ASHEVILLE, N.C., Oct. 30, 2017 — HomeTrust Bancshares, Inc. (NASDAQ:HTBI) (“Company”), the holding company of HomeTrust Bank (“Bank”), today announced preliminary net income of $5.6 million for the quarter ended September 30, 2017, a $1.7 million, or 45.6% increase over net income of $3.8 million for the same period a year ago. The Company’s diluted earnings per share increased $0.08, or 36.4% to $0.30 for the three months ended September 30, 2017 compared to $0.22 per share for the same period in fiscal 2017. The increase in net income largely reflects the acquisition of TriSummit Bancorp, Inc. and its wholly-owned subsidiary TriSummit Bank (“TriSummit”) effective January 1, 2017 and additional increases in net interest income from organic loan growth.
For the quarter ended September 30, 2017 compared to the corresponding quarter in the previous year:
- commercial loan portfolio originations increased $87.1 million, or 113.1% from $77.0 million to $164.1 million;
- retail loan portfolio originations increased $5.8 million, or 7.8% from $74.6 million to $80.4 million; and
- organic net loan growth, which excludes loans acquired through acquisitions and purchases of home equity lines of credit (“HELOCs”), was $43.2 million or 7.9% annualized.
“Our solid performance this quarter continues to demonstrate the successful execution of our strategic plan,” said Dana Stonestreet, Chairman, President, and CEO. “Our strong growth in loans and core deposits along with increased noninterest income and disciplined expense management have led to positive trends across all of our performance ratios. I could not be more proud of the HomeTrust team that continues to capitalize on the momentum in our new growing urban markets that is transforming HomeTrust from a rural mutual savings bank to a regional commercial bank. The cumulative impact of our team’s work over the past five years has positioned the Bank to make fiscal 2018 an inflection point for our financial performance and stockholder returns.”
Income Statement Review
Net interest income was $24.6 million for the quarter ended September 30, 2017 compared to $21.1 million for the comparative quarter in fiscal 2017. The $3.4 million, or 16.3% increase was primarily due to a $5.1 million increase in interest income driven by an increase in average-interest earning assets. Average interest-earning assets increased $391.6 million, or 15.5% to $2.9 billion for the quarter ended September 30, 2017 compared to $2.5 billion for the corresponding quarter in fiscal 2017. The average balance of loans receivable for the quarter ended September 30, 2017 increased $513.4 million, or 27.8% due to the TriSummit acquisition and increased organic net loan growth, which was mainly funded by the cumulative decrease of $121.8 million, or 17.9% in average interest-earning deposits with banks, securities available for sale, and other interest-earning assets, an increase in average deposits of $256.0 million, or 14.2%, and an increase in average Federal Home Loan Bank (“FHLB”) borrowings of $134.2 million, or 25.1% as compared to the same quarter last year. Net interest margin (on a fully taxable-equivalent basis) for the three months ended September 30, 2017 and 2016 was 3.44%. We continue to utilize our leveraging strategy, where additional short-term FHLB borrowings are invested in various short-term liquid assets to generate additional net interest income, as well as increased dividend income from the required purchase of additional FHLB stock. During the three months ended September 30, 2017 our leveraging strategy produced an additional $967,000 in interest income at an average yield of 1.58%, while the average cost of the borrowings was 1.18%, resulting in approximately $245,000 in net interest income. During the same quarter in the prior fiscal year, our leveraging strategy produced an additional $999,000 in interest income at an average yield of 1.01%, while the average cost of the borrowings was 0.42%, resulting in approximately $589,000 in net interest income. Excluding the effects of the leveraging strategy, the net interest margin would be 3.72% and 3.97% for the quarters ended September 30, 2017 and 2016, respectively.
Total interest income increased $5.1 million, or 22.4% for the three months ended September 30, 2017 as compared to the same period last year, which was primarily driven by a $4.8 million, or 23.3% increase in loan interest income. The additional loan interest income was primarily due to the increase in the average balance of loans receivable which was partially offset by a $1.1 million, or 57.6% decrease in the accretion of purchase discounts on acquired loans to $775,000 for the quarter ended September 30, 2017 from $1.8 million for the same quarter in fiscal 2017, as a result of full repayments of several loans with large discounts in the previous fiscal year. This decrease in purchase discount accretion led to a 19 basis point decrease in average loan yields to 4.37% for the quarter ended September 30, 2017 from 4.56% in the corresponding quarter last year. Excluding the effects of the accretion on purchase discounts on acquired loans, loan yields increased eight basis points to 4.24% for the quarter ended September 30, 2017 compared to 4.16% in the same period last year.
Total interest expense increased $1.7 million, or 100.4% for the quarter ended September 30, 2017 compared to the same period last year. This increase was primarily related to average borrowings, consisting of short-term FHLB advances, increasing by $134.2 million to $668.1 million primarily due to funding for loan growth as well as a 76 basis point increase in the average cost of borrowings during the quarter as compared to the same quarter last year. In addition, the TriSummit acquisition and recent deposit marketing initiatives contributed to a $186.9 million increase in the average balance of interest-bearing deposits. The overall average cost of funds increased 24 basis points to 0.55% for the current quarter as compared to the same quarter last year due primarily to the impact of the recent increases in the federal funds rate on our borrowings.
Noninterest income increased $336,000, or 7.9% to $4.6 million for the three months ended September 30, 2017 from $4.2 million for the same period in the previous year, primarily due to a $125,000, or 6.5% increase in service charges on deposit accounts, a $126,000, or 12.9% increase in loan income from the gain on the sale of mortgage loans and various commercial loan-related fees, and a $306,000, or 75.9% increase in other income primarily driven by gains on an investment in a small business investment company.
Noninterest expense for the three months ended September 30, 2017 increased $2.0 million, or 10.2% to $21.1 million compared to $19.1 million for the three months ended September 30, 2016. Salaries and employee benefits increased $1.7 million, or 15.5% primarily as a result of the TriSummit acquisition and a $434,000 increase in stock-based compensation expense primarily driven by the increase in the Company’s stock price during the three months ended September 30, 2017 compared to the same period in fiscal 2017. In addition, the TriSummit acquisition led to additional noninterest expenses as shown in the cumulative increase of $775,000, or 9.9% in net occupancy expense, core deposit intangible amortization, and other expenses. These increases in noninterest expense were partially offset by the absence of $307,000 in merger-related expenses, and a $178,000, or 65.2% decrease in real estate owned (“REO”) related expenses for the quarter ended September 30, 2017 compared to the same period last year. We continue to actively market our REO properties in an effort to minimize holding costs.
For the three months ended September 30, 2017, the Company’s income tax expense was $2.5 million, an increase of $86,000, or 3.5% compared to $2.4 million for the three months ended September 30, 2016, reflecting an increase in taxable income. For the three months ended September 30, 2017 and 2016, the Company incurred a charge of $133,000 and $490,000 related to the decrease in value of our deferred tax assets based on decreases in North Carolina’s corporate tax rate. The Company’s effective income tax rate for the three months ended September 30, 2017 was 31.1% compared to 38.8% for the three months ended September 30, 2016.
Balance Sheet Review
Total assets were $3.2 billion at September 30, 2017 as well as June 30, 2017. Total liabilities remained constant as well at $2.8 billion at both dates. Deposit growth of $51.9 million, or 2.5% and the cumulative decrease of $47.5 million, or 11.3% in cash and cash equivalents, certificates of deposits in other banks, and securities available for sale during the first quarter of fiscal 2018 were used to fund the $43.3 million, or 1.8% increase in total loans, the $49.9 million, or 33.3% increase in commercial paper, and reduce borrowings by $16.7 million, or 2.4%. The increase in net loans receivable was driven by $43.2 million of organic net loan growth. The increase of $2.2 million in loans held for sale was a result of volume increases from our expanded mortgage operations into newer market areas.
Total deposits increased $51.9 million, or 2.5%, during the quarter to $2.1 billion at September 30, 2017. The increase was primarily due to an increase of $56.1 million in our core deposits (which excludes certificates of deposit) as a result of recent deposit gathering initiatives, which were partially offset by a $4.3 million managed run off in our higher costing certificates of deposit and brokered deposits.
Stockholders’ equity at September 30, 2017 increased $7.8 million, or 2.0% to $405.5 million from $397.6 million at June 30, 2017. The increase was primarily driven by $5.6 million in net income, $1.2 million representing stock-based compensation, and $680,000 in a cumulative adjustment for the adoption of Accounting Standard Update 2016-09, “Improvements to Employee Share-Based Payment Accounting.” As of September 30, 2017, HomeTrust Bank was considered “well capitalized” in accordance with its regulatory capital guidelines and exceeded all regulatory capital requirements with Common Equity Tier 1, Tier 1 Risk-Based, Total Risk-Based, and Tier 1 Leverage capital ratios of 11.53%, 11.53%, 12.35%, and 10.05%, respectively. In addition, the Company exceeded all regulatory capital requirements as of that date.
The allowance for loan losses was $22.0 million, or 0.92% of total loans, at September 30, 2017 compared to $21.2 million, or 0.90% of total loans, at June 30, 2017. The allowance for loan losses to total gross loans excluding acquired loans was 1.01% at September 30, 2017, compared to 1.03% at June 30, 2017.
There was no provision for losses on loans for the three months ended September 30, 2017 and 2016. Net loan recoveries totaled $846,000 for the three months ended September 30, 2017 compared to net charge-offs of $341,000 for the same period during the prior fiscal year. Net recoveries as a percentage of average loans increased to (0.14)% for the quarter ended September 30, 2017 from net charge-offs of 0.07% for the same period last fiscal year.
Nonperforming assets remained constant at $20.0 million, or 0.62% of total assets, at September 30, 2017 and June 30, 2017, and were $22.7 million, or 0.82% of total assets, a year ago. Nonperforming assets included $14.1 million in nonaccruing loans and $5.9 million in REO at September 30, 2017, compared to $13.7 million and $6.3 million, in nonaccruing loans and REO, respectively, at June 30, 2017. Included in nonperforming loans are $5.2 million of loans restructured from their original terms of which $3.1 million were current at September 30, 2017, with respect to their modified payment terms. At September 30, 2017, $5.6 million, or 40.1% of nonaccruing loans were current on their required loan payments. Purchased impaired loans aggregating $6.5 million acquired from 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 0.59% at September 30, 2017 compared to 0.58% at June 30, 2017, and 0.90% at September 30, 2016.
The ratio of classified assets to total assets decreased to 1.50% at September 30, 2017 from 1.57% at June 30, 2017. Classified assets decreased 3.0% to $48.7 million at September 30, 2017 compared to $50.2 million at June 30, 2017 and were $57.1 million at September 30, 2016. Our overall asset quality metrics continue to demonstrate our commitment to growing and maintaining a high quality loan portfolio.
About HomeTrust Bancshares, Inc.
HomeTrust Bancshares, Inc. is the holding company for HomeTrust Bank. As of September 30, 2017, the Company had assets of $3.2 billion. The Bank, founded in 1926, is a North Carolina state chartered, community-focused financial institution committed to providing value added relationship banking through 42 locations as well as online/mobile channels. Locations include: North Carolina (including the Asheville metropolitan area, the “Piedmont” region, Charlotte, 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.
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 acquisition of TriSummit 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.hometrustbanking.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 2018 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.
Dana L. Stonestreet – Chairman, President and Chief Executive Officer
Tony J. VunCannon – Executive Vice President, Chief Financial Officer, and Treasurer