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

Company Release - 4/24/2019 4:05 PM ET

ASHEVILLE, N.C., April 24, 2019 (GLOBE NEWSWIRE) -- HomeTrust Bancshares, Inc. (NASDAQ: HTBI) ("Company"), the holding company of HomeTrust Bank ("Bank"), today announced preliminary net income for the third quarter of fiscal 2019.

For the quarter ended March 31, 2019 compared to the corresponding quarter in the previous year:

  • net income was $3.3 million, compared to $6.1 million;
  • diluted earnings per share ("EPS") was $0.18, compared to a $0.32;
  • return on assets ("ROA") was 0.39%, compared to 0.76%;
  • net interest income increased $1.2 million, or 4.8% to $26.6 million from $25.4 million;
  • noninterest income increased $857,000, or 18.9% to $5.4 million from $4.5 million;
  • provision for loan losses increased to $5.5 million from $0;
  • organic net loan growth, which excludes purchases of home equity lines of credit, was $38.5 million, or 6.2% annualized compared to $24.2 million, or 4.3% annualized; and
  • quarterly cash dividends continued at $0.06 per share totaling $1.1 million.

For the nine months ended March 31, 2019 compared to the corresponding period in the previous year:

  • net income was $19.1 million, compared to $1.0 million;
  • diluted EPS was $1.02, compared to a $0.06;
  • ROA was 0.76%, compared to 0.04%;
  • net interest income increased $4.5 million, or 6.0% to $80.0 million from $75.4 million;
  • noninterest income increased $2.8 million, or 21.4% to $16.1 million from $13.3 million;
  • provision for loan losses increased to $5.5 million from $0; and
  • organic net loan growth was $171.8 million, or 9.7% annualized compared to $91.0 million, or 5.5% annualized.

Earnings during the three and nine months ended March 31, 2019 were negatively impacted by a significant charge-off and specific reserve related to one $6.0 million customer relationship, which resulted in a $5.5 million provision for loan losses. In addition, earnings for the nine months ended March 31, 2018 included an $18.0 million write-down of deferred tax assets following a deferred tax revaluation resulting from enactment of the Tax Cuts and Jobs Act (the "Tax Act”) with no comparable charge in the current period.

At the end of March, the Company became aware that a commercial borrower operating as a heavy equipment contractor with $6.0 million of outstanding borrowings from the Bank had unexpectedly ceased operations. Based on further investigation and certain actions taken by the principal of the borrower subsequent to quarter end, the Company believes that the Bank’s collateral, consisting primarily of accounts receivable, has substantially deteriorated. As a result of this investigation and further subsequent developments, based on the estimated value of the remaining collateral, the Company recorded a $2.6 million loan charge-off and a $3.4 million specific reserve in the allowance for loan losses related to this lending relationship. The Company is taking action to enforce its rights against the borrower, guarantors and its collateral, including to preserve and recover the borrower’s assets, where appropriate.

“Although our earnings were negatively affected by this single commercial relationship, which reduced net income by approximately $4.2 million for the quarter, on an after-tax basis, we believe our credit metrics and overall credit performance remain strong," said Dana Stonestreet, Chairman, President, and Chief Executive Officer. “Excluding this lending relationship, we had positive trends in nonaccrual loans, classified assets, and delinquencies quarter over quarter."

Mr. Stonestreet continued, "Our core revenues this quarter continued to thrive and were bolstered by our new equipment finance and SBA lines of business. Our equipment finance originations were $34.6 million for the quarter and $113.4 million year to date, while the gain on sale of SBA loans added $843,000 in noninterest income for the quarter and over $2.0 million for the year. I couldn't be more proud of the high level of collaboration and teamwork across all lines of business throughout the Bank's operations, as we continue to focus on providing exceptional service to our customers while building franchise value for our shareholders."

Income Statement Review

Net interest income increased to $26.6 million for the quarter ended March 31, 2019, compared to $25.4 million for the comparative quarter in fiscal 2018. The $1.2 million, or 4.8% increase was due to a $5.3 million increase in interest and dividend income primarily driven by an increase in average interest-earning assets, which was partially offset by a $4.1 million increase in interest expense. Average interest-earning assets increased $196.0 million, or 6.6% to $3.2 billion for the quarter ended March 31, 2019 compared to $3.0 billion for the corresponding quarter in fiscal 2018. For the quarter ended March 31, 2019, the average balance of total loans receivable increased $218.4 million, or 9.0% compared to the same quarter last year primarily due to organic loan growth. The average balance of other interest-earning assets increased $40.8 million, or 16.0% between the periods primarily due to increases in commercial paper investments. These increases were mainly funded by the cumulative decrease of $63.2 million, or 21.6% in average interest-earning deposits in other banks and securities available for sale, and an increase in average interest-bearing liabilities, primarily deposits, of $184.6 million, or 7.5% as compared to the same quarter last year. Net interest margin (on a fully taxable-equivalent basis) for the three months ended March 31, 2019 decreased to 3.39% from 3.46% for the same period a year ago.

Total interest and dividend income increased $5.3 million, or 18.1% for the three months ended March 31, 2019 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 $785,000, or 52.4% increase in interest income from commercial paper and interest-bearing deposits in other financial institutions. The additional loan interest income was driven by increases in both the average balance of loans receivable and loan yields compared to the prior year quarter. Average loan yields increased 29 basis points to 4.69% for the quarter ended March 31, 2019 from 4.40% in the corresponding quarter last year primarily due to the impact of increases in the targeted federal funds rate. Partially offsetting the increase in loan interest income was a $412,000, or 47.2% 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 March 31, 2019 and 2018, average loan yields included seven and 14 basis points, respectively, from the accretion of purchase discounts on acquired loans. The incremental accretion and the impact to loan yield will 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 $7.1 million at March 31, 2019, compared to $7.7 million at December 31, 2018 and $10.0 million at March 31, 2018.

Total interest expense increased $4.1 million, or 101.8% for the quarter ended March 31, 2019 compared to the same period last year. The increase was due to a $2.8 million, or 171.5% increase in deposit interest expense and a $1.3 million, or 55.0% 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 $177.4 million, or 9.8% along with a 53 basis point increase in the average cost of interest-bearing deposits for the quarter ended March 31, 2019 compared to the same quarter last year. Average borrowings for the quarter ended March 31, 2019 increased $7.2 million, or 1.1% and the average cost of borrowings increased 77 basis points compared to the same period last year, driving the increase in interest expense on those borrowings. The overall average cost of funds increased 58 basis points to 1.23% for the current quarter compared to 0.65% 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 $4.5 million, or 6.0% to $80.0 million for the nine months ended March 31, 2019 compared to $75.4 million for the nine months ended March 31, 2018. Average interest-earning assets increased $168.4 million, or 5.7% to $3.1 billion for the nine months ended March 31, 2019 compared to $3.0 billion in the same period in 2018. The $208.7 million, or 8.7% increase in the average balance of loans receivable for the nine months ended March 31, 2019 compared to the same period last year was due primarily to organic loan growth. The average balance of other interest-earning assets increased $45.4 million, or 19.3% between the periods primarily due to increases in commercial paper investments. These increases were mainly funded by the cumulative decrease of $85.8 million, or 26.6% in average interest-earning deposits in other banks and securities available for sale, and an increase in average interest-bearing liabilities of $135.1 million, or 5.5%. Net interest margin (on a fully taxable-equivalent basis) for the nine months ended March 31, 2019 remained consistent at 3.45% compared to the same period last year.

Total interest and dividend income increased $15.0 million, or 17.4% for the nine months ended March 31, 2019 as compared to the same period last year. The increase was primarily driven by an $12.3 million, or 15.8% increase in loan interest income, a $2.1 million, or 53.8% increase in interest income from commercial paper and interest-bearing deposits in other financial institutions, and a $791,000, or 42.0% increase in other investments 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 $912,000, or 35.5% decrease in the accretion of purchase discounts on acquired loans to $1.7 million from $2.6 million as a result of reduced prepayments for the nine months ended March 31, 2019 as compared to the same period last year. Average loan yields increased 27 basis points to 4.65% for the nine months ended March 31, 2019 from 4.38% in the corresponding period last year. For the nine months ended March 31, 2019 and 2018, average loan yields included nine and 14 basis points, respectively, from the accretion of purchase discounts on acquired loans.

Total interest expense increased $10.5 million, or 95.6% for the nine months ended March 31, 2019 compared to the same period last year. This increase was primarily related to the $141.3 million, or 7.9% increase in average interest-bearing deposits and the corresponding 41 basis point increase in the average cost of those deposits, resulting in additional deposit interest expense of $6.3 million for the nine months ended March 31, 2019 as compared to the same period in the prior year. In addition, average borrowings decreased $6.2 million, or 0.9%, however, an 86 basis point increase in the average cost of those borrowings resulted in an additional $4.2 million in interest expense from borrowings for the nine months ended March 31, 2019 as compared to the same period in the prior year. The overall cost of funds increased 51 basis points to 1.11% for the nine months ended March 31, 2019 compared to 0.60% in the corresponding period last year.

Noninterest income increased $857,000, or 18.9% to $5.4 million for the three months ended March 31, 2019 from $4.5 million for the same period in the previous year. The leading factors of the increase included a $330,000, or 17.1% increase in service charges on deposit accounts as a result of an increase in deposit accounts and related fees; a $392,000, or 36.3% increase in gains from the sale of loans due to originations and sales of the guaranteed portion of U.S Small Business Administration (“SBA”) commercial loans, and a $349,000, or 53.9% 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 $196,000, or 59.4% decline in loan income and fees for the three months ended March 31, 2019 compared to the same period last year.

Noninterest income increased $2.8 million, or 21.4% to $16.1 million for the nine months ended March 31, 2019 from $13.3 million for the same period in the previous year. Driving the increase was a $1.5 million, or 25.6% increase in service charges on deposit accounts; a $1.1 million, or 37.9% increase on gain on sale of loans primarily due to originations and sales of SBA commercial loans; and a $593,000, or 32.4% increase in other noninterest income primarily related to operating lease income. Partially offsetting these increases was $153,000, or 16.8% decrease in loan income and fees and an $164,000 decline in gains from the sale of premises and equipment for the nine months ended March 31, 2019 compared to the same period last year as there were no sales occurring during the current period.

Noninterest expense for the three months ended March 31, 2019 increased $1.9 million, or 9.1% to $23.0 million compared to $21.1 million for the three months ended March 31, 2018. The increase was primarily due to a $1.5 million, or 12.9% increase in salaries and employee benefits; a $380,000, or 23.8% increase in computer services; a $66,000, or 19.8% increase in marketing and advertising; a $89,000, or 3.7% increase in net occupancy expense; and a $209,000, or 8.4% increase in other expenses, mainly driven by the expansion of our SBA and equipment finance lines of business. Partially offsetting these increases was the cumulative decrease of $408,000, or 19.3% in telephone, postage, and supplies expense; deposit insurance premiums, real estate owned ("REO") related expenses; and core deposit intangibles amortization for the three months ended March 31, 2019 compared to the same period last year.

Noninterest expense for the nine months ended March 31, 2019 increased $3.8 million, or 6.0% to $66.7 million compared to $62.9 million for the nine months ended March 31, 2018. The increase was primarily due to a $2.7 million, or 7.6% increase in salaries and employee benefits; a $984,000, or 20.8% increase in computer services; a $368,000, or 5.1% increase in other expenses; a $139,000, or 15.3% increase in REO related expenses; and a cumulative increase of $307,000, or 2.9% in net occupancy, marketing and advertising, and telephone, postage, and supplies expense. Partially offsetting these increases was a $462,000, or 22.6% decrease in core deposit intangible amortization and a $287,000, or 23.0% decrease in deposit insurance premiums for the nine months ended March 31, 2019 compared to the same period last year.

For the three months ended March 31, 2019, the Company's income tax expense was $185,000 compared to $2.7 million for the three months ended March 31, 2018. The decrease in the Company’s federal income tax provision for the three months ended March 31, 2019 was due to lower taxable income, the reversal of a $325,000 tax valuation allowance related to the Company's alternative minimum tax ("AMT") credits, and from the impact of the Tax Act that lowered the corporate federal income tax rate from 34% to 21%.

For the nine months ended March 31, 2019, the Company's income tax expense was $4.7 million compared to $24.7 million for the corresponding period last year. The Company’s corporate federal income tax rate for the nine months ended March 31, 2019 and 2018 was 21% and 27.5%, respectively. In the quarter ended December 31, 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.

Balance Sheet Review

Total assets increased $153.6 million, or 4.6% to $3.5 billion at March 31, 2019 from $3.3 billion at June 30, 2018. Total liabilities increased $155.6 million, or 5.4% to $3.1 billion at March 31, 2019 from $2.9 billion at June 30, 2018. Deposit growth of $112.1 million, or 5.1%; a $45.0 million, or 7.1% increase in borrowings; and the cumulative decrease of $26.6 million, or 12.0% in certificates of deposit in other banks and investment securities were used to fund the $131.4 million, or 5.2% increase in total loans receivable, net of deferred loan fees, the $17.8 million, or 7.8% increase in commercial paper, the $8.8 million, or 151.1% increase in loans held for sale, and the $9.2 million, or 21.9% increase in other investments, net during the nine months of fiscal 2019. The increase in net loans receivable from June 30, 2018, was primarily driven by organic net loan growth of $171.8 million, or 9.71% annualized. The $114.8 million, or 77.2% 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 nine months ended March 31, 2019, by $35.1 million or 4.1%. The increase in loans held for sale was due primarily to SBA loans originated during the period.

Stockholders' equity at March 31, 2019 decreased $2.0 million, or 0.5% to $407.2 million in comparison to $409.2 million at June 30, 2018. Changes within stockholders' equity included $19.1 million in net income, $2.2 million in stock-based compensation, and a $1.3 million increase in other comprehensive income representing a reduction in unrealized losses on investment securities, net of tax, partially offset by 857,155 shares of common stock repurchased at an average cost of $27.21, or approximately $23.3 million in total, and $2.2 million related to cash dividends. As of March 31, 2019, HomeTrust Bank and the Company were considered "well capitalized" in accordance with their regulatory capital guidelines and exceeded all regulatory capital requirements.

Asset Quality

The allowance for loan losses was $24.4 million, or 0.92% of total loans, at March 31, 2019 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 0.99% at March 31, 2019, compared to 0.91% at June 30, 2018. The increase in the allowance for loan losses is related to the $6.0 million commercial lending relationship discussed above.

There was a $5.5 million provision for loan losses for the three and nine months ended March 31, 2019 compared to no provision for the corresponding periods in fiscal 2018. This provision for loan losses relates to a $3.4 million specific reserve and a $2.6 million loan charge-off related to the $6.0 million commercial loan relationship discussed above. Net loan charge-offs totaled $2.5 million and $2.1 million for the three and nine months ended March 31, 2019, respectively, compared to net loan recoveries of $382,000 and $321,000 for the same periods in fiscal 2018, respectively. Net charge-offs as a percentage of average loans increased to 0.38% and 0.11% for the three and nine months ended March 31, 2019, respectively, from net recoveries of (0.06%) and (0.02)% for the same periods last year, respectively.

Nonperforming assets decreased slightly by $300,000, or 2.1% to $14.3 million, or 0.41% of total assets, at March 31, 2019 compared to $14.6 million, or 0.44% of total assets at June 30, 2018. Nonperforming assets included $11.3 million in nonaccruing loans, including the remaining balance from the commercial lending relationship discussed above, and $3.0 million in REO at March 31, 2019, compared to $10.9 million and $3.7 million, in nonaccruing loans and REO, respectively, at June 30, 2018. Included in nonperforming loans are $3.6 million of loans restructured from their original terms of which $1.8 million were current at March 31, 2019, with respect to their modified payment terms. At March 31, 2019, $6.8 million, or 60.3% of nonaccruing loans were current on their required loan payments. Purchased impaired loans aggregating $1.9 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 0.43% at both March 31, 2019 and June 30, 2018.

The ratio of classified assets to total assets remained consistent at 1.00% at March 31, 2019 and June 30, 2018. Classified assets increased to $34.5 million at March 31, 2019 compared to $33.1 million at June 30, 2018, due to the inclusion of the commercial lending relationship discussed above. While the previously mentioned significant provision for loan losses negatively affected our earnings, we believe 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 March 31, 2019, the Company had assets of $3.5 billion. The Bank, founded in 1926, is a North Carolina state chartered, community-focused financial institution committed to providing value added relationship banking 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)March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018(2)
 March 31,
 2018
Assets         
Cash$40,633  $44,425  $39,872  $45,222  $38,100 
Interest-bearing deposits37,678  26,881  18,896  25,524  41,296 
Cash and cash equivalents78,311  71,306  58,768  70,746  79,396 
Commercial paper246,903  239,286  238,224  229,070  239,435 
Certificates of deposit in other financial institutions56,209  51,936  58,384  66,937  84,218 
Securities available for sale, at fair value139,112  149,752  148,704  154,993  160,971 
Other investments, at cost51,122  44,858  43,996  41,931  41,405 
Loans held for sale14,745  13,095  10,773  5,873  6,071 
Total loans, net of deferred loan fees2,660,647  2,632,231  2,587,106  2,525,852  2,445,755 
Allowance for loan losses(24,416) (21,419) (20,932) (21,060) (21,472)
Net loans2,636,231  2,610,812  2,566,174  2,504,792  2,424,283 
Premises and equipment, net67,983  66,610  62,681  62,537  62,725 
Accrued interest receivable10,885  10,372  10,252  9,344  9,216 
Real estate owned ("REO")3,003  2,955  3,286  3,684  5,053 
Deferred income taxes28,832  28,533  30,942  32,565  34,311 
Bank owned life insurance ("BOLI")89,663  89,156  88,581  88,028  87,532 
Goodwill25,638  25,638  25,638  25,638  25,638 
Core deposit intangibles2,948  3,436  3,963  4,528  5,131 
Other assets6,152  5,354  3,593  3,503  5,478 
Total Assets$3,457,737  $3,413,099  $3,353,959  $3,304,169  $3,270,863 
Liabilities and Stockholders' Equity         
Liabilities         
Deposits$2,308,395  $2,258,069  $2,203,044  $2,196,253  $2,180,324 
Borrowings680,000  688,000  675,000  635,000  625,000 
Capital lease obligations1,888  1,897  1,905  1,914  1,920 
Other liabilities60,224  54,163  59,815  61,760  62,066 
Total liabilities3,050,507  3,002,129  2,939,764  2,894,927  2,869,310 
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)183  185  190  191  190 
Additional paid in capital196,824  203,660  214,803  217,480  216,712 
Retained earnings217,490  215,289  208,365  200,575  193,368 
Unearned Employee Stock Ownership Plan ("ESOP") shares(7,009) (7,142) (7,274) (7,406) (7,538)
Accumulated other comprehensive loss(258) (1,022) (1,889) (1,598) (1,179)
Total stockholders' equity407,230  410,970  414,195  409,242  401,553 
Total Liabilities and Stockholders' Equity$3,457,737  $3,413,099  $3,353,959  $3,304,169  $3,270,863 

_________________________________

(1) Shares of common stock issued and outstanding were 18,265,535 at March 31, 2019; 18,520,825 at December 31, 2018, 18,939,280 at September 30, 2018; 19,041,668 at June 30, 2018; and 19,034,868 at March 31, 2018.
(2) Derived from audited financial statements.


Consolidated Statement of Income (Unaudited)

 Three Months Ended Nine Months Ended
 March 31, December 31, March 31, March 31, March 31,
(Dollars in thousands)2019 2018 2018 2019 2018
Interest and Dividend Income         
Loans$30,770  $30,544  $26,355  $90,042  $77,745 
Securities available for sale850  876  916  2,582  2,791 
Commercial paper and interest-bearing deposits in other financial institutions2,283  1,966  1,498  6,106  3,970 
Other investments821  1,014  626  2,674  1,883 
Total interest and dividend income34,724  34,400  29,395  101,404  86,389 
Interest Expense         
Deposits4,404  3,607  1,622  10,761  4,509 
Borrowings3,741  3,692  2,414  10,691  6,460 
Total interest expense8,145  7,299  4,036  21,452  10,969 
Net Interest Income26,579  27,101  25,359  79,952  75,420 
Provision for Loan Losses5,500      5,500   
Net Interest Income after Provision for Loan Losses21,079  27,101  25,359  74,452  75,420 
Noninterest Income         
Service charges and fees on deposit accounts2,265  2,577  1,935  7,243  5,766 
Loan income and fees134  295  330  757  910 
Gain on sale of loans held for sale1,472  944  1,080  4,086  2,963 
BOLI income518  520  536  1,574  1,616 
Gain from sale of premises and equipment        164 
Other, net997  749  648  2,424  1,831 
Total noninterest income5,386  5,085  4,529  16,084  13,250 
Noninterest Expense         
Salaries and employee benefits13,463  12,857  11,927  39,005  36,252 
Net occupancy expense2,478  2,551  2,389  7,376  7,211 
Marketing and advertising400  402  334  1,219  1,106 
Telephone, postage, and supplies698  743  748  2,210  2,181 
Deposit insurance premiums320  335  413  959  1,246 
Computer services1,980  1,895  1,600  5,724  4,740 
Loss on sale and impairment of REO246  75  194  500  152 
REO expense200  173  311  548  757 
Core deposit intangible amortization488  526  642  1,580  2,042 
Other2,705  2,301  2,496  7,598  7,230 
Total noninterest expense22,978  21,858  21,054  66,719  62,917 
Income Before Income Taxes3,487  10,328  8,834  23,817  25,753 
Income Tax Expense185  2,287  2,707  4,684  24,725 
Net Income$3,302  $8,041  $6,127  $19,133  $1,028 
                    


Per Share Data

  Three Months Ended Nine Months Ended
  March 31,  December 31,  March 31,  March 31,  March 31, 
  2019  2018  2018  2019  2018 
                     
Net income per common share:(1)                    
Basic $0.19  $0.45  $0.34  $1.07  $0.06 
Diluted $0.18  $0.43  $0.32  $1.02  $0.06 
Adjusted net income per common share:(2)          
Basic $0.17  $0.45  $0.36  $1.06  $1.06 
Diluted $0.16  $0.43  $0.34  $1.02  $1.02 
           
Average shares outstanding:          
Basic 17,506,018  17,797,553  18,052,000  17,811,962  17,997,997 
Diluted 18,197,429  18,497,334  18,761,586  18,528,161  18,688,486 
Book value per share at end of period $22.29  $22.19  $21.10  $22.39  $21.10 
Tangible book value per share at end of period (2) $20.77  $20.66  $19.54  $20.86  $19.54 
Total shares outstanding at end of period 18,265,535  18,520,825  19,034,868  18,265,535  19,034,868 

__________________________________________________

(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,
  2019 2018 2018 2019 2018
       
Performance ratios: (1)             
Return on assets (ratio of net income to average total assets) 0.39% 0.95% 0.76% 0.76% 0.04%
Return on assets - adjusted(2) 0.35  0.95  0.80  0.74  0.79 
Return on equity (ratio of net income to average equity) 3.24  7.83  6.16  6.21  0.34 
Return on equity - adjusted(2) 2.92  7.83  6.47  6.11  6.32 
Tax equivalent yield on earning assets(3) 4.42  4.45  4.00  4.36  3.93 
Rate paid on interest-bearing liabilities 1.23  1.13  0.65  1.11  0.60 
Tax equivalent average interest rate spread (3) 3.19  3.32  3.35  3.25  3.35 
Tax equivalent net interest margin(3) (4) 3.39  3.51  3.46  3.45  3.45 
Average interest-earning assets to average interest-bearing liabilities 119.70  120.48  120.71  120.81  120.60 
Operating expense to average total assets 2.69  2.59  2.60  2.64  2.60 
Efficiency ratio 71.88  67.91  70.44  69.47  70.96 
Efficiency ratio - adjusted (2) 71.19  67.32  69.50  68.84  70.16 

_____________________________

(1) Ratios are annualized where appropriate.
(2) See Non-GAAP reconciliation tables below for adjustments.
(3) For the three months ended March 31, 2019, December 31, 2018, and March 31, 2018, 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 nine months ended March 31, 2019 and 2018, 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
 March 31, December 31, September 30, June 30, March 31,
 2019 2018 2018 2018 2018
Asset quality ratios:         
Nonperforming assets to total assets(1)0.41% 0.37% 0.40% 0.44% 0.54%
Nonperforming loans to total loans(1)0.43  0.37  0.39  0.43  0.52 
Total classified assets to total assets1.00  0.97  0.93  1.00  1.29 
Allowance for loan losses to nonperforming loans(1)215.46  221.45  207.06  192.96  169.71 
Allowance for loan losses to total loans0.92  0.81  0.81  0.83  0.88 
Allowance for loan losses to total gross loans excluding acquired loans(2)0.99  0.89  0.88  0.91  0.97 
Net charge-offs (recoveries) to average loans (annualized)0.38  (0.07) 0.02  0.07  (0.06)
Capital ratios:              
Equity to total assets at end of period11.78% 12.04% 12.35% 12.39% 12.28%
Tangible equity to total tangible assets(2)11.06  11.31  11.59  11.61  11.48 
Average equity to average assets11.93  12.20  12.43  12.31  12.30 

__________________________________________

(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, 2019, there were $3.6 million of restructured loans included in nonaccruing loans and $6.8 million, or 60.3% 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,
 2019 2018
 Average Interest Yield/ Average Interest Yield/
 Balance Earned/Rate(2) Balance Earned/ Rate(2)
 Outstanding Paid(2)  Outstanding Paid(2)  
(Dollars in thousands)                     
Assets:           
Interest-earning assets:           
Loans receivable(1)$2,650,155  $31,084  4.69% $2,431,723  $26,761  4.40%
Deposits in other financial institutions89,063  448  2.01% 126,933  441  1.39%
Investment securities139,898  850  2.43% 165,219  916  2.22%
Other interest-earning assets(3)295,215  2,655  3.60% 254,424  1,682  2.65%
Total interest-earning assets3,174,331  35,037  4.42% 2,978,299  29,800  4.00%
Other assets246,858      259,390     
Total assets3,421,189      3,237,689     
Liabilities and equity:           
Interest-bearing deposits:           
Interest-bearing checking accounts463,807  332  0.29% 480,650  236  0.20%
Money market accounts701,692  1,408  0.80% 657,214  633  0.39%
Savings accounts188,848  58  0.12% 221,214  72  0.13%
Certificate accounts627,444  2,606  1.66% 445,328  681  0.61%
Total interest-bearing deposits1,981,791  4,404  0.89% 1,804,406  1,622  0.36%
Borrowings670,142  3,741  2.23% 662,977  2,414  1.46%
Total interest-bearing liabilities2,651,933  8,145  1.23% 2,467,383  4,036  0.65%
Noninterest-bearing deposits298,118      308,955     
Other liabilities63,015      63,177     
Total liabilities3,013,066      2,839,515     
Stockholders' equity408,123      398,174     
Total liabilities and stockholders' equity$3,421,189      $3,237,689     
            
Net earning assets$522,398      $510,916     
Average interest-earning assets to           
average interest-bearing liabilities119.70%     120.71%    
Tax-equivalent:           
Net interest income  $26,892      $25,764   
Interest rate spread    3.19%     3.35%
Net interest margin(4)    3.39%     3.46%
Non-tax-equivalent:           
Net interest income  $26,579      $25,358   
Interest rate spread    3.15%     3.28%
Net interest margin(4)    3.35%     3.39%

__________________

(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 $313 and $406 for the three months ended March 31, 2019 and 2018, 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 Nine Months Ended March 31,
 2019 2018
 Average Interest Yield/ Average Interest Yield/
 Balance Earned/ Rate(2) Balance Earned/ Rate(2)
 Outstanding Paid(2)   Outstanding Paid(2)  
(Dollars in thousands)                     
Assets:           
Interest-earning assets:           
Loans receivable(1)$2,608,485  $90,920  4.65% $2,399,753  $78,914  4.38%
Deposits in other financial institutions88,092  1,258  1.90% 145,761  1,494  1.37%
Investment securities148,645  2,582  2.32% 176,726  2,791  2.11%
Other interest-earning assets(3)280,327  7,520  3.58% 234,931  4,359  2.47%
Total interest-earning assets3,125,549  102,280  4.36% 2,957,171  87,558  3.95%
Other assets245,360       271,231      
Total assets$3,370,909       $3,228,402      
Liabilities and equity:             
Interest-bearing liabilities:             
Interest-bearing checking accounts463,035  903  0.26% 471,618  688  0.19%
Money market accounts689,363  3,630  0.70% 635,645  1,695  0.36%
Savings accounts197,929  189  0.13% 227,413  225  0.13%
Certificate accounts573,647  6,039  1.40% 447,950  1,901  0.57%
Total interest-bearing deposits1,923,974  10,761  0.75% 1,782,626  4,509  0.36%
Borrowings663,157  10,691  2.15% 669,371  6,460  1.29%
Total interest-bearing liabilities2,587,130  21,452  1.11% 2,451,997  10,969  0.60%
Noninterest-bearing deposits310,304      309,162     
Other liabilities62,830      65,380     
Total liabilities2,960,264      2,826,539     
Stockholders' equity410,645      401,863     
Total liabilities and stockholders' equity$3,370,909      $3,228,402     
            
Net earning assets$538,419      $505,174     
Average interest-earning assets to           
average interest-bearing liabilities120.81%     120.60%    
Tax-equivalent:           
Net interest income  $80,828      $76,589   
Interest rate spread    3.25%     3.35%
Net interest margin(4)    3.45%     3.45%
Non-tax-equivalent:             
Net interest income  $79,952       $75,420    
Interest rate spread    3.22%     3.30%
Net interest margin(4)    3.41%     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 $876 and $1,169 for the nine months ended March 31, 2019 and 2018, 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)March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
Retail consumer loans:                   
One-to-four family$658,723  $661,374  $656,011  $664,289  $670,036 
HELOCs - originated133,203  135,430  135,512  137,564  143,049 
HELOCs - purchased128,832  138,571  150,733  166,276  165,680 
Construction and land/lots76,153  74,507  75,433  65,601  68,121 
Indirect auto finance162,127  170,516  173,305  173,095  160,664 
Consumer19,374  13,520  13,139  12,379  11,317 
Total retail consumer loans1,178,412  1,193,918  1,204,133  1,219,204  1,218,867 
Commercial loans:         
Commercial real estate892,383  904,357  879,184  857,315  810,332 
Construction and development214,511  198,738  198,809  192,102  184,179 
Commercial and industrial263,646  224,582  193,739  148,823  132,337 
Municipal leases112,067  111,135  111,951  109,172  101,108 
Total commercial loans1,482,607  1,438,812  1,383,683  1,307,412  1,227,956 
Total loans2,661,019  2,632,730  2,587,816  2,526,616  2,446,823 
Deferred loan fees, net(372) (499) (710) (764) (1,068)
Total loans, net of deferred loan fees2,660,647  2,632,231  2,587,106  2,525,852  2,445,755 
Allowance for loan losses(24,416) (21,419) (20,932) (21,060) (21,472)
Loans, net$2,636,231  $2,610,812  $2,566,174  $2,504,792  $2,424,283 
                    

Deposits

(Dollars in thousands)March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
Core deposits:                   
Noninterest-bearing accounts$301,083  $300,031  $313,110  $317,822  $303,875 
NOW accounts477,637  474,080  462,694  471,364  496,934 
Money market accounts692,102  703,445  687,148  677,665  659,791 
Savings accounts192,754  192,954  203,372  213,250  220,497 
Total core deposits1,663,576  1,670,510  1,666,324  1,680,101  1,681,097 
Certificates of deposit644,819  587,559  536,720  516,152  499,227 
Total$2,308,395  $2,258,069  $2,203,044  $2,196,253  $2,180,324 
                    


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 Nine Months Ended
(Dollars in thousands) March 31, December 30, March 31, March 31, March 31,
  2019 2018 2018 2019 2018
Noninterest expense $22,978  $21,858  $21,054  $66,719  $62,917 
           
Net interest income $26,579  $27,101  $25,359  $79,952  $75,420 
Plus noninterest income 5,386  5,085  4,529  16,084  13,250 
Plus tax equivalent adjustment 313  282  406  876  1,169 
Less gain on sale of premises and equipment         164 
Net interest income plus noninterest income – as adjusted $32,278  $32,468  $30,294  $96,912  $89,675 
Efficiency ratio 71.19% 67.32% 69.50% 68.84% 70.16%
Efficiency ratio (without adjustments) 71.88% 67.91% 70.44% 69.47% 70.96%

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,
  2019 2018 2018 2018 2018
Total stockholders' equity $407,230  $410,970  $414,195  $409,242  $401,553 
Less: goodwill, core deposit intangibles, net of taxes 27,908  28,284  28,690  29,125  29,589 
Tangible book value (1) $379,322  $382,686  $385,505  $380,117  $371,964 
Common shares outstanding 18,265,535  18,520,825  18,939,280  19,041,668  19,034,868 
Tangible book value per share $20.77  $20.66  $20.35  $19.96  $19.54 
Book value per share $22.29  $22.19  $21.87  $21.49  $21.10 

(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,
  2019 2018 2018 2018 2018
   
  (Dollars in thousands)
Tangible equity(1) $379,322  $382,686  $385,505  $380,117  $371,964 
Total assets 3,457,737  3,413,099  3,353,959  3,304,169  3,270,863 
Less: goodwill, core deposit intangibles, net of taxes 27,908  28,284  28,690  29,125  29,589 
Total tangible assets(2) $3,429,829  $3,384,815  $3,325,269  $3,275,044  $3,241,274 
Tangible equity to tangible assets 11.06% 11.31% 11.59% 11.61% 11.48%

(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 Nine Months Ended
(Dollars in thousands, except per share data) March 31, December 31, March 31, March 31, March 31,
  2019 2018 2018 2019 2018
State tax expense adjustment (1) $  $  $  $  $133 
Change in federal tax law adjustment (2) (325)   318  (325) 18,011 
Gain from sale of premises and equipment         (164)
Total adjustments (325)   318  (325) 17,980 
Tax effect         49 
Total adjustments, net of tax (325)   318  (325) 18,029 
           
Net income (GAAP) 3,302  8,041  6,127  19,133  1,028 
           
Net income (non-GAAP) $2,977  $8,041  $6,445  $18,808  $19,057 
           
Per Share Data          
Average shares outstanding - basic 17,506,018  17,797,553  18,052,000  17,811,962  17,997,997 
Average shares outstanding - diluted 18,197,429  18,497,334  18,761,586  18,528,161  18,688,486 
           
Basic EPS          
EPS (GAAP) $0.19  $0.45  $0.34  $1.07  $0.06 
Non-GAAP adjustment (0.02)   0.02  (0.01) 1.00 
EPS (non-GAAP) $0.17  $0.45  $0.36  $1.06  $1.06 
           
Diluted EPS          
EPS (GAAP) $0.18  $0.43  $0.32  $1.02  $0.06 
Non-GAAP adjustment (0.02)   0.02    0.96 
EPS (non-GAAP) $0.16  $0.43  $0.34  $1.02  $1.02 
           
Average Balances          
Average assets $3,421,189  $3,369,726  $3,237,689  $3,370,909  $3,228,402 
Average equity 408,123  410,943  398,174  410,645  401,863 
           
ROA          
ROA (GAAP) 0.39% 0.95% 0.76% 0.76% 0.04%
Non-GAAP adjustment (0.04)% % 0.04% (0.02)% 0.75%
ROA (non-GAAP) 0.35% 0.95% 0.80% 0.74% 0.79%
                     
ROE                    
ROE (GAAP) 3.24% 7.83% 6.16% 6.21% 0.34%
Non-GAAP adjustment (0.32)% % 0.31% (0.10)% 5.98%
ROE (non-GAAP) 2.92% 7.83% 6.47% 6.11% 6.32%
                     

(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.

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) March 31, December 31, September 30, June 30, March 31,
  2019 2018 2018 2018 2018
Total gross loans receivable (GAAP) $2,661,019  $2,632,730  $2,587,816  $2,526,616  $2,446,823 
Less: acquired loans 223,101  236,389  253,695  271,801  288,847 
Adjusted loans (non-GAAP) $2,437,918  $2,396,341  $2,334,121  $2,254,815  $2,157,976 
           
Allowance for loan losses (GAAP) $24,416  $21,419  $20,932  $21,060  $21,472 
Less: allowance for loan losses on acquired loans 201  199  295  483  459 
Adjusted allowance for loan losses $24,215  $21,220  $20,637  $20,577  $21,013 
Adjusted allowance for loan losses / Adjusted loans (non-GAAP) 0.99% 0.89% 0.88% 0.91% 0.97%


 

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Source: HomeTrust Bancshares, Inc.