018 compared to the same period last year as there were no sales occurring during the current period.

Noninterest expense for the three months ended December 31, 2018 increased $881,000, or 4.2% to $21.9 million compared to $21.0 million for the three months ended December 31, 2017. The increase was primarily due to a $884,000, or 7.4% increase in salaries and employee benefits; a $300,000, or 18.8% increase in computer services; a $83,000, or 26.0% increase in marketing and advertising, and a $78,000, or 3.2% increase in net occupancy expense, mainly driven by the expansion of our SBA and equipment finance lines of business. Partially offsetting these increases was the cumulative decrease of $464,000 or 10.1% in telephone, postage, and supplies expense; deposit insurance premiums, real estate owned ("REO") related expenses; core deposit intangibles amortization; and other expenses for the three months ended December 31, 2018 compared to the same period last year.

Noninterest expense for the six months ended December 31, 2018 increased $1.9 million, or 4.5% to $43.7 million compared to $41.9 million for the six months ended December 31, 2017. The increase was primarily due to a $1.2 million, or 5.0% increase in salaries and employee benefits; a $604,000, or 19.2% increase in computer services; a $198,000, or 49.0% increase in REO related expenses; and a cumulative increase of $202,000, or 2.9% in net occupancy, marketing and advertising, and telephone, postage, and supplies expense. Partially offsetting these increases was a $309,000, or 22.1% decrease in core deposit intangible amortization and a $194,000, or 23.3% decrease in deposit insurance premiums for the six months ended December 31, 2018 compared to the same period last year.

For the three months ended December 31, 2018, the Company's income tax expense was $2.3 million compared to $19.5 million for the three months ended December 31, 2017. The Company’s federal income tax provision for the three months ended December 31, 2018 benefited from the impact of the Tax Act that lowered the corporate federal income tax rate from 34% to 21%. In the fourth quarter of 2017, following a revaluation of net deferred tax assets due to the Tax Act, the Company recorded additional income tax expense of $17.7 million.

For the six months ended December 31, 2018, the Company's income tax expense was $4.5 million compared to $22.0 million for the corresponding period last year. The Company’s corporate federal income tax rate for the six months ended December 31, 2018 and 2017 was 21% and 27.5%, respectively.

Balance Sheet Review

Total assets increased $108.9 million, or 3.3% to $3.4 billion at December 31, 2018 from $3.3 billion at June 30, 2018. Total liabilities increased $107.2 million, or 3.7% to $3.0 billion at December 31, 2018 from $2.9 billion at June 30, 2018. Deposit growth of $61.8 million, or 2.8%; a $53.0 million, or 8.3% increase in borrowings; and the cumulative decrease of $20.2 million, or 9.1% in certificates of deposit in other banks and investment securities were used to fund the $106.4 million, or 4.2% increase in total loans receivable, net of deferred loan fees, the $10.2 million, or 4.5% increase in commercial paper, the $7.2 million, or 123.0% increase in loans held for sale, and the $2.9 million, or 7.0% increase in other investments, net during the first six months of fiscal 2019. The increase in net loans receivable from June 30, 2018, was primarily driven by organic net loan growth of $134.1 million, or 11.1% annualized. The $75.8 million, or 51.0% increase in commercial and industrial loans was driven by our new equipment finance line of business. In addition, commercial real estate loans increased during the six months ended December 31, 2018, by $47.0 million or 5.5%. The increase in loans held for sale was due primarily to SBA loans originated during the period.

Stockholders' equity at December 31, 2018 increased $1.7 million, or 0.4% to $411.0 million from $409.2 million at June 30, 2018. The increase was due to $15.8 million in net income, $1.5 million in stock-based compensation, and a $576,000 increase in other comprehensive income representing a reduction in unrealized losses on investment securities, net of tax, partially offset by 560,155 shares of common stock repurchased at an average cost of $27.49, or approximately $15.6 million in total, and $1.1 million related to our first cash dividend. As of December 31, 2018, HomeTrust Bank was considered "well capitalized" in accordance with its regulatory capital guidelines and exceeded all regulatory capital requirements with Common Equity Tier 1, Tier 1 Risk-Based, Total Risk-Based, and Tier 1 Leverage capital ratios of 11.86%, 11.86%, 12.58%, and 10.68%, respectively.  In addition, the Company exceeded all regulatory capital requirements as of that date.

Asset Quality

The allowance for loan losses was $21.4 million, or 0.81% of total loans, at December 31, 2018 compared to $21.1 million, or 0.83% of total loans, at June 30, 2018. The allowance for loan losses to total gross loans excluding acquired loans was 0.89% at December 31, 2018, compared to 0.91% at June 30, 2018.

There was no provision for losses on loans for the six months ended December 31, 2018 and 2017 reflecting the decline in nonaccruing loans and net loan recoveries offset by loan growth. Net loan recoveries totaled $359,000 for the six months ended December 31, 2018, compared to net loan charge-offs of $61,000 for the same period in fiscal 2018. Net recoveries as a percentage of average loans increased to (0.03%) for the six months ended December 31, 2018 from net charge-offs of 0.01% for the same period last year.

Nonperforming assets decreased $2.0 million, or 13.5% to $12.6 million, or 0.37% of total assets, at December 31, 2018 compared to $14.6 million, or 0.44% of total assets at June 30, 2018. Nonperforming assets included $9.6 million in nonaccruing loans and $3.0 million in REO at December 31, 2018, compared to $10.9 million and $3.7 million, in nonaccruing loans and REO, respectively, at June 30, 2018. Included in nonperforming loans are $3.9 million of loans restructured from their original terms of which $2.2 million were current at December 31, 2018, with respect to their modified payment terms. At December 31, 2018, $5.8 million, or 60.0% of nonaccruing loans were current on their required loan payments. Purchased impaired loans aggregating $2.1 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 0.37% at December 31, 2018 compared to 0.43% at June 30, 2018.

The ratio of classified assets to total assets decreased slightly to 0.97% at December 31, 2018 from 1.00% at June 30, 2018. Classified assets remained consistent at $33.2 million at December 31, 2018 compared to $33.1 million at June 30, 2018. 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, 2018, the Company had assets of $3.4 billion. The Bank, founded in 1926, is a North Carolina state chartered, community-focused financial institution committed to providing value added relationship banking through 43 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 expected cost savings, synergies and other financial benefits from our acquisitions  might not be realized within the expected time frames or at all, and costs or difficulties relating to integration matters might be greater than expected; 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 2019 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 Officer
Tony J. VunCannon – Executive Vice President, Chief Financial Officer, Corporate Secretary and Treasurer
828-259-3939


Consolidated Balance Sheets (Unaudited)

(Dollars in thousands)December 31, 2018 September 30, 2018 June 30, 2018(2) March 31,
 2018
 December 31,
 2017
Assets         
Cash$44,425  $39,872  $45,222  $38,100  $46,743 
Interest-bearing deposits26,881  18,896  25,524  41,296  51,922 
Cash and cash equivalents71,306  58,768  70,746  79,396  98,665 
Commercial paper239,286  238,224  229,070  239,435  199,722 
Certificates of deposit in other financial institutions51,936  58,384  66,937  84,218  100,349 
Securities available for sale, at fair value149,752  148,704  154,993  160,971  167,669 
Other investments, at cost44,858  43,996  41,931  41,405  43,319 
Loans held for sale13,095  10,773  5,873  6,071  7,072 
Total loans, net of deferred loan fees2,632,231  2,587,106  2,525,852  2,445,755  2,418,014 
Allowance for loan losses(21,419) (20,932) (21,060) (21,472) (21,090)
Net loans2,610,812  2,566,174  2,504,792  2,424,283  2,396,924 
Premises and equipment, net66,610  62,681  62,537  62,725  62,435 
Accrued interest receivable10,372  10,252  9,344  9,216  9,371 
Real estate owned ("REO")2,955  3,286  3,684  5,053  4,818 
Deferred income taxes28,533  30,942  32,565  34,311  36,526 
Bank owned life insurance ("BOLI")89,156  88,581  88,028  87,532  86,984 
Goodwill25,638  25,638  25,638  25,638  25,638 
Core deposit intangibles3,436  3,963  4,528  5,131  5,773 
Other assets5,354  3,593  3,503  5,478  5,323 
Total Assets$3,413,099  $3,353,959  $3,304,169  $3,270,863  $3,250,588 
Liabilities and Stockholders' Equity         
Liabilities         
Deposits$2,258,069  $2,203,044  $2,196,253  $2,180,324  $2,108,208 
Borrowings688,000  675,000  635,000  625,000  685,000 
Capital lease obligations1,897  1,905  1,914  1,920  1,925 
Other liabilities54,163  59,815  61,760  62,066  60,094 
Total liabilities3,002,129  2,939,764  2,894,927  2,869,310  2,855,227 
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 (1)185  190  191  190  190 
Additional paid in capital203,660  214,803  217,480  216,712  215,928 
Retained earnings215,289  208,365  200,575  193,368  187,241 
Unearned Employee Stock Ownership Plan ("ESOP") shares(7,142) (7,274) (7,406) (7,538) (7,670)
Accumulated other comprehensive income (loss)(1,022) (1,889) (1,598) (1,179) (328)
Total stockholders' equity410,970  414,195  409,242  401,553  395,361 
Total Liabilities and Stockholders' Equity$3,413,099  $3,353,959  $3,304,169  $3,270,863  $3,250,588 

_________________________________

(1) Shares of common stock issued and outstanding were 18,520,825 at December 31, 2018, 18,939,280 at September 30, 2018; 19,041,668 at June 30, 2018; 19,034,868 at March 31, 2018; and 18,967,175 at December 31, 2017.

(2) Derived from audited financial statements.


Consolidated Statement of Income (Loss) (Unaudited)

 Three Months Ended Six Months Ended
 December 31, September 30, December 31, December 31, December 31,
(Dollars in thousands)2018 2018 2017 2018 2017
Interest and Dividend Income         
Loans$30,544  $28,728  $26,140  $59,272  $51,390 
Securities available for sale876  856  904  1,732  1,875 
Commercial paper and interest-bearing deposits in other financial institutions1,966  1,857  1,303  3,823  2,472 
Other investments1,014  839  631  1,853  1,257 
Total interest and dividend income34,400  32,280  28,978  66,680  56,994 
Interest Expense         
Deposits3,607  2,750  1,541  6,357  2,887 
Borrowings3,692  3,258  2,077  6,950  4,046 
Total interest expense7,299  6,008  3,618  13,307  6,933 
Net Interest Income27,101  26,272  25,360  53,373  50,061 
Provision for Loan Losses         
Net Interest Income after Provision for Loan Losses27,101  26,272  25,360  53,373  50,061 
Noninterest Income         
Service charges and fees on deposit accounts2,577  2,401  1,987  4,978  3,831 
Loan income and fees295  328  197  623  580 
Gain on sale of loans held for sale944  1,670  1,164  2,614  1,883 
BOLI income520  536  518  1,056  1,080 
Gain from sale of premises and equipment        164 
Other, net749  678  593  1,427  1,183 
Total noninterest income5,085  5,613  4,459  10,698  8,721 
Noninterest Expense         
Salaries and employee benefits12,857  12,685  11,973  25,542  24,325 
Net occupancy expense2,551  2,347  2,473  4,898  4,822 
Marketing and advertising402  417  319  819  772 
Telephone, postage, and supplies743  769  748  1,512  1,433 
Deposit insurance premiums335  304  419  639  833 
Computer services1,895  1,849  1,595  3,744  3,140 
Loss (gain) on sale and impairment of REO75  179  104  254  (42)
REO expense173  175  205  348  446 
Core deposit intangible amortization526  565  681  1,091  1,400 
Other2,301  2,593  2,460  4,894  4,734 
Total noninterest expense21,858  21,883  20,977  43,741  41,863 
Income Before Income Taxes10,328  10,002  8,842  20,330  16,919 
Income Tax Expense2,287  2,212  19,508  4,499  22,018 
Net Income (Loss)$8,041  $7,790  $(10,666) $15,831  $(5,099)




Per Share Data

  Three Months Ended Six months ended
  December 31, September 30, December 31, December 31, December 31,
  2018 2018 2017 2018 2017
Net income (loss) per common share:(1)          
Basic $0.45  $0.43  $(0.59) $0.88  $(0.28)
Diluted $0.43  $0.41  $(0.59) $0.84  $(0.28)
Adjusted net income per common share:(2)          
Basic $0.45  $0.43  $0.39  $0.88  $0.70 
Diluted $0.43  $0.41  $0.38  $0.84  $0.68 
           
Average shares outstanding:          
Basic 17,797,553  18,125,637  17,975,883  17,961,465  17,971,439 
Diluted 18,497,334  18,880,476  17,975,883  18,689,584  17,971,439 
Diluted (adjusted) (3) 18,497,334  18,880,476  18,689,894  18,689,584  18,655,048 
Book value per share at end of period $22.19  $21.87  $20.84  $22.19  $20.84 
Tangible book value per share at end of period (2) $20.66  $20.35  $19.26  $20.66  $19.26 
Total shares outstanding at end of period 18,520,825  18,939,280  18,967,175  18,520,825  18,967,175 

__________________________________________________

(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.

(3) Average shares outstanding - diluted were adjusted for the three and six months ended December 31, 2017 to include potentially dilutive shares not otherwise included due to the corresponding net losses under GAAP.


Selected Financial Ratios and Other Data

  Three Months Ended Six Months Ended
  December 31, September 30, December 31, December 31, December 31,
  2018 2018 2017 2018 2017
Performance ratios: (1)      
Return (loss) on assets (ratio of net income to average total assets) 0.95% 0.94% (1.31)% 0.95% (0.32)%
Return on assets - adjusted(2) 0.95  0.94  0.86  0.95  0.78 
Return (loss) on equity (ratio of net income to average equity) 7.83  7.55  (10.51) 7.69  (2.53)
Return on equity - adjusted(2) 7.83  7.55  6.92  7.69  6.25 
Tax equivalent yield on earning assets(3) 4.45  4.23  3.95  4.34  3.92 
Rate paid on interest-bearing liabilities 1.13  0.95  0.58  1.04  0.56 
Tax equivalent average interest rate spread (3) 3.32  3.28  3.37  3.30  3.36 
Tax equivalent net interest margin(3) (4) 3.51  3.45  3.46  3.48  3.45 
Average interest-earning assets to average interest-bearing liabilities 120.48  121.97  120.42  121.22  120.54 
Operating expense to average total assets 2.59  2.64  2.58  2.61  2.60 
Efficiency ratio 67.91  68.63  70.35  68.27  71.22 
Efficiency ratio - adjusted (2) 67.32  68.03  69.47  67.67  70.50 

_____________________________

(1) Ratios are annualized where appropriate.

(2) See Non-GAAP reconciliation tables below for adjustments.

(3) For the three months ended December 31, 2018, September 30, 2018, and December 31, 2017, the weighted average rate for municipal leases is adjusted for a 24%, 24%, and 30% combined federal and state tax rate, respectively since the interest from these leases is tax exempt. For the six months ended December 31, 2018 and 2017, the weighted average rate for municipal leases is adjusted for a 24% and 30% combined federal and state tax rate, respectively.

(4) Net interest income divided by average interest-earning assets.


 At or For the Three Months Ended
 December 31, September 30, June 30, March 31, December 31,
 2018 2018 2018 2018 2017
Asset quality ratios:         
Nonperforming assets to total assets(1)0.37% 0.40% 0.44% 0.54% 0.59%
Nonperforming loans to total loans(1)0.37  0.39  0.43  0.52  0.59 
Total classified assets to total assets0.97  0.93  1.00  1.29  1.39 
Allowance for loan losses to nonperforming loans(1)221.45  207.06  192.96  169.71  146.79 
Allowance for loan losses to total loans0.81  0.81  0.83  0.88  0.87 
Allowance for loan losses to total gross loans excluding acquired loans(2)0.89  0.88  0.91  0.97  0.97 
Net charge-offs (recoveries) to average loans (annualized)(0.07) 0.02  0.07  (0.06) 0.15 
Capital ratios:         
Equity to total assets at end of period12.04% 12.35% 12.39% 12.28% 12.16%
Tangible equity to total tangible assets(2)11.31  11.59  11.61  11.48  11.34 
Average equity to average assets12.20  12.43  12.31  12.30  12.49 

__________________________________________

(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, 2018, there were $3.9 million of restructured loans included in nonaccruing loans and $5.8 million, or 60.0% 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,
 2018 2017
 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)$2,610,117  $30,826  4.72% $2,406,014  $26,518  4.41%
Deposits in other financial institutions82,700  395  1.91% 151,197  517  1.37%
Investment securities151,788  876  2.31% 175,039  903  2.06%
Other interest-earning assets(3)274,605  2,585  3.77% 241,948  1,418  2.34%
Total interest-earning assets3,119,210  34,682  4.45% 2,974,198  29,356  3.95%
Other assets250,516      275,434     
Total assets3,369,726      3,249,632     
Liabilities and equity:           
Interest-bearing deposits:           
Interest-bearing checking accounts465,418  302  0.26% 471,474  236  0.20%
Money market accounts689,335  1,265  0.73% 644,928  585  0.36%
Savings accounts196,434  63  0.13% 227,933  76  0.13%
Certificate accounts564,112  1,977  1.40% 448,507  644  0.57%
Total interest-bearing deposits1,915,299  3,607  0.75% 1,792,842  1,541  0.33%
Borrowings673,783  3,692  2.19% 677,013  2,077  1.22%
 Total interest-bearing liabilities2,589,082  7,299  1.13% 2,469,855  3,618  0.58%
Noninterest-bearing deposits309,012      307,934     
Other liabilities60,689      65,850     
Total liabilities2,958,783      2,843,639     
Stockholders' equity410,943      405,993     
Total liabilities and stockholders' equity$3,369,726      $3,249,632     
            
Net earning assets$530,128      $504,343     
Average interest-earning assets to           
average interest-bearing liabilities120.48%     120.42%    
Tax-equivalent:           
Net interest income  $27,383      $25,738   
Interest rate spread    3.32%     3.37%
Net interest margin(4)    3.51%     3.46%
Non-tax-equivalent:           
Net interest income  $27,101      $25,360   
Interest rate spread    3.28%     3.32%
Net interest margin(4)    3.48%     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 $282 and $378 for the three months ended December 31, 2018 and 2017, respectively, calculated based on a combined federal and state tax rate of 24% and 30%, respectively.
(3) The average other interest-earning assets consists of FRB stock, FHLB stock, Small Business Investment Company ("SBIC") investments, and commercial paper.
(4) Net interest income divided by average interest-earning assets.

 For the Six Months Ended December 31,
 2018 2017
 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)$2,584,145  $59,837  4.63% $2,383,768  $52,154  4.38%
Deposits in other financial institutions87,607  811  1.85% 155,175  1,053  1.36%
Investment securities153,019  1,732  2.26% 182,479  1,875  2.06%
Other interest-earning assets(3)272,914  4,865  3.57% 225,185  2,676  2.38%
Total interest-earning assets3,097,685  67,245  4.34% 2,946,607  57,758  3.92%
Other assets248,084      277,151     
Total assets$3,345,769      $3,223,758     
Liabilities and equity:           
Interest-bearing liabilities:           
Interest-bearing checking accounts462,657  571  0.25% 467,201  452  0.19%
Money market accounts683,332  2,222  0.65% 625,095  1,062  0.34%
Savings accounts202,362  131  0.13% 230,436  153  0.13%
Certificate accounts547,310  3,433  1.25% 449,173  1,220  0.54%
Total interest-bearing deposits1,895,661  6,357  0.67% 1,771,905  2,887  0.33%
Borrowings659,821  6,950  2.11% 672,552  4,046  1.20%
 Total interest-bearing liabilities2,555,482  13,307  1.04% 2,444,457  6,933  0.56%
Noninterest-bearing deposits316,397      309,265     
Other liabilities61,985      66,328     
Total liabilities2,933,864      2,820,050     
Stockholders' equity411,905      403,708     
Total liabilities and stockholders' equity$3,345,769      $3,223,758     
            
Net earning assets$542,203      $502,150     
Average interest-earning assets to           
average interest-bearing liabilities121.22%     120.54%    
Tax-equivalent:           
Net interest income  $53,938      $50,825   
Interest rate spread    3.30%     3.36%
Net interest margin(4)    3.48%     3.45%
Non-tax-equivalent:           
Net interest income  $53,373      $50,061   
Interest rate spread    3.26%     3.30%
Net interest margin(4)    3.45%     3.40%

__________________
(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 $565 and $764 for the six months ended December 31, 2018 and 2017, respectively, calculated based on a combined federal and state tax rate of 24% and 30%, respectively.
(3) The average other interest-earning assets consists of FRB stock, FHLB stock, Small Business Investment Company ("SBIC") investments, and commercial paper.
(4) Net interest income divided by average interest-earning assets.


Loans

(Dollars in thousands)December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018 December 31, 2017
Retail consumer loans:         
  One-to-four family$661,374  $656,011  $664,289  $670,036  $686,229 
  HELOCs - originated135,430  135,512  137,564  143,049  150,084 
  HELOCs - purchased138,571  150,733  166,276  165,680  162,181 
  Construction and land/lots74,507  75,433  65,601  68,121  60,805 
  Indirect auto finance170,516  173,305  173,095  160,664  150,042 
  Consumer13,520  13,139  12,379  11,317  9,699 
Total retail consumer loans1,193,918  1,204,133  1,219,204  1,218,867  1,219,040 
Commercial loans:         
  Commercial real estate904,357  879,184  857,315  810,332  786,381 
  Construction and development198,738  198,809  192,102  184,179  185,921 
  Commercial and industrial224,671  193,739  148,823  132,337  127,709 
  Municipal leases111,135  111,951  109,172  101,108  100,205 
Total commercial loans1,438,901  1,383,683  1,307,412  1,227,956  1,200,216 
Total loans2,632,819  2,587,816  2,526,616  2,446,823  2,419,256 
  Deferred loan fees, net(588) (710) (764) (1,068) (1,242)
Total loans, net of deferred loan fees2,632,231  2,587,106  2,525,852  2,445,755  2,418,014 
  Allowance for loan losses(21,419) (20,932) (21,060) (21,472) (21,090)
Loans, net$2,610,812  $2,566,174  $2,504,792  $2,424,283  $2,396,924 

Deposits

(Dollars in thousands)December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018 December 31, 2017
Core deposits:         
  Noninterest-bearing accounts$300,031  $313,110  $317,822  $303,875  $313,493 
  NOW accounts474,080  462,694  471,364  496,934  489,668 
  Money market accounts703,445  687,148  677,665  659,791  638,259 
  Savings accounts192,954  203,372  213,250  220,497  224,732 
Total core deposits1,670,510  1,666,324  1,680,101  1,681,097  1,666,152 
Certificates of deposit587,559  536,720  516,152  499,227  442,056 
Total$2,258,069  $2,203,044  $2,196,253  $2,180,324  $2,108,208 


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; net income excluding certain state income tax expense, adjustments for the change in federal tax law, and gain from the sale of premises and equipment; earnings per share ("EPS"), return on assets ("ROA"), and return on equity ("ROE") excluding certain state income tax expense, adjustments for the change in federal tax law, and gain from the sale of premises and equipment; 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,
  2018 2018 2017 2018 2017
Noninterest expense $21,858  $21,883  $20,977  $43,741  $41,863 
           
Net interest income $27,101  $26,272  $25,360  $53,373  $50,061 
Plus noninterest income 5,085  5,613  4,459  10,698  8,721 
Plus tax equivalent adjustment 282  281  378  565  764 
Less gain on sale of premises and equipment         164 
Net interest income plus noninterest income – as adjusted $32,468  $32,166  $30,197  $64,636  $59,382 
Efficiency ratio 67.32% 68.03% 69.47% 67.67% 70.50%
Efficiency ratio (without adjustments) 67.91% 68.63% 70.35% 68.27% 71.22%

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,
  2018 2018 2018 2018 2017
Total stockholders' equity $410,970  $414,195  $409,242  $401,553  $395,361 
Less: goodwill, core deposit intangibles, net of taxes 28,284  28,690  29,125  29,589  30,083 
Tangible book value (1) $382,686  $385,505  $380,117  $371,964  $365,278 
Common shares outstanding 18,520,825  18,939,280  19,041,668  19,034,868  18,967,175 
Tangible book value per share $20.66  $20.35  $19.96  $19.54  $19.26 
Book value per share $22.19  $21.87  $21.49  $21.10  $20.84 

(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,
  2018 2018 2018 2018 2017
  (Dollars in thousands)
Tangible equity(1) $382,686  $385,505  $380,117  $371,964  $365,278 
Total assets 3,413,099  3,353,959  3,304,169  3,270,863  3,250,588 
Less: goodwill, core deposit intangibles, net of taxes 28,284  28,690  29,125  29,589  30,083 
Total tangible assets(2) $3,384,815  $3,325,269  $3,275,044  $3,241,274  $3,220,505 
Tangible equity to tangible assets 11.31% 11.59% 11.61% 11.48% 11.34%

(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 net income and earnings per share (EPS) as adjusted to exclude state tax expense rate change, federal tax law rate change, and gain from sale of premises and equipment:

  Three Months Ended Six Months Ended
(Dollars in thousands, except per share data) December 31, September 30, December 31, December 31, December 31,
  2018 2018 2017 2018 2017
State tax expense adjustment (1) $  $  $  $  $133 
Change in federal tax law adjustment (2)     17,693    17,693 
Gain from sale of premises and equipment         (164)
Total adjustments     17,693    17,662 
Tax effect         49 
Total adjustments, net of tax     17,693    17,711 
           
Net income (loss) (GAAP) 8,041  7,790  (10,666) 15,831  (5,099)
           
Net income (non-GAAP) $8,041  $7,790  $7,027  $15,831  $12,612 
           
Per Share Data          
Average shares outstanding - basic 17,797,553  18,125,637  17,975,883  17,961,465  17,971,439 
Average shares outstanding - diluted 18,497,334  18,880,476  17,975,883  18,689,584  17,971,439 
Average shares outstanding - diluted (adjusted) (3) 18,497,334  18,880,476  18,689,894  18,689,584  18,655,048 
           
Basic EPS          
EPS (GAAP) $0.45  $0.43  $(0.59) $0.88  $(0.28)
Non-GAAP adjustment     0.98    0.98 
EPS (non-GAAP) $0.45  $0.43  $0.39  $0.88  $0.70 
           
Diluted EPS          
EPS (GAAP) $0.43  $0.41  $(0.59) $0.84  $(0.28)
Non-GAAP adjustment     0.97    0.96 
EPS (non-GAAP) $0.43  $0.41  $0.38  $0.84  $0.68 
           
Average Balances          
Average assets $3,369,726  $3,321,811  $3,249,632  $3,345,769  $3,223,758 
Average equity 410,943  412,868  405,993  411,905  403,708 
           
ROA          
ROA (GAAP) 0.95% 0.94% (1.31)% 0.95% (0.32)%
Non-GAAP adjustment % % 2.17% % 1.10%
ROA (non-GAAP) 0.95% 0.94% 0.86% 0.95% 0.78%
           
ROE          
ROE (GAAP) 7.83% 7.55% (10.51)% 7.69% (2.53)%
Non-GAAP adjustment % % 17.43% % 8.78%
ROE (non-GAAP) 7.83% 7.55% 6.92% 7.69% 6.25%

(1)                   State tax adjustment is a result of various revaluations of state deferred tax assets.
(2)                   Revaluation and related adjustments of net deferred tax assets due to the Tax Cuts and Jobs Act.
(3)                   Average shares outstanding - diluted were adjusted for the three and six months ended December 31, 2017 to included potentially dilutive shares not considered due to the corresponding net losses under GAAP.

Set forth below is a reconciliation to GAAP of the allowance for loan losses to total loans 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,
  2018 2018 2018 2018 2017
Total gross loans receivable (GAAP) $2,632,819  $2,587,816  $2,526,616  $2,446,823  $2,419,256 
Less: acquired loans 236,389  253,695  271,801  288,847  311,508 
Adjusted loans (non-GAAP) $2,396,430  $2,334,121  $2,254,815  $2,157,976  $2,107,748 
           
Allowance for loan losses (GAAP) $21,419  $20,932  $21,060  $21,472  $21,090 
Less: allowance for loan losses on acquired loans 199  295  483  459  566 
Adjusted allowance for loan losses $21,220  $20,637  $20,577  $21,013  $20,524 
Adjusted allowance for loan losses / Adjusted loans (non-GAAP) 0.89% 0.88% 0.91% 0.97% 0.97%

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Source: HomeTrust Bancshares, Inc.