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HomeTrust Bancshares, Inc. Reports Financial Results For The Second Quarter Of Fiscal 2020

Company Release - 1/29/2020 8:30 AM ET

ASHEVILLE, N.C., Jan. 29, 2020 (GLOBE NEWSWIRE) -- HomeTrust Bancshares, Inc. (NASDAQ: HTBI) ("Company"), the holding company of HomeTrust Bank ("Bank"), today announced preliminary net income for the second quarter of fiscal 2020 increased 14.3% to $9.2 million, or $0.52 per diluted share compared to $8.0 million, or $0.43 per diluted share for the same period a year ago. Net income increased 13.7% to $18.0 million, or $1.01 per diluted share for the six months ended December 31, 2019, compared to $15.8 million, or $0.84 per diluted share for the first six months of fiscal year 2019. Earnings for the three and six months ended December 31, 2019 included a $958,000 after tax gain from the sale of $154.9 million in one-to-four family loans previously reported as held for sale to shift the Company's loan mix and lower its loan to deposit ratio.

Highlights for the quarter ended December 31, 2019 compared to the corresponding quarter in the previous year are as follows:

  • return on assets ("ROA") increased 7.4% to 1.02% from 0.95%;
  • return on equity ("ROE") increased 13.3% to 8.87% from 7.83%;
  • noninterest income increased $4.0 million, or 78.4% to $9.1 million from $5.1 million;
  • noninterest income net of the gain on the previously discussed loan sale increased $2.7 million, or 52.9% to $7.8 million from $5.1 million;
  • organic net loan growth, which excludes one-to-four family loans transferred to held for sale and purchases of home equity lines of credit, was $41.4 million, or 6.9% annualized compared to $57.3 million, or 9.4% annualized;
  • gain on sale of Small Business Administration ("SBA") loans increased $742,000, or 251.3% to $1.0 million from $295,000;
  • 207,261 shares were repurchased during the quarter at an average price of $26.15 per share; and
  • quarterly cash dividends increased 16.7% to $0.07 per share totaling $1.2 million.

Highlights for the six months ended December 31, 2019 compared to the corresponding period in the previous year are as follows:

  • ROA increased 5.3% to 1.00% from 0.95%;
  • ROE increased 13.4% to 8.72% from 7.69%;
  • noninterest income increased $6.0 million, or 56.4% to $16.7 million from $10.7 million;
  • noninterest income net of the gain on the previously discussed loan sale increased $4.7 million, or 44.3% to $15.4 million from $10.7 million;
  • organic net loan growth was $114.4 million, or 8.8% compared to $134.1 million, or 11.4%;
  • gain on sale of SBA loans increased $871,000, or 73.0% to $2.1 million from $1.2 million;
  • total deposits increased $230.5 million, or 9.9% to $2.6 billion from $2.3 billion; and
  • 396,421 shares of common stock were repurchased during the period at an average price of $25.78 per share.

“Despite the industry wide pressure from the interest rate environment, we have continued to deliver strong results through the first half of fiscal 2020," said Dana Stonestreet, Chairman, President, and Chief Executive Officer. "I could not be prouder of our talented and dedicated HomeTrust team that continues to take all our existing and new SBA and equipment finance lines of business to higher performing levels. In the second half of fiscal 2020, we look forward to the conversion of our core technology system to improve customer experience, operational efficiencies, and scalability. Keeping our infrastructure strong is critical to our continued growth and sustainability as we execute our strategic plan to increase revenues, earnings per share and shareholder value."

Income Statement Review

Net interest income decreased slightly to $27.0 million for the quarter ended December 31, 2019, compared to $27.1 million for the comparative quarter in fiscal 2019. The $67,000, or 0.2% decrease was due to a $1.5 million increase in interest and dividend income primarily driven by an increase in average interest-earning assets, which was more than offset by a $1.6 million increase in interest expense. Average interest-earning assets increased $219.6 million, or 7.0% to $3.3 billion for the quarter ended December 31, 2019 compared to $3.1 billion for the corresponding quarter in fiscal 2019. For the quarter ended December 31, 2019, the average balance of total loans receivable increased $172.3 million, or 6.6% compared to the same quarter last year primarily due to organic loan growth. The average balance of commercial paper and deposits in other banks increased $33.2 million, or 10.6% between the periods driven by increases in commercial paper investments. The average balance in securities available for sale increased $13.8 million, or 9.1%, which was primarily driven by the purchase of shorter-term corporate bonds. These increases were mainly funded by a portion of the $204.2 million, or 7.9% increase in average interest-bearing liabilities, as compared to the same quarter last year. Net interest margin (on a fully taxable-equivalent basis) for the three months ended December 31, 2019 decreased to 3.27% from 3.51% for the same period a year ago.

Total interest and dividend income increased $1.5 million, or 4.3% for the three months ended December 31, 2019 as compared to the same period last year, which was primarily driven by a $1.6 million, or 5.2% increase in loan interest income and a $217,000, or 24.8% increase in interest income from securities available for sale which was partially offset by a $242,000, or 23.9% decrease in other investment income. The additional loan interest income was primarily driven by an increase in the average balance of loans receivable partially offset by a decrease in loan yields. Average loan yields decreased six basis points to 4.66% for the quarter ended December 31, 2019 from 4.72% in the corresponding quarter last year. For the quarters ended December 31, 2019 and 2018, average loan yields included five and 13 basis points, respectively, from the accretion of purchase discounts on acquired loans. The incremental accretion and the impact to the yield on loans may change during any period based on the volume of prepayments, but it is expected to decrease over time as the balance of the purchase discount for acquired loans decreases. The total purchase discount for acquired loans was $5.9 million at December 31, 2019, compared to $6.7 million at June 30, 2019, and $7.7 million at December 31, 2018.

Total interest expense increased $1.6 million, or 21.4% for the quarter ended December 31, 2019 compared to the same period last year. The increase was driven by a $2.7 million, or 75.2% increase in deposit interest expense partially offset by a $1.2 million, or 31.2% decrease in interest expense on borrowings. The additional deposit interest expense was a result of our continued focus on increasing deposits as the average balance of interest-bearing deposits increased $272.5 million, or 14.2% along with a 41 basis point increase in the average cost of interest-bearing deposits for the quarter ended December 31, 2019 compared to the same quarter last year. Average borrowings for the quarter ended December 31, 2019 decreased $68.3 million, or 10.1% along with a 51 basis point decrease in the average cost of borrowings compared to the same period last year. Borrowings were paid down utilizing proceeds from the previously mentioned one-to-four family loan sale. The decrease in the average cost of borrowing was driven by the lower federal funds rate during the current quarter compared to the prior year. The overall average cost of funds increased 14 basis points to 1.27% for the current quarter compared to 1.13% in the same quarter last year due primarily to the impact of the deposit market interest rate increases on our interest-bearing liabilities.

Net interest income increased to $54.1 million for the six months ended December 31, 2019, compared to $53.4 million for the comparative period in fiscal 2019. The $734,000, or 1.4% increase was due to a $5.5 million increase in interest and dividend income primarily driven by an increase in average interest-earning assets, which was partially offset by a $4.7 million increase in interest expense. Average interest-earning assets increased $220.3 million, or 7.1% to $3.3 billion for the six months ended December 31, 2019 compared to $3.1 billion for the corresponding period in fiscal 2019. For the six months ended December 31, 2019, the average balance of total loans receivable increased $181.9 million, or 7.0% compared to the same period last year primarily due to organic loan growth. The average balance of commercial paper and deposits in other banks increased $37.5 million, or 11.8% between the periods driven by increases in commercial paper investments. These increases were primarily funded by the $221.8 million, or 8.7% increase in average interest-bearing liabilities, as compared to the same six month period last year. Net interest margin (on a fully taxable-equivalent basis) for the six months ended December 31, 2019 decreased to 3.30% from 3.48% for the same period a year ago.

Total interest and dividend income increased $5.5 million, or 8.2% for the six months ended December 31, 2019 as compared to the same period last year, which was primarily driven by a $5.1 million, or 8.6% increase in loan interest income, a $257,000, or 14.8% increase in interest income from securities available for sale, and a $342,000, or 8.9% increase in interest income from commercial paper and interest-bearing deposits, which was partially offset by a $249,000, or 13.4% decrease in other investment income. 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. Average loan yields increased seven basis points to 4.70% for the six months ended December 31, 2019 from 4.63% in the corresponding period last year. For the six months ended December 31, 2019 and 2018, average loan yields included six and nine basis points, respectively, from the accretion of purchase discounts on acquired loans.

Total interest expense increased $4.7 million, or 35.5% for the six months ended December 31, 2019 compared to the same period last year. The increase was driven by a $5.8 million, or 91.5% increase in deposit interest expense partially offset by a $1.1 million, or 15.7% decrease in interest expense on borrowings. The additional deposit interest expense was a result of a $237.2 million, or 12.5% increase in the average balance of interest-bearing deposits along with a 47 basis point increase in the average cost of those deposits for the six months ended December 31, 2019 as compared to the same period last year. Average borrowings for the six months ended December 31, 2019 decreased $15.4 million, or 2.3% along with a 29 basis point decrease in the average cost of borrowings compared to the same period last year. The overall cost of funds increased 26 basis points to 1.30% for the six months ended December 31, 2019 compared to 1.04% in the corresponding period last year.

Noninterest income increased $4.0 million, or 78.4% to $9.1 million for the three months ended December 31, 2019 from $5.1 million for the same period in the previous year primarily due a $2.8 million, or 300.0% increase in the gain on sale of loans held for sale, as well as a $576,000, 195.3% increase in loan income and fees, and a $565,000, or 75.4% increase in other noninterest income. The increase in the gain on sale of loans held for sale was a result of the previously discussed one-to-four family loans sold during the quarter which resulted in a non-recurring $1.3 million gain. In addition, $57.8 million of residential mortgage loans originated for sale were sold with gains of $1.5 million compared to $24.9 million sold and gains of $649,000 in the corresponding quarter in the prior year. During the quarter ended December 31, 2019, $16.5 million of the guaranteed portion of SBA commercial loans were sold with gains of $1.0 million compared to $4.8 million sold and gains of $295,000 in the corresponding quarter in the prior year. The $576,000, 194.8% increase for the quarter in loan income and fees is primarily a result of our adjustable rate conversion program and prepayment fees on equipment finance loans. The $565,000, or 75.5% increase in other noninterest income primarily related to operating lease income from the new equipment finance line of business.

Noninterest income increased $6.0 million, or 56.4% to $16.7 million for the six months ended December 31, 2019 from $10.7 million for the same period in the previous year primarily due to a $3.5 million, or 132.4% increase in the gain on sale of loans held for sale, a $1.1 million, or 181.4% increase in loan income and fees, and a $1.2 million, or 85.9% increase in other noninterest income. In addition to the previously mentioned non-recurring gain on the sale of one-to-four family loans, $103.2 million of residential mortgage loans sold with gains of $2.8 million for the six months ended December 31, 2019, compared to $56.5 million sold and gains of $1.4 million in the corresponding period in the prior year. During the six months ended December 31, 2019, $29.2 million of SBA commercial loans were sold with recorded gains of $2.1 million compared to $17.2 million sold and gains of $1.2 million in the corresponding period in the prior year. The increase in loan income and fees is primarily a result of our adjustable rate conversion program and prepayment fees on equipment finance loans. The increase in other noninterest income primarily related to operating lease income from the equipment finance line of business.

Noninterest expense for the three months ended December 31, 2019 increased $2.2 million, or 10.0% to $24.0 million compared to $21.9 million for the three months ended December 31, 2018. The increase was primarily due to a $1.3 million, or 10.2% increase in salaries and employee benefits as a result of new positions and annual salary increases; an $891,000, or 36.7% increase in other expenses, mainly driven by depreciation from our equipment finance line of business and expenses related to our upcoming core system conversion; a $239,000, or 59.5% increase in marketing and advertising expense, which was used to promote deposit growth and other banking products; a $112,000, or 46.2% increase in real estate owned ("REO") related expenses as a result of  higher pre foreclosure expenses during the quarter, and a $90,000, or 4.7% increase in computer services. Partially offsetting these increases was a decrease of $323,000, or 96.4% in deposit insurance premiums as a result of credits issued by the Federal Deposit Insurance Corporation ("FDIC") and a $153,000, or 29.1% decrease in core deposit intangible amortization for the three months ended December 31, 2019 compared to the same period last year.

Noninterest expense for the six months ended December 31, 2019 increased $3.8 million, or 8.8% to $47.6 million compared to $43.7 million for the six months ended December 31, 2018. The increase was primarily due to a $2.5 million, or 9.9% increase in salaries and employee benefits; a $1.4 million, or 27.8% increase in other expenses, mainly driven by depreciation from our equipment finance line of business; a $501,000, or 61.2% increase in marketing and advertising expense; and a $265,000, or 7.1% increase in computer services. Partially offsetting these increases was a decrease of $627,000, or 98.1% in deposit insurance premiums and a $308,000, or 28.2% decrease in core deposit intangible amortization for the six months ended December 31, 2019 compared to the same period last year.

For the three months ended December 31, 2019, the Company's income tax expense increased $189,000, or 8.3% to $2.5 million from $2.3 million for the corresponding quarter in the previous year as a result of higher taxable income. The effective tax rate for the three months ended December 31, 2019 and 2018 was 21.2% and 22.1%, respectively.

For the six months ended December 31, 2019, the Company's income tax expense increased $373,000, or 8.3% to $4.9 million from $4.5 million for the corresponding period in the previous year as a result of higher taxable income. The effective tax rate for the three months ended December 31, 2019 and 2018 was 21.3% and 22.1%, respectively.

Balance Sheet Review

Total assets and liabilities remained relatively level at $3.5 and $3.1 billion, respectively, at December 31, 2019 compared to June 30, 2019. The funds received from the $154.9 million in one-to-four family loans sold and deposit growth of $230.5 million, or 9.9% were used to pay down $245.0 million, or 36.0% of borrowings, fund the $41.6 million, or 7.8% net increase in cash and cash equivalents, commercial paper, certificates of deposits in other banks, securities available for sale, and other investments at cost for the first six months of fiscal 2020. Loans held for sale include approximately $85.6 million in one-to-four family loans being marketed for sale. The Company is selling these lower rate one-to-four family loans to decrease its loan to deposit ratio while increasing its net interest margin over time. Excluding these one-to-four family loans, loans held for sale increased $14.3 million primarily from $17.3 million of home equity loans originated for sale during the period. Deferred income taxes decreased $4.5 million, or 16.8% to $22.1 million at December 31, 2019 from $26.5 million at June 30, 2019 due to the use of net operating loss carryforwards.

As of July 1, 2019, the Company adopted the new lease accounting standard, which drove several changes on the balance sheet. Land totaling $2.1 million related to the Company's one finance lease (f/k/a capital lease) was reclassed from premises and equipment, net to other assets as a right of use ("ROU") asset and the corresponding liability was reclassed from a separate line on the balance sheet to other liabilities as a lease liability. As of December 31, 2019, the Company has $4.8 million in ROU assets and corresponding lease liabilities, which are maintained in other assets and other liabilities, respectively.

Stockholders' equity at December 31, 2019 increased $8.1 million, or 2.0% to $417.0 million compared to $408.9 million at June 30, 2019. Changes within stockholders' equity included $18.0 million in net income and $1.6 million in stock-based compensation, partially offset by 396,421 shares of common stock repurchased at an average cost of $25.78, or approximately $10.2 million in total, and $2.2 million related to cash dividends declared. As of December 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 $22.0 million, or 0.86% of total loans, at December 31, 2019 compared to $21.4 million, or 0.79% of total loans, at June 30, 2019. The allowance for loan losses to total gross loans excluding acquired loans was 0.92% at December 31, 2019, compared to 0.85% at June 30, 2019. The increase in the ratio of allowance for loan losses to gross loans was driven by approximately $154.9 million of one-to-four family loans being sold, $85.6 million one-to-four loans being transferred to loans held for sale from total loans, and a $602,000 increase in the allowance for loan losses from a $400,000 provision for loan losses and $202,000 in net loan recoveries. The increase in the allowance was mainly driven by one large commercial real estate loan relationship that was moved to nonaccrual during the quarter which resulted in approximately $1.1 million combination of charge-offs and impairments.

There was a $400,000 provision for loan losses for the six months ended December 31, 2019, compared to no provision for the  corresponding period in fiscal year 2019. Net loan recoveries totaled $202,000 for the six months ended December 31, 2019, compared to $359,000 for the same period in fiscal year 2019. Net recoveries as a percentage of average loans were (0.01)% and (0.03)% for the six months ended December 31, 2019 and 2018, respectively.

Nonperforming assets increased by $2.4 million, or 18.5% to $15.7 million, or 0.45% of total assets, at December 31, 2019 compared to $13.3 million, or 0.40% of total assets at June 30, 2019. Nonperforming assets included $14.3 million in nonaccruing loans and $1.5 million in REO at December 31, 2019, compared to $10.4 million and $2.9 million, in nonaccruing loans and REO, respectively, at June 30, 2019. The increase in nonaccruing loans primarily relates to the previously discussed commercial real estate loan relationship that was moved to nonaccrual during the quarter. Included in nonperforming loans are $7.3 million of loans restructured from their original terms of which $5.8 million were current at December 31, 2019, with respect to their modified payment terms. Purchased impaired loans aggregating $1.2 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 0.56% at December 31, 2019 and 0.38% at June 30, 2019.

The ratio of classified assets to total assets increased to 0.90% at December 31, 2019 from 0.89% at June 30, 2019. Classified assets increased to $31.4 million at December 31, 2019 compared to $30.9 million at June 30, 2019. Our overall asset quality metrics continue to demonstrate our commitment to growing and maintaining a loan portfolio with a moderate risk profile.

About HomeTrust Bancshares, Inc.

HomeTrust Bancshares, Inc. is the holding company for HomeTrust Bank. As of December 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 with over 40 locations as well as online/mobile channels. Locations include: North Carolina (including the Asheville metropolitan area, the "Piedmont" region, Charlotte, and Raleigh/Cary), Upstate South Carolina (Greenville), East Tennessee (including Kingsport/Johnson City/Bristol, Knoxville, and Morristown) and Southwest Virginia (including the Roanoke Valley). The Bank is the 2nd largest community bank headquartered in North Carolina.

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements often include words such as "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events, many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially, from those currently expected or projected in these forward-looking statements. Factors that could cause our actual results to differ materially from those described in the forward-looking statements, include increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and other factors described in HomeTrust's latest annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other documents filed with or furnished to the Securities and Exchange Commission - which are available on our website at www.htb.com  and on the SEC's website at www.sec.gov. Any of the forward-looking statements that we make in this press release or the documents we file with or furnish to the SEC are based upon management's beliefs and assumptions at the time they are made and may turn out to be wrong because of inaccurate assumptions we might make, because of the factors described above or because of other factors that we cannot foresee. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for fiscal 2020 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect our operating and stock performance.

WEBSITE: WWW.HOMETRUSTBANCSHARES.COM

Contact:
Dana L. Stonestreet – Chairman, President and Chief Executive Officer
Tony J. VunCannon – Executive Vice President, Chief Financial Officer, Corporate Secretary and Treasurer
828-259-3939


Consolidated Balance Sheets (Unaudited)

(Dollars in thousands)December 31, 2019 September 30, 2019 June 30, 2019(1) March 31, 2019 December 31, 2018
Assets         
Cash$47,213  $52,082  $40,909  $40,633  $44,425 
Interest-bearing deposits41,705  65,011  30,134  37,678  26,881 
Cash and cash equivalents88,918  117,093  71,043  78,311  71,306 
Commercial paper253,794  254,302  241,446  246,903  239,286 
Certificates of deposit in other banks47,628  50,117  52,005  56,209  51,936 
Securities available for sale, at fair value146,022  165,714  121,786  139,112  149,752 
Other investments, at cost36,898  45,900  45,378  51,122  44,858 
Loans held for sale118,055  289,319  18,175  14,745  13,095 
Total loans, net of deferred loan fees2,554,541  2,508,730  2,705,190  2,660,647  2,632,231 
Allowance for loan losses(22,031) (21,314) (21,429) (24,416) (21,419)
Net loans2,532,510  2,487,416  2,683,761  2,636,231  2,610,812 
Premises and equipment, net58,020  58,509  61,051  60,559  66,610 
Accrued interest receivable9,714  10,434  10,533  10,885  10,372 
Real estate owned ("REO")1,451  2,582  2,929  3,003  2,955 
Deferred income taxes22,066  24,257  26,523  28,832  28,533 
Bank owned life insurance ("BOLI")91,048  90,499  90,254  89,663  89,156 
Goodwill25,638  25,638  25,638  25,638  25,638 
Core deposit intangibles1,715  2,088  2,499  2,948  3,436 
Other assets36,755  31,441  23,157  13,576  5,354 
Total Assets$3,470,232  $3,655,309  $3,476,178  $3,457,737  $3,413,099 
Liabilities and Stockholders' Equity         
Liabilities         
Deposits$2,557,769  $2,494,194  $2,327,257  $2,308,395  $2,258,069 
Borrowings435,000  685,000  680,000  680,000  688,000 
Other liabilities60,468  63,047  60,025  62,112  56,060 
Total liabilities3,053,237  3,242,241  3,067,282  3,050,507  3,002,129 
Stockholders' Equity         
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued or outstanding         
Common stock, $0.01 par value, 60,000,000 shares authorized (2)177  178  180  183  185 
Additional paid in capital182,366  186,359  190,315  196,824  203,660 
Retained earnings240,312  232,315  224,545  217,490  215,289 
Unearned Employee Stock Ownership Plan ("ESOP") shares(6,612) (6,744) (6,877) (7,009) (7,142)
Accumulated other comprehensive income (loss)752  960  733  (258) (1,022)
Total stockholders' equity416,995  413,068  408,896  407,230  410,970 
Total Liabilities and Stockholders' Equity$3,470,232  $3,655,309  $3,476,178  $3,457,737  $3,413,099 

_________________________________

(1)Derived from audited financial statements.
(2)Shares of common stock issued and outstanding were 17,664,384 at December 31, 2019; 17,818,145 at September 30, 2019; 17,984,105 at June 30, 2019; 18,265,535 at March 31, 2019; and 18,520,825 at December 31, 2018.

Consolidated Statement of Income (Unaudited)

 Three Months Ended Six Months Ended
 December 31, September 30, December 31, December 31, December 31,
(Dollars in thousands)2019 2019 2018 2019 2018
Interest and Dividend Income         
Loans$32,119  $32,266  $30,544  $64,385  $59,272 
Commercial paper and interest-bearing deposits1,912  2,253  1,966  4,165  3,823 
Securities available for sale1,093  896  876  1,989  1,732 
Other investments772  832  1,014  1,604  1,853 
Total interest and dividend income35,896  36,247  34,400  72,143  66,680 
Interest Expense         
Deposits6,321  5,853  3,607  12,174  6,357 
Borrowings2,541  3,321  3,692  5,862  6,950 
Total interest expense8,862  9,174  7,299  18,036  13,307 
Net Interest Income27,034  27,073  27,101  54,107  53,373 
Provision for Loan Losses400      400   
Net Interest Income after Provision for Loan Losses26,634  27,073  27,101  53,707  53,373 
Noninterest Income         
Service charges and fees on deposit accounts2,605  2,443  2,577  5,048  4,978 
Loan income and fees871  882  295  1,753  623 
Gain on sale of loans held for sale3,775  2,299  944  6,074  2,614 
BOLI income509  697  520  1,206  1,056 
Other, net1,314  1,339  749  2,653  1,427 
Total noninterest income9,074  7,660  5,085  16,734  10,698 
Noninterest Expense         
Salaries and employee benefits14,170  13,912  12,857  28,082  25,542 
Net occupancy expense2,384  2,342  2,425  4,726  4,751 
Computer services1,985  2,024  1,895  4,009  3,744 
Telephone, postage, and supplies798  802  743  1,600  1,512 
Marketing and advertising641  679  402  1,320  819 
Deposit insurance premiums12    335  12  639 
Loss (gain) on sale and impairment of REO122  (19) 75  103  254 
REO expense238  258  173  496  348 
Core deposit intangible amortization373  411  526  784  1,092 
Other3,318  3,124  2,427  6,442  5,040 
Total noninterest expense24,041  23,533  21,858  47,574  43,741 
Income Before Income Taxes11,667  11,200  10,328  22,867  20,330 
Income Tax Expense2,476  2,396  2,287  4,872  4,499 
Net Income$9,191  $8,804  $8,041  $17,995  $15,831 
                    

Per Share Data

 Three Months Ended Six months ended
 December 31, September 30, December 31, December 31, December 31,
 2019 2019 2018 2019 2018
Net income per common share:(1)         
Basic$0.54  $0.51  $0.45  $1.05  $0.88 
Diluted$0.52  $0.49  $0.43  $1.01  $0.84 
Average shares outstanding:         
Basic16,906,457  17,097,647  17,797,553  17,002,052  17,961,465 
Diluted17,567,680  17,753,657  18,497,334  17,660,687  18,689,584 
Book value per share at end of period$23.61  $23.18  $22.19  $23.61  $22.19 
Tangible book value per share at end of period (2)$22.08  $21.65  $20.66  $22.08  $20.66 
Cash dividends declared per common share$0.07  $0.06  $0.06  $0.13  $0.06 
Total shares outstanding at end of period17,664,384  17,818,145  18,520,825  17,664,384  18,520,825 

_________________________________

(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 Six Months Ended
 December 31, September 30, December 31, December 31, December 31,
 2019 2019 2018 2019 2018
Performance ratios: (1)     
Return on assets (ratio of net income to average total assets)1.02% 0.99% 0.95% 1.00% 0.95%
Return on equity (ratio of net income to average equity)8.87  8.57  7.83  8.72  7.69 
Tax equivalent yield on earning assets(2)4.34  4.43  4.45  4.38  4.34 
Rate paid on interest-bearing liabilities1.27  1.33  1.13  1.30  1.04 
Tax equivalent average interest rate spread (2)3.07  3.10  3.32  3.08  3.30 
Tax equivalent net interest margin(2) (3)3.27  3.32  3.51  3.30  3.48 
Average interest-earning assets to average interest-bearing liabilities119.53  119.41  120.48  119.47  121.22 
Operating expense to average total assets2.66  2.64  2.59  2.65  2.61 
Efficiency ratio66.58  67.75  67.91  67.16  68.27 
Efficiency ratio - adjusted (4)66.05  67.20  67.32  66.62  67.67 

_________________________________

(1)Ratios are annualized where appropriate.
(2)The weighted average rate for municipal leases is adjusted for a 24% combined federal and state tax rate, respectively since the interest from these leases is tax exempt.
(3)Net interest income divided by average interest-earning assets.
(4)See Non-GAAP reconciliation tables below for adjustments.
  


  
          
          
          
               
               
               
               
               
               
               
          
               
               
               
 At or For the Three Months Ended
  
          
          
          
               
               
               
               
               
               
               
          
               
               
               
 December 31, September 30, June 30, March 31, December 31,
  
          
          
          
               
               
               
               
               
               
               
          
               
               
               
 2019 2019 2019 2019 2018
  
          
          
          
               
               
               
               
               
               
               
          
               
               
               
Asset quality ratios:         
  
          
          
          
               
               
               
               
               
               
               
          
               
               
               
Nonperforming assets to total assets(1)0.45% 0.37% 0.38% 0.41% 0.37%
  
          
          
          
               
               
               
               
               
               
               
          
               
               
               
Nonperforming loans to total loans(1)0.56  0.43  0.38  0.43  0.37 
  
          
          
          
               
               
               
               
               
               
               
          
               
               
               
Total classified assets to total assets0.90  0.84  0.89  1.00  0.97 
  
          
          
          
               
               
               
               
               
               
               
          
               
               
               
Allowance for loan losses to nonperforming loans(1)154.48  195.88  206.90  215.46  221.45 
  
          
          
          
               
               
               
               
               
               
               
          
               
               
               
Allowance for loan losses to total loans0.86  0.85  0.79  0.92  0.81 
  
          
          
          
               
               
               
               
               
               
               
          
               
               
               
Allowance for loan losses to total gross loans excluding acquired loans(2)0.92  0.92  0.85  0.99  0.89 
  
          
          
          
               
               
               
               
               
               
               
          
               
               
               
Net charge-offs (recoveries) to average loans (annualized)(0.05) 0.02  0.47  0.38  (0.07)
  
          
          
          
               
               
               
               
               
               
               
          
               
               
               
Capital ratios:         
  
          
          
          
               
               
               
               
               
               
               
          
               
               
               
Equity to total assets at end of period12.02% 11.30% 11.76% 11.78% 12.04%
  
          
          
          
               
               
               
               
               
               
               
          
               
               
               
Tangible equity to total tangible assets(2)11.33  10.63  11.06  11.06  11.31 
  
          
          
          
               
               
               
               
               
               
               
          
               
               
               
Average equity to average assets11.52  11.54  11.72  11.93  12.20 

_________________________________

(1)Nonperforming assets include nonaccruing loans, consisting of certain restructured loans, and REO. There were no accruing loans more than 90 days past due at the dates indicated. At December 31, 2019, there were $7.3 million of restructured loans included in nonaccruing loans and $7.6 million, or 53.0% of nonaccruing loans were current on their loan payments. Purchased impaired loans acquired through bank acquisitions are excluded from nonaccruing loans due to the accretion of discounts in accordance with the acquisition method of accounting for business combinations.
(2)See Non-GAAP reconciliation tables below for adjustments.
  

Average Balance Sheet Data

 For the Three Months Ended December 31,
 2019 2018
 Average
Balance
Outstanding
 Interest
Earned/
Paid(2)
 Yield/
Rate(2)
 Average
Balance
Outstanding
 Interest
Earned/
Paid(2)
 Yield/
Rate(2)
(Dollars in thousands) 
Assets:           
Interest-earning assets:           
Loans receivable(1)$2,782,412  $32,409  4.66% $2,610,117  $30,826  4.72%
Commercial paper and deposits in other banks346,376  1,912  2.21% 313,158  1,965  2.51%
Securities available for sale165,577  1,093  2.64% 151,788  876  2.31%
Other interest-earning assets(3)44,398  772  6.95% 44,147  1,015  9.20%
Total interest-earning assets3,338,763  36,186  4.34% 3,119,210  34,682  4.45%
Other assets269,679      250,516     
Total assets$3,608,442      $3,369,726     
Liabilities and equity:           
Interest-bearing deposits:           
Interest-bearing checking accounts455,747  375  0.33% 465,418  302  0.26%
Money market accounts785,374  2,083  1.06% 689,335  1,265  0.73%
Savings accounts168,022  50  0.12% 196,434  63  0.13%
Certificate accounts778,664  3,813  1.96% 564,112  1,977  1.40%
Total interest-bearing deposits2,187,807  6,321  1.16% 1,915,299  3,607  0.75%
Borrowings605,489  2,541  1.68% 673,783  3,692  2.19%
Total interest-bearing liabilities2,793,296  8,862  1.27% 2,589,082  7,299  1.13%
Noninterest-bearing deposits334,732      309,012     
Other liabilities65,812      60,689     
Total liabilities3,193,840      2,958,783     
Stockholders' equity414,602      410,943     
Total liabilities and stockholders' equity$3,608,442      $3,369,726     
            
Net earning assets$545,467      $530,128     
Average interest-earning assets to           
average interest-bearing liabilities119.53%     120.48%    
Tax-equivalent:           
Net interest income  $27,324      $27,383   
Interest rate spread    3.07%     3.32%
Net interest margin(4)    3.27%     3.51%
Non-tax-equivalent:           
Net interest income  $27,034      $27,101   
Interest rate spread    3.03%     3.28%
Net interest margin(4)    3.24%     3.48%

_________________________________

(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 $290 and $282 for the three months ended December 31, 2019 and 2018, respectively, calculated based on a combined federal and state tax rate of 24%.
(3)The average other interest-earning assets consists of FRB stock, FHLB stock, and SBIC investments.
(4)Net interest income divided by average interest-earning assets.
  


 For the Six Months Ended December 31,
 2019 2018
 Average
Balance
Outstanding
 Interest
Earned/
Paid(2)
 Yield/
Rate(2)
 Average
Balance
Outstanding
 Interest
Earned/
Paid(2)
 Yield/
Rate(2)
(Dollars in thousands) 
Assets:           
Interest-earning assets:           
Loans receivable(1)$2,766,022  $64,960  4.70% $2,584,145  $59,837  4.63%
Commercial paper and deposits in other banks354,750  4,165  2.35% 317,219  3,823  2.41%
Securities available for sale152,143  1,989  2.61% 153,019  1,732  2.26%
Other interest-earning assets(3)45,054  1,604  7.12% 43,302  1,853  8.56%
Total interest-earning assets3,317,969  72,718  4.38% 3,097,685  67,245  4.34%
Other assets267,028      248,084     
Total assets$3,584,997      $3,345,769     
Liabilities and equity:           
Interest-bearing liabilities:           
Interest-bearing checking accounts448,636  694  0.31% 462,657  571  0.25%
Money market accounts752,178  3,844  1.02% 683,332  2,222  0.65%
Savings accounts170,207  103  0.12% 202,362  131  0.13%
Certificate accounts761,810  7,533  1.98% 547,310  3,433  1.25%
Total interest-bearing deposits2,132,831  12,174  1.14% 1,895,661  6,357  0.67%
Borrowings644,451  5,862  1.82% 659,821  6,950  2.11%
 Total interest-bearing liabilities2,777,282  18,036  1.30% 2,555,482  13,307  1.04%
Noninterest-bearing deposits330,418      316,397     
Other liabilities64,456      61,985     
Total liabilities3,172,156      2,933,864     
Stockholders' equity412,841      411,905     
Total liabilities and stockholders' equity$3,584,997      $3,345,769     
            
Net earning assets$540,687      $542,203     
Average interest-earning assets to           
average interest-bearing liabilities119.47%     121.22%    
Tax-equivalent:           
Net interest income  $54,682      $53,938   
Interest rate spread    3.08%     3.30%
Net interest margin(4)    3.30%     3.48%
Non-tax-equivalent:           
Net interest income  $54,108      $53,373   
Interest rate spread    3.05%     3.26%
Net interest margin(4)    3.26%     3.45%

_________________________________

(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 $574 and $565 for the six months ended December 31, 2019 and 2018, respectively, calculated based on a combined federal and state tax rate of 24%.
(3)The average other interest-earning assets consists of FRB stock, FHLB stock, and SBIC investments.
(4)Net interest income divided by average interest-earning assets.
  

Loans

(Dollars in thousands)December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018
Retail consumer loans:         
One-to-four family$417,255  $396,649  $660,591  $658,723  $661,374 
HELOCs - originated142,989  141,129  139.435  133,203  135,430 
HELOCs - purchased92,423  104,324  116,972  128,832  138,571 
Construction and land/lots71,901  85,319  80,602  76,153  74,507 
Indirect auto finance142,533  147,808  153,448  162,127  170,516 
Consumer11,102  11,400  11.416  19,374  13,520 
Total retail consumer loans878,203  886,629  1,162,464  1,178,412  1,193,918 
Commercial loans:         
Commercial real estate998,019  990,787  927,261  892,383  904,357 
Construction and development223,839  203,494  210,916  214,511  198,738 
Commercial and industrial152,727  158,706  160,471  154,471  143,201 
Equipment finance185,427  154,479  132,058  109.175  81,380 
Municipal leases115,240  114,382  112,016  112,067  111,135 
Total commercial loans1,675,252  1,621,848  1,542,722  1,482,607  1,438,812 
Total loans2,553,455  2,508,477  2,705,186  2,661,019  2,632,730 
Deferred loan costs (fees), net1,086  253  4  (372) (499)
Total loans, net of deferred loan fees2,554,541  2,508,730  2,705,190  2,660,647  2,632,231 
Allowance for loan losses(22,031) (21,314) (21,429) (24,416) (21,419)
Loans, net$2,532,510  $2,487,416  $2,683,761  $2,636,231  $2,610,812 
                    

Deposits

(Dollars in thousands)December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018
Core deposits:         
Noninterest-bearing accounts$327,320  $327,371  $294,322  $301,083  $300,031 
NOW accounts457,428  449,623  452,295  477,637  474,080 
Money market accounts815,949  769,000  691,172  692,102  703,445 
Savings accounts167,520  169,872  177,278  192,754  192,954 
Total core deposits1,768,217  1,715,866  1,615,067  1,663,576  1,670,510 
Certificates of deposit789,552  778,328  712,190  644,819  587,559 
Total deposits$2,557,769  $2,494,194  $2,327,257  $2,308,395  $2,258,069 
                    

Non-GAAP Reconciliations

In addition to results presented in accordance with generally accepted accounting principles utilized in the United States ("GAAP"), this earnings release contains certain non-GAAP financial measures, which include: the efficiency ratio; tangible book value; tangible book value per share; tangible equity to tangible assets ratio; and the ratio of the allowance for loan losses to total loans excluding acquired loans. The Company believes these non-GAAP financial measures and ratios as presented are useful for both investors and management to understand the effects of certain items and provides an alternative view of the Company's performance over time and in comparison to the Company's competitors. These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for total stockholders' equity or operating results determined in accordance with GAAP.  These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

Set forth below is a reconciliation to GAAP of our efficiency ratio:

    
 Three Months Ended Six Months Ended
(Dollars in thousands)December 31, September 30, December 31, December 31, December 31,
 2019 2019 2018 2019 2018
Noninterest expense$24,041  $23,533  $21,858  $47,574  $43,741 
          
Net interest income$27,034  $27,073  $27,101  $54,107  $53,373 
Plus noninterest income9,074  7,660  5,085  16,734  10,698 
Plus tax equivalent adjustment290  285  282  574  565 
Net interest income plus noninterest income – as adjusted$36,398  $35,018  $32,468  $71,415  $64,636 
Efficiency ratio - adjusted66.05% 67.20% 67.32% 66.62% 67.67%
Efficiency ratio66.58% 67.75% 67.91% 67.16% 68.27%
               

Set forth below is a reconciliation to GAAP of tangible book value and tangible book value per share:

  
 As of
(Dollars in thousands, except per share data)December 31, September 30, June 30, March 31, December 31,
 2019 2019 2019 2019 2018
Total stockholders' equity$416,995  $413,068  $408,896  $407,230  $410,970 
Less: goodwill, core deposit intangibles, net of taxes26,959  27,246  27,562  27,908  28,284 
Tangible book value (1)$390,036  $385,822  $381,334  $379,322  $382,686 
Common shares outstanding17,664,384  17,818,145  17,984,105  18,265,535  18,520,825 
Tangible book value per share$22.08  $21.65  $21.20  $20.77  $20.66 
Book value per share$23.61  $23.18  $22.74  $22.29  $22.19 


(1)Tangible book value is equal to total stockholders' equity less goodwill and core deposit intangibles, net of related deferred tax liabilities.
  

Set forth below is a reconciliation to GAAP of tangible equity to tangible assets:

  
 As of
 December 31, September 30, June 30, March 31, December 31,
 2019 2019 2019 2019 2018
 (Dollars in thousands)
Tangible equity(1)$390,036  $385,822  $381,334  $379,322  $382,686 
Total assets3,470,232  3,655,309  3,476,178  3,457,737  3,413,099 
Less: goodwill, core deposit intangibles, net of taxes26,959  27,246  27,562  27,908  28,284 
Total tangible assets(2)$3,443,273  $3,628,063  $3,448,616  $3,429,829  $3,384,815 
Tangible equity to tangible assets11.33% 10.63% 11.06% 11.06% 11.31%


(1)Tangible equity (or tangible book value) is equal to total stockholders' equity less goodwill and core deposit intangibles, net of related deferred tax liabilities.
(2)Total tangible assets is equal to total assets less goodwill and core deposit intangibles, net of related deferred tax liabilities.
  

Set forth below is a reconciliation to GAAP of the allowance for loan losses to total loans (excluding net deferred loan fees) and the allowance for loan losses as adjusted to exclude acquired loans:

  
 As of
(Dollars in thousands)December 31, September 30, June 30, March 31, December 31,
 2019 2019 2019 2019 2018
Total gross loans receivable (GAAP)$2,553,455  $2,508,477  $2,705,186  $2,661,019  $2,632,730 
Less: acquired loans186,970  206,937  214,046  223,101  236,389 
Adjusted loans (non-GAAP)$2,366,485  $2,301,540  $2,491,140  $2,437,918  $2,396,341 
          
Allowance for loan losses (GAAP)$22,031  $21,314  $21,429  $24,416  $21,419 
Less: allowance for loan losses on acquired loans152  194  201  201  199 
Adjusted allowance for loan losses$21,879  $21,120  $21,228  $24,215  $21,220 
Adjusted allowance for loan losses / Adjusted loans (non-GAAP)0.92% 0.92% 0.85% 0.99% 0.89%

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Source: HomeTrust Bancshares, Inc.