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HomeTrust Bancshares, Inc. Reports Fourth Quarter and Fiscal Year 2019 Financial Results

Company Release - 7/25/2019 9:00 AM ET

ASHEVILLE, N.C., July 25, 2019 (GLOBE NEWSWIRE) -- HomeTrust Bancshares, Inc. (NASDAQ: HTBI) ("Company"), the holding company of HomeTrust Bank ("Bank"), today announced preliminary net income increased 11.2% to $8.0 million, or $0.44 per diluted share for the fourth quarter of fiscal 2019, compared to $7.2 million, or $0.38 per diluted share for the same period a year ago. Net income totaled $27.1 million, or $1.46 per diluted share for the year ended June 30, 2019, compared to $8.2 million, or $0.44 per diluted share for fiscal year 2018. Earnings during the year ended June 30, 2019 were negatively impacted by a $5.7 million provision primarily related to one $6.0 million commercial lending relationship, which was fully charged off. Earnings for the year ended June 30, 2018 included a $17.9 million write-down of deferred tax assets following a deferred tax revaluation resulting from enactment of the Tax Cuts and Jobs Act (“Tax Act”) with no comparable charge in fiscal year 2019.

"We concluded fiscal 2019 on yet another high note set by record net income,” said Dana Stonestreet, Chairman, President and Chief Executive Officer. “Our success reflects the hard work of our employees to ensure our customers and communities are, as we like to say, Ready for What's Next. As a result, we had over $1 billion in loan originations for the second year in a row; net organic loan growth of 10%; SBA loan sales that generated $3.4 million in noninterest income; and our new equipment finance line of business originated $147 million in loans and leases during the year. Continued improvements in our financial performance led to our first cash dividend along with the adoption of our sixth stock repurchase program. As we look into fiscal 2020 and beyond, we will remain focused and disciplined on executing our strategic plan to deliver more value to our customers and shareholders."

Highlights for the quarter ended June 30, 2019 compared to the corresponding quarter in the previous year:

  • return on assets ("ROA") increased 4.5% to 0.92% from 0.88%;
  • net interest income increased $1.0 million, or 3.9% to $26.9 million from $25.9 million;
  • noninterest income increased $1.7 million, or 34.6% to $6.8 million from $5.1 million;
  • provision for loan losses increased to $200,000 from $0;
  • organic net loan growth, which excludes purchases of home equity lines of credit, was $56.0 million, or 8.9% annualized compared to $80.3 million, or 14.1% annualized;
  • 292,630 shares were repurchased during the quarter at an average price of $25.01 per share; and
  • quarterly cash dividends of $0.06 per share totaling $1.1 million.

Highlights for the year ended June 30, 2019 compared to the year ended June 30, 2018:

  • ROA was 0.80%, compared to 0.25%;
  • net interest income increased $5.5 million, or 5.5% to $106.9 million from $101.3 million;
  • noninterest income increased $3.9 million, or 20.7% to $22.9 million from $19.0 million;
  • provision for loan losses increased to $5.7 million from $0;
  • net loans receivable increased 7.1% to $2.7 billion from $2.5 billion;
  • organic net loan growth was $228.6 million, or 9.7% compared to $171.3 million, or 7.8%;
  • nonperforming assets decreased 9.0% to $13.3 million, or 0.38% of total assets compared to $14.6 million, or 0.44% of total assets;
  • total deposits increased 6.0% to $2.3 billion from $2.2 billion; and
  • 1,149,785 shares of common stock were repurchased during the year at an average price of $26.65 per share.

Income Statement Review

Net interest income increased to $26.9 million for the quarter ended June 30, 2019 compared to $25.9 million for the comparative quarter in fiscal 2018. The $1.0 million, or 3.9% increase was due to a $4.8 million increase in interest and dividend income primarily driven by an increase in average interest-earning assets, which was partially offset by a $3.8 million increase in interest expense, which was primarily driven by increases in the cost of interest-bearing liabilities. Average interest-earning assets increased $189.3 million, or 6.2% to $3.2 billion for the quarter ended June 30, 2019 compared to $3.0 billion for the corresponding quarter in fiscal 2018. For the quarter ended June 30, 2019, the average balance of total loans receivable increased $226.5 million, or 9.2% compared to the same quarter last year primarily due to organic loan growth. The average balance of other interest-earning assets increased $4.4 million, or 1.6% between the periods primarily due to increases in commercial paper investments and other investments at cost. These increases were mainly funded by the cumulative decrease of $41.7 million, or 15.4% in average interest-earning deposits in other banks and securities available for sale, and an increase in average interest-bearing liabilities, primarily deposits, of $203.1 million, or 8.1% as compared to the same quarter last year. Net interest margin (on a fully taxable-equivalent basis) for the three months ended June 30, 2019 decreased to 3.38% from 3.47% for the same period a year ago.

Total interest and dividend income increased $4.8 million, or 15.6% for the three months ended June 30, 2019 as compared to the same period last year, which was primarily driven by a $4.5 million, or 16.5% increase in loan interest income and a $306,000, or 13.0% increase in interest income from other interest-earning assets (comprised primarily of income from commercial paper). 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 28 basis points to 4.76% for the quarter ended June 30, 2019 from 4.48% 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 $164,000, or 27.5% 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 June 30, 2019 and 2018, average loan yields included six and ten 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 $6.7 million at June 30, 2019, compared to $7.1 million at March 31, 2019 and $8.8 million at June 30, 2018.

Total interest expense increased $3.8 million, or 75.0% for the quarter ended June 30, 2019 compared to the same period last year. The increase was due to a $2.7 million, or 122.1% increase in deposit interest expense and a $1.1 million, or 37.9% 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 $128.5 million, or 6.9% along with a 52 basis point increase in the average cost of interest-bearing deposits for the quarter ended June 30, 2019 compared to the same quarter last year. Average borrowings for the quarter ended June 30, 2019 increased $74.6 million, or 12.0% and the average cost of borrowings increased 42 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 50 basis points to 1.32% for the current quarter compared to 0.82% 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 $5.5 million or 5.5% to $106.9 million for the year ended June 30, 2019 compared to $101.3 million for the year ended June 30, 2018. Average interest-earning assets increased $173.6 million, or 5.8% to $3.1 billion for the year ended June 30, 2019 compared to $3.0 billion in the prior year. The $213.2 million, or 8.8% increase in average balance of total loans receivable for the year ended June 30, 2019 was primarily due to organic loan growth. The average balance of other interest-earning assets increased $35.2 million, or 14.2% between the periods primarily due to increases in commercial paper investments and other investments at cost. These increases were mainly funded by the cumulative decrease of $74.7 million, or 24.2% in average interest-earning deposits in other banks and securities available for sale, and an increase in average interest-bearing liabilities of $152.1 million, or 6.2%. Net interest margin (on a fully taxable-equivalent basis) for the year ended June 30, 2019 decreased three basis points to 3.43% from 3.46% for last year.

Total interest and dividend income increased $19.9 million, or 16.9% for the year ended June 30, 2019 as compared to the year ended June 30, 2018. The increase was primarily driven by a $16.8 million, or 16.0% increase in loan interest income and a $3.5 million, or 51.6% increase in interest income from other interest-earning assets, partially offset by a $433,000, or 7.7% decrease in interest income from securities available for sale and deposits in other banks. The additional loan interest income was primarily due to the increase in the average balance of loans receivable, which was partially offset by a $1.1 million decrease in the accretion of purchase discounts on acquired loans to $2.1 million for the year ended June 30, 2019 from $3.2 million for fiscal year 2018. Average loan yields increased 27 basis points to 4.68% for the year ended June 30, 2019 from 4.41% last year. For the year ended June 30, 2019 and 2018, average loan yields included eight and 14 basis points, respectively, from the accretion of purchase discounts on acquired loans.

Total interest expense increased $14.3 million, or 89.0% for the year ended June 30, 2019 compared to last year. This increase was primarily related to the $138.1 million, or 7.7% increase in average interest-bearing deposits and the corresponding 44 basis point increase in the average cost of those deposits, resulting in additional deposit interest expense of $9.0 million for the year ended June 30, 2019 as compared to the year ended June 30, 2018. In addition, average borrowings increased $13.9 million, or 2.1% along with a corresponding increase of 77 basis points in the average cost of those borrowings, resulting in additional interest expense of $5.3 million for the year ended June 30, 2019 as compared to the year ended June 30, 2018. The overall cost of funds increased 51 basis points to 1.16% for the year ended June 30, 2019 compared to 0.65% last year.

Noninterest income increased $1.7 million, or 34.6% to $6.8 million for the three months ended June 30, 2019 from $5.1 million for the same period in the previous year. The leading factors of the increase included an $819,000, or 62.4% increase in gains from the sale of loans due primarily to originations and sales of the guaranteed portion of U.S Small Business Administration (“SBA”) commercial loans; a $511,000, or 84.3% increase in other noninterest income primarily related to operating lease income from the new equipment finance line of business; and a $399,000, or 150.0% increase in loan income and fees as result of our adjustable rate conversion program, which allows borrowers to convert from an adjustable rate to a fixed rate loan.

Noninterest income increased $3.9 million, or 20.7% to $22.9 million for the year ended June 30, 2019 from $19.0 million for the year ended June 30, 2018. Driving the increase was a $1.9 million, or 45.4% increase on gain on sale of loans primarily due to originations and sales of SBA commercial loans; a $1.1 million, or 45.3% increase in other noninterest income primarily related to operating lease income; an $809,000, or 9.2% increase in service charges on deposit accounts as a result of an increase in deposit accounts and related fees; and a $246,000, or 20.9% increase in loan income and fees. There was also no gain from the sale of premises and equipment for the year ended June 30, 2019 as compared to $164,000 last year.

Noninterest expense for the three months ended June 30, 2019 increased $1.7 million, or 7.6% to $23.4 million compared to $21.8 million for the three months ended June 30, 2018. The increase was primarily due to a $1.4 million, or 11.5% increase in salaries and employee benefits; a $262,000, or 70.4% increase in marketing and advertising; a $240,000, or 14.1% increase in computer services; and a $53,000, or 6.8% increase in telephone, postage, and supplies expense, mainly driven by the expansion of our SBA and equipment finance lines of business. The $94,000, or 25.2% increase in deposit insurance premiums was due to changes in our loan mix and lower capital levels as a result of stock repurchases. Partially offsetting these increases was the cumulative decrease of $286,000, or 6.9% in real estate owned ("REO") related expenses; core deposit intangibles amortization; and other expense for the three months ended June 30, 2019 compared to the same period last year.

Noninterest expense for the year ended June 30, 2019 increased $4.8 million, or 5.6% to $90.1 million compared to $85.3 million for the year ended June 30, 2018. The increase was primarily due to a $4.1 million, or 8.6% increase in salaries and employee benefits; a $1.2 million, or 19.0% increase in computer services; a $375,000, or 25.4% increase in marketing and advertising; and a $121,000, or 10.2% increase in REO related expenses. Partially offsetting these increases was a $616,000, or 23.3% decrease in core deposit intangible amortization; a $235,000, or 2.4% decrease in net occupancy expense; and a $193,000, or 11.9% decrease in deposit insurance premiums as a result of lower nonaccrual loans during the year ended June 30, 2019 compared to last year.

For the three months ended June 30, 2019, the Company's income tax expense was $2.1 million compared to $2.0 million for the three months ended June 30, 2018. The effective tax rates for the three months ended June 30, 2019 and 2018 are 20.8% and 21.8%, respectively.

For the year ended June 30, 2019, the Company's income tax expense was $6.8 million compared to $26.7 million for the year ended June 30, 2018. The Company’s corporate federal income tax rate for the years ended June 30, 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 $17.9 million.

Balance Sheet Review

Total assets increased $172.0 million, or 5.2% to $3.5 billion at June 30, 2019 from $3.3 billion at June 30, 2018. Total liabilities increased $172.4 million, or 6.0% to $3.1 billion at June 30, 2019 from $2.9 billion at June 30, 2018. Deposit growth of $131.0 million, or 6.0%; a $45.0 million, or 7.1% increase in borrowings; and the cumulative decrease of $48.1 million, or 21.7% in certificates of deposit in other banks and securities available for sale were used to fund the $179.3 million, or 7.1% increase in total loans receivable, net of deferred loan fees, the $12.4 million, or 5.4% increase in commercial paper, the $12.3 million, or 209.5% increase in loans held for sale, and the $9.4 million, or 22.4% increase in other investments, net during the fiscal year 2019. The increase in net loans receivable from June 30, 2018, was driven by organic net loan growth of $228.6 million as primarily seen in the growth of our commercial and industrial and equipment finance loans which had a cumulative increase of $143.7 million, or 96.6%. In addition, commercial real estate loans increased during the year ended June 30, 2019, by $69.9 million or 8.2%. The increase in loans held for sale was due primarily to SBA loans originated during the period. The $13.7 million, or 391.2% increase in other assets was primarily due to the increase in operating leases originated by our new equipment finance line of business.

Stockholders' equity at June 30, 2019 decreased $346,000, or 0.1% to $408.9 million compared to $409.2 million at June 30, 2018. Changes within stockholders' equity included $27.1 million in net income, $3.0 million in stock-based compensation, and a $2.3 million increase in other comprehensive income representing a reduction in unrealized losses on investment securities, net of tax, to an unrealized gain of $733,000, partially offset by 1,149,785 shares of common stock repurchased at an average price per share of $26.65, or approximately $30.6 million in total, and $3.2 million related to cash dividends. As of June 30, 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 $21.4 million, or 0.79% of total loans, at June 30, 2019 compared to $21.1 million, or 0.83% of total loans, at June 30, 2018. The allowance for loan losses to gross loans, excluding acquired loans, was 0.85% at June 30, 2019, compared to 0.91% at June 30, 2018.

There was a $200,000 provision for loan losses for the three months ended June 30, 2019 compared to none for the same period last year. The $5.7 million provision for loan losses for the year ended June 30, 2019 compared to no provision for the year ended June 30, 2018 is primarily related to a $6.0 million commercial lending relationship, which was fully charged off in the third and fourth quarters this fiscal year. At the end of March 2019, 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, the Company believed that the Bank's collateral, consisting primarily of accounts receivable, had substantially deteriorated. As a result of this investigation and further subsequent developments, the Company determined a full charge-off of this relationship was appropriate. The Company is continuing to take action to enforce its rights against the borrower, guarantors and its collateral, including to preserve and recover the borrower’s assets, where appropriate.

As a result of this charged off lending relationship, net loan charge-offs increased to $3.2 million for the three months ended June 30, 2019 as compared to $412,000 for the same period during the prior fiscal year. Net loan charge-offs increased to $5.3 million for the year ended June 30, 2019 from $91,000 for fiscal 2018. Net charge-offs as a percentage of average loans were 0.47% for the quarter ended June 30, 2019 compared to 0.07% for the same period last fiscal year. Net charge-offs as a percentage of average loans increased to 0.20% for the year ended June 30, 2019 from 0% for last fiscal year.

Nonperforming assets decreased 9.0% to $13.3 million, or 0.38% of total assets, at June 30, 2019, compared to $14.6 million, or 0.44% of total assets, at June 30, 2018. Nonperforming assets included $10.4 million in nonaccruing loans and $2.9 million in REO at June 30, 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 $4.5 million of loans restructured from their original terms of which $1.8 million were current at June 30, 2019, with respect to their modified payment terms. The decrease in nonaccruing loans was primarily due to continued improvement in credit quality throughout the loan portfolio and loans returning to performing status as payment history and the borrower's financial status improved. At June 30, 2019, $4.1 million, or 39.6%, of nonaccruing loans were current on their required loan payments. Purchased impaired loans acquired from prior acquisitions aggregating $1.3 million 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 decreased to 0.38% at June 30, 2019 from 0.43% at June 30, 2018.

The ratio of classified assets to total assets decreased to 0.89% at June 30, 2019 from 1.0% at June 30, 2018. Classified assets decreased 6.5% to $30.9 million at June 30, 2019 compared to $33.1 million at June 30, 2018. 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 June 30, 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, Cary, and Raleigh), 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 2020 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect our operating and stock performance.

WEBSITE: WWW.HTB.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)June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
 2018
 June 30,
2018 (2)
Assets                   
Cash$40,909  $40,633  $44,425  $39,872  $45,222 
Interest-bearing deposits30,134  37,678  26,881  18,896  25,524 
Cash and cash equivalents71,043  78,311  71,306  58,768  70,746 
Commercial paper241,446  246,903  239,286  238,224  229,070 
Certificates of deposit in other banks52,005  56,209  51,936  58,384  66,937 
Securities available for sale, at fair value121,786  139,112  149,752  148,704  154,993 
Other investments, at cost51,328  51,122  44,858  43,996  41,931 
Loans held for sale18,175  14,745  13,095  10,773  5,873 
Total loans, net of deferred loan fees2,705,190  2,660,647  2,632,231  2,587,106  2,525,852 
Allowance for loan losses(21,429) (24,416) (21,419) (20,932) (21,060)
Net loans2,683,761  2,636,231  2,610,812  2,566,174  2,504,792 
Premises and equipment, net61,051  60,559  61,232  61,737  62,537 
Accrued interest receivable10,533  10,885  10,372  10,252  9,344 
Real estate owned ("REO")2,929  3,003  2,955  3,286  3,684 
Deferred income taxes26,523  28,832  28,533  30,942  32,565 
Bank owned life insurance ("BOLI")90,254  89,663  89,156  88,581  88,028 
Goodwill25,638  25,638  25,638  25,638  25,638 
Core deposit intangibles2,499  2,948  3,436  3,963  4,528 
Other assets17,207  13,576  10,732  4,537  3,503 
Total Assets$3,476,178  $3,457,737  $3,413,099  $3,353,959  $3,304,169 
Liabilities and Stockholders' Equity         
Liabilities         
Deposits$2,327,257  $2,308,395  $2,258,069  $2,203,044  $2,196,253 
Borrowings680,000  680,000  688,000  675,000  635,000 
Capital lease obligations1,880  1,888  1,897  1,905  1,914 
Other liabilities58,145  60,224  54,163  59,815  61,760 
Total liabilities3,067,282  3,050,507  3,002,129  2,939,764  2,894,927 
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)180  183  185  190  191 
Additional paid in capital190,315  196,824  203,660  214,803  217,480 
Retained earnings224,545  217,490  215,289  208,365  200,575 
Unearned Employee Stock Ownership Plan ("ESOP") shares(6,877) (7,009) (7,142) (7,274) (7,406)
Accumulated other comprehensive income (loss)733  (258) (1,022) (1,889) (1,598)
Total stockholders' equity408,896  407,230  410,970  414,195  409,242 
Total Liabilities and Stockholders' Equity$3,476,178  $3,457,737  $3,413,099  $3,353,959  $3,304,169 

_________________________________

  1. Shares of common stock issued and outstanding was 17,984,105 at June 30, 2019; 18,265,535 at March 31, 2019; 18,520,825 at December 31, 2018, 18,939,280 at September 30, 2018; and 19,041,668 at June 30, 2018.
  2. Derived from audited financial statements.


Consolidated Statement of Income (Unaudited)

 Three Months Ended Year Ended
(Dollars in thousands)June 30,
2019
 March 31,
 2019
 June 30, 
2018
 June 30,
 2019
 June 30, 
2018 (1)
Interest and Dividend Income                   
Loans$31,861  $30,770  $27,337  $121,903  $105,082 
Securities available for sale861  850  877  3,443  3,668 
Certificates of deposit and other interest-bearing deposits2,172  2,283  1,969  8,278  5,939 
Other investments961  821  830  3,635  2,713 
Total interest and dividend income35,855  34,724  31,013  137,259  117,402 
Interest Expense         
Deposits4,996  4,404  2,249  15,757  6,758 
Borrowings3,935  3,741  2,854  14,626  9,314 
Total interest expense8,931  8,145  5,103  30,383  16,072 
Net Interest Income26,924  26,579  25,910  106,876  101,330 
Provision for Loan Losses200  5,500    5,700   
Net Interest Income after Provision for Loan Losses26,724  21,079  25,910  101,176  101,330 
Noninterest Income         
Service charges and fees on deposit accounts2,368  2,265  2,376  9,611  8,802 
Loan income and fees665  134  266  1,422  1,176 
Gain on sale of loans held for sale2,132  1,472  1,313  6,218  4,276 
BOLI income529  518  501  2,103  2,117 
Gain from sale of premises and equipment        164 
Other, net1,117  997  606  3,541  2,437 
Total noninterest income6,811  5,386  5,062  22,895  18,972 
Noninterest Expense         
Salaries and employee benefits13,286  13,463  11,918  52,291  48,170 
Net occupancy expense2,408  2,294  2,478  9,454  9,689 
Marketing and advertising634  400  372  1,853  1,478 
Telephone, postage, and supplies830  698  777  3,040  2,958 
Deposit insurance premiums467  320  373  1,426  1,619 
Computer services1,940  1,980  1,700  7,664  6,440 
Loss (gain) on sale and impairment of REO(61) 246  (25) 439  127 
REO expense326  200  308  874  1,065 
Core deposit intangible amortization449  488  603  2,029  2,645 
Other3,136  2,889  3,250  11,064  11,140 
Total noninterest expense23,415  22,978  21,754  90,134  85,331 
Income Before Income Taxes10,120  3,487  9,218  33,937  34,971 
Income Tax Expense2,107  185  2,011  6,791  26,736 
Net Income$8,013  $3,302  $7,207  $27,146  $8,235 

_________________________________

  1. Derived from audited financial statements.


Per Share Data

  Three Months Ended Year Ended
  June 30, 
2019
 March 31, 
2019
 June 30, 
2018
 June 30, 
2019
 June 30,
 2018
Net income per common share:(1)                    
Basic $0.45  $0.19  $0.40  $1.52  $0.45 
Diluted $0.44  $0.18  $0.38  $1.46  $0.44 
Adjusted net income per common share:(2)          
Basic $0.45  $0.17  $0.38  $1.52  $1.44 
Diluted $0.44  $0.16  $0.36  $1.46  $1.38 
Average shares outstanding:          
Basic 17,332,700  17,506,018  18,121,690  17,692,493  18,028,854 
Diluted 17,984,958  18,197,429  18,847,279  18,393,184  18,726,431 
Book value per share at end of period $22.74  $22.29  $21.49  $22.74  $21.49 
Tangible book value per share at end of period (2) $21.20  $20.77  $19.96  $21.20  $19.96 
Cash dividends declared per common share $0.06  $0.06  $  $0.18  $ 
Total shares outstanding at end of period 17,984,105  18,265,535  19,041,668  17,984,105  19,041,668 

__________________________________________________

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


Selected Financial Ratios and Other Data

  Three Months Ended Year Ended
  June 30,
2019
 March 31,
2019
 June 30,
2018
 June 30,
2019
 June 30,
2018
Performance ratios:(1)      
Return on assets (ratio of net income to average total assets) 0.92% 0.39% 0.88% 0.80% 0.25%
Return on assets - adjusted(2) 0.92  0.35  0.83  0.79  0.80 
Return on equity (ratio of net income to average equity) 7.87  3.24  7.12  6.62  2.05 
Return on equity - adjusted(2) 7.87  2.92  6.75  6.54  6.43 
Tax equivalent yield on earning assets(3) 4.49  4.42  4.14  4.39  4.00 
Rate paid on interest-bearing liabilities 1.32  1.23  0.82  1.16  0.65 
Tax equivalent average interest rate spread(3) 3.17  3.19  3.32  3.23  3.35 
Tax equivalent net interest margin(3) (4) 3.38  3.39  3.47  3.43  3.46 
Average interest-earning assets to average interest-bearing liabilities 119.16  119.70  121.27  120.39  120.77 
Operating expense to average total assets 2.70  2.69  2.62  2.65  2.63 
Efficiency ratio 69.41  71.88  70.24  69.46  70.93 
Efficiency ratio - adjusted(2) 68.81  71.19  69.36  68.83  70.12 

__________________________________

  1. Ratios are annualized where appropriate.
  2. See Non-GAAP reconciliations below for adjustments.
  3. For the three months ended June 30, 2019, March 31, 2019, and June 30, 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 years ended June 30, 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
  June 30, March 31, December 31, September 30, June 30,
  2019 2019 2018 2018 2018
Asset quality ratios:          
Nonperforming assets to total assets(1) 0.38% 0.41% 0.37% 0.40% 0.44%
Nonperforming loans to total loans(1) 0.38  0.43  0.37  0.39  0.43 
Total classified assets to total assets 0.89  1.00  0.97  0.93  1.00 
Allowance for loan losses to nonperforming loans(1) 206.90  215.46  221.45  207.06  192.96 
Allowance for loan losses to total loans 0.79  0.92  0.81  0.81  0.83 
Allowance for loan losses to total gross loans excluding acquired loans(2) 0.85  0.99  0.89  0.88  0.91 
Net charge-offs (recoveries) to average loans (annualized) 0.47  0.38  (0.07) 0.02  0.07 
Capital ratios:          
Equity to total assets at end of period 11.76% 11.78% 12.04% 12.35% 12.39%
Tangible equity to total tangible assets(2) 11.06  11.06  11.31  11.59  11.61 
Average equity to average assets 11.72  11.93  12.20  12.43  12.31 

__________________________________________

  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 June 30, 2019, there were $4.5 million of restructured loans included in nonaccruing loans and $4.1 million, or 39.6%, of nonaccruing loans were current on their loan payments.  Purchased impaired loans acquired through 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 reconciliations below for adjustments.


Average Balance Sheet Data

 Three Months Ended June 30,
 2019 2018
(Dollars in thousands)Average
Balance
Outstanding
 Interest
Earned/
Paid(2)
 Yield/
Rate(2)
 Average
Balance
Outstanding
 Interest
Earned/
Paid(2)
 Yield/
Rate(2)
Assets:           
Interest-earning assets:           
Loans receivable (1)$2,703,056  $32,156  4.76% $2,476,524  $27,727  4.48%
Deposits in other banks93,365  468  2.00% 110,819  440  1.59%
Securities available for sale135,438  861  2.54% 159,667  877  2.20%
Other interest-earning assets(3)290,962  2,665  3.66% 286,524  2,359  3.29%
Total interest-earning assets3,222,821  36,150  4.49% 3,033,534  31,403  4.14%
Other assets252,037      255,903     
Total Assets3,474,858      3,289,437     
Liabilities and equity:           
Interest-bearing liabilities:           
Interest-bearing checking accounts462,626  348  0.30% 480,688  282  0.24%
Money market accounts691,701  1,472  0.85% 670,486  746  0.45%
Savings accounts184,719  56  0.12% 216,058  70  0.13%
Certificate accounts666,219  3,120  1.87% 509,543  1,151  0.90%
Total interest-bearing deposits2,005,265  4,996  1.00% 1,876,775  2,249  0.48%
Borrowings699,374  3,935  2.25% 624,725  2,854  1.83%
Total interest-bearing liabilities2,704,639  8,931  1.32% 2,501,500  5,103  0.82%
Noninterest-bearing deposits298,769      317,356     
Other liabilities64,102      65,678     
Total liabilities3,067,510      2,884,534     
Stockholders' equity407,348      404,903     
Total liabilities and stockholders' equity3,474,858      3,289,437     
            
Net earning assets$518,182      $532,034     
Average interest-earning assets to average interest-bearing liabilities119.16%     121.27%    
Tax-equivalent:           
Net interest income  $27,219      $26,300   
Interest rate spread    3.17%     3.32%
Net interest margin(4)    3.38%     3.47%
Non-tax-equivalent:           
Net interest income  $26,924      $25,910   
Interest rate spread    3.13%     3.27%
Net interest margin(4)    3.34%     3.42%

_________________________________________________
(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 $295 and $390 for the three months ended June 30, 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 consist of FRB stock, FHLB stock, Small Business Investment Company ("SBIC") investments, and commercial paper.
(4) Net interest income divided by average interest-earning asset.

 Years Ended June 30,
 2019 2018
(Dollars in thousands)Average
Balance
Outstanding
 Interest
Earned/
Paid(2)
 Yield/
Rate(2)
 Average
Balance
Outstanding
 Interest
Earned/
Paid(2)
 Yield/
Rate(2)
Assets:           
Interest-earning assets:           
Loans receivable (1)$2,632,127  $123,076  4.68% $2,418,946  $106,641  4.41%
Deposits in other banks89,410  1,726  1.93% 137,026  1,934  1.41%
Securities available for sale145,344  3,443  2.37% 172,461  3,668  2.13%
Other interest-earning assets(3)282,986  10,187  3.60% 247,829  6,718  2.71%
Total interest-earning assets3,149,867  138,432  4.39% 2,976,262  118,961  4.00%
Other assets247,029      267,399     
Total Assets3,396,896      3,243,661     
Liabilities and equity:           
Interest-bearing liabilities:           
Interest-bearing checking accounts462,933  1,251  0.27% 473,880  970  0.20%
Money market accounts689,946  5,102  0.74% 644,331  2,442  0.38%
Savings accounts194,635  245  0.13% 224,582  295  0.13%
Certificate accounts596,727  9,159  1.53% 463,306  3,051  0.66%
Total interest-bearing deposits1,944,241  15,757  0.81% 1,806,099  6,758  0.37%
Borrowings672,186  14,626  2.18% 658,240  9,314  1.41%
Total interest-bearing liabilities2,616,427  30,383  1.16% 2,464,339  16,072  0.65%
Noninterest-bearing deposits307,420      311,210     
Other liabilities63,229      65,489     
Total liabilities2,987,076      2,841,038     
Stockholders' equity409,820      402,623     
Total liabilities and stockholders' equity3,396,896      3,243,661     
            
Net earning assets$533,440      $511,923     
Average interest-earning assets to average interest-bearing liabilities120.39%     120.77%    
Tax-equivalent:           
Net interest income  $108,049      $102,889   
Interest rate spread    3.23%     3.35%
Net interest margin(4)    3.43%     3.46%
Non-tax-equivalent:           
Net interest income  $106,876      $101,330   
Interest rate spread    3.20%     3.29%
Net interest margin(4)    3.39%     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 $1,173 and $1,559 for the year ended June 30, 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 consist of FRB stock, FHLB stock, SBIC investments, and commercial paper.
(4) Net interest income divided by average interest-earning assets.


Loans

(Dollars in thousands)June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
Retail consumer loans:                   
  One-to-four family$660,591  $658,723  $661,374  $656,011  $664,289 
   HELOCs - originated131,095  133,203  135,430  135,512  137,564 
  HELOCs - purchased116,972  128,832  138,571  150,733  166,276 
  Construction and land/lots80,602  76,153  74,507  75,433  65,601 
  Indirect auto finance153,448  162,127  170,516  173,305  173,095 
  Consumer19,756  19,374  13,520  13,139  12,379 
Total retail consumer loans1,162,464  1,178,412  1,193,918  1,204,133  1,219,204 
Commercial loans:         
  Commercial real estate927,261  892,383  904,357  879,184  857,315 
  Construction and development210,916  214,511  198,738  198,809  192,102 
  Commercial and industrial160,471  154,470  143,201  150,362  135,336 
  Equipment finance132,058  109,175  81,380  43,377  13,487 
  Municipal leases112,016  112,067  111,135  111,951  109,172 
Total commercial loans1,542,722  1,482,607  1,438,812  1,383,683  1,307,412 
Total loans2,705,186  2,661,019  2,632,730  2,587,816  2,526,616 
  Deferred loan costs (fees), net4  (372) (499) (710) (764)
Total loans, net of deferred loan fees2,705,190  2,660,647  2,632,231  2,587,106  2,525,852 
  Allowance for loan losses(21,429) (24,416) (21,419) (20,932) (21,060)
Loans, net$2,683,761  $2,636,231  $2,610,812  $2,566,174  $2,504,792 

Deposits

(Dollars in thousands)June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
Core deposits:                   
   Noninterest-bearing accounts$294,322  $301,083  $300,031  $313,110  $317,822 
  NOW accounts452,295  477,637  474,080  462,694  471,364 
  Money market accounts691,172  692,102  703,445  687,148  677,665 
  Savings accounts177,278  192,754  192,954  203,372  213,250 
Total core deposits1,615,067  1,663,576  1,670,510  1,666,324  1,680,101 
Certificates of deposit712,190  644,819  587,559  536,720  516,152 
Total$2,327,257  $2,308,395  $2,258,069  $2,203,044  $2,196,253 


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 facilitate comparison of the quality and composition of the Company's capital and earnings ability over time and in comparison to its 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 Year Ended
(Dollars in thousands) June 30, March 31, June 30, June 30,
  2019 2019 2018 2019 2018
Noninterest expense $23,415  $22,978  $21,754  $90,134  $85,331 
           
Net interest income  26,924  $26,579  $25,910  $106,876  $101,330 
Plus noninterest income 6,811  5,386  5,062  22,895  18,972 
Plus tax equivalent adjustment 295  313  390  1,174  1,559 
Less gain on sale of fixed assets         164 
Net interest income plus noninterest income – as adjusted $34,030  $32,278  $31,362  $130,945  $121,697 
Efficiency ratio - adjusted 68.81% 71.19% 69.36% 68.83% 70.12%
Efficiency ratio (without adjustments) 69.41% 71.88% 70.24% 69.46% 70.93%

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) June 30,
2019
  March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
 
Total stockholders' equity $408,896  $407,230  $410,970  $414,195  $409,242 
Less: goodwill, core deposits intangibles, net of taxes 27,562  27,908  28,284  28,690  29,125 
Tangible book value (1) $381,334  $379,322  $382,686  $385,505  $380,117 
Common shares outstanding 17,984,105  18,265,535  18,520,825  18,939,280  19,041,668 
Tangible book value per share $21.20  $20.77  $20.66  $20.35  $19.96 
Book value per share $22.74  $22.29  $22.19  $21.87  $21.49 

_________________________________________________________________
(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
  June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
(Dollars in thousands)                    
Tangible equity(1) $381,334  $379,322  $382,686  $385,505  $380,117 
Total assets $3,476,178  $3,457,737  $3,413,099  $3,353,959  $3,304,169 
Less: goodwill and core deposit intangibles, net of taxes 27,562  27,908  28,284  28,690  29,125 
Total tangible assets(2) $3,448,616  $3,429,829  $3,384,815  $3,325,269  $3,275,044 
Tangible equity to tangible assets 11.06% 11.06% 11.31% 11.59% 11.61%

_________________________________________________________________
(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, ROA, ROE, and EPS as adjusted to exclude certain state tax expense, adjustments for the change in federal tax law, and gain on sale of premises and equipment:

  Three Months Ended Year Ended
(Dollars in thousands, except per share data) June 30,
 2019
 March 31,
 2019
 June 30, 
2018
 June 30,
 2019
 June 30,
 2018
State tax expense adjustment (1)     (275)   (142)
Change in federal tax law adjustment (2)   (325) (103) (325) 17,908 
Gain on sale of premises and equipment         (164)
Total adjustments   (325) (378) (325) 17,602 
Tax effect (3)         49 
Total adjustments, net of tax   (325) (378) (325) 17,651 
           
Net income (GAAP) 8,013  3,302  7,207  27,146  8,235 
           
Net income (non-GAAP) $8,013  $2,977  $6,829  $26,821  $25,886 
           
Per Share Data          
Average shares outstanding - basic 17,332,700  17,506,018  18,121,690  17,692,493  18,028,854 
Average shares outstanding - diluted 17,984,958  18,197,429  18,847,279  18,393,184  18,726,431 
           
Basic EPS          
EPS (GAAP) $0.45  $0.19  $0.40  $1.52  $0.45 
Non-GAAP adjustment   (0.02) (0.02)   0.99 
EPS (non-GAAP) $0.45  $0.17  $0.38  $1.52  $1.44 
           
Diluted EPS          
EPS (GAAP) $0.44  $0.18  $0.38  $1.46  $0.44 
Non-GAAP adjustment   (0.02) (0.02)   0.94 
EPS (non-GAAP) $0.44  $0.16  $0.36  $1.46  $1.38 
           
Average Balances          
Average assets $3,474,858  $3,241,189  $3,289,437  $3,396,896  $3,243,661 
Average equity $407,348  $408,123  $404,903  $409,820  $402,623 
           
ROA          
ROA (GAAP) 0.92% 0.39% 0.88% 0.80% 0.25%
Non-GAAP adjustment % (0.04)% (0.05)% (0.01)% 0.55%
ROA (non-GAAP) 0.92% 0.35% 0.83% 0.79% 0.80%
           
ROE          
ROE (GAAP) 7.87% 3.24% 7.12% 6.62% 2.05%
Non-GAAP adjustment % (0.32)% (0.37)% (0.08)% 4.38%
ROE (non-GAAP) 7.87% 2.92% 6.75% 6.54% 6.43%

________________________________________________________________________
(1) State tax adjustment is a result of various revaluations of state deferred tax assets.
(2) Revaluation of net deferred tax assets due to the Tax 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)June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
Total gross loans receivable (GAAP)$2,705,186  $2,661,019  $2,632,730  $2,587,816  $2,526,616 
Less: acquired loans214,046  223,101  236,389  253,695  271,801 
Adjusted loans (non-GAAP)$2,491,140  $2,437,918  $2,396,341  $2,334,121  $2,254,815 
          
Allowance for loan losses (GAAP)$21,429  $24,416  $21,419  $20,932  $21,060 
Less: allowance for loan losses on acquired loans201  201  199  295  483 
Adjusted allowance for loan losses$21,228  $24,215  $21,220  $20,637  $20,577 
Allowance for loan losses / Adjusted loans (non-GAAP)0.85% 0.99% 0.89% 0.88% 0.91%

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Source: HomeTrust Bancshares, Inc.