ASHEVILLE, N.C., Oct. 29, 2018 — HomeTrust Bancshares, Inc. (NASDAQ: HTBI) (“Company”), the holding company of HomeTrust Bank (“Bank”), today announced preliminary net income of $7.8 million for the quarter ended September 30, 2018, a $2.2 million, or 39.9% increase over net income of $5.6 million for the same period a year ago. The Company’s diluted earnings per share increased $0.11, or 36.7% to $0.41 for the three months ended September 30, 2018 compared to $0.30 for the same period in fiscal 2018.
In addition to the almost 40% increase in earnings, highlights for the quarter ended September 30, 2018 compared to the corresponding quarter in the previous year include:
- Return on assets increased to 0.94%, or 34.3% from 0.70%;
- Net interest income increased $1.6 million, or 6.4% to $26.3 million from $24.7 million;
- Noninterest income increased $1.4 million, or 31.7% to $5.6 million from $4.3 million;
- Organic net loan growth, which excludes purchases of home equity lines of credit, was $76.8 million, or 13.0% annualized compared to $43.2 million, or 7.9% annualized for the same quarter last year; and
- Resuming our stock buyback program with the repurchase of 128,300 shares of common stock at an average share price of $29.03.
“Record net income for the first quarter of fiscal 2019 reflects our continued momentum and the impact of our new lines of business. The gain on sale of SBA loans produced $898,000 of fee income and equipment finance originated almost $33 million in loans for the quarter,” said Dana Stonestreet, Chairman, President, and Chief Executive Officer. “The cumulative impact of all that our team has accomplished, coupled with the addition of high performing revenue producers in our attractive markets, continues our inflection point for growth in revenue, earnings and shareholder value.”
Income Statement Review
Net interest income increased to $26.3 million for the quarter ended September 30, 2018 compared to $24.7 million for the comparative quarter in fiscal 2018. The $1.6 million or 6.4% increase was primarily due to a $4.3 million increase in interest and dividend income driven by an increase in average interest-earning assets, which was partially offset by a $2.7 million increase in interest expense. Average interest-earning assets increased $156.9 million, or 5.4% to $3.1 billion for the quarter ended September 30, 2018 compared to $2.9 billion for the corresponding quarter in fiscal 2018. For the quarter ended September 30, 2018, the average balance of total loans receivable increased $196.4 million, or 8.3% primarily due to organic loan growth. The average balance of other interest-earning assets increased $62.8 million, or 30.1% primarily due to increases in commercial paper investments. These increases were mainly funded by the cumulative decrease of $102.3 million, or 29.3% in average interest-earning deposits in other banks and investment securities, and an increase in average interest-bearing liabilities of $102.8 million, or 4.3% as compared to the same quarter last year. Net interest margin (on a fully taxable-equivalent basis) for the three months ended September 30, 2018 increased slightly to 3.45% from 3.44% for the same period a year ago.
Total interest and dividend income increased $4.3 million, or 15.2% for the three months ended September 30, 2018 as compared to the same period last year, which was primarily driven by a $3.5 million, or 13.8% increase in loan interest income and a $688,000, or 58.9% increase in interest income from certificates of deposit and other interest-bearing deposits including commercial paper. The additional loan interest income was driven by the increase in the average balance of loans receivable and loan yields compared to the prior year quarter. Average loan yields increased 17 basis points to 4.54% for the quarter ended September 30, 2018 from 4.37% in the corresponding quarter from last year primarily due to the impact of the recent increases in the targeted federal funds rate. Partially offsetting the increase in loan interest income was a $404,000, or 52.1% 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 September 30, 2018 and 2017, the average loan yields included six and 13 basis points, respectively, from the accretion of purchase discounts on acquired loans.
Total interest expense increased $2.7 million, or 81.2% for the quarter ended September 30, 2018 compared to the same period last year. The increase was driven by a $1.4 million, or 104.3% increase in deposit interest expense and a $1.3 million, or 65.5% 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 deposits increased $125.1 million along with a 28 basis point increase in the average cost of deposits for the quarter ended September 30, 2018 compared to the same quarter last year. The decrease in average borrowings was more than offset by the 84 basis point increase in the average cost of borrowings during the three months ended September 30, 2018 as compared to the same period last year, which drove the increase in interest expense. The overall average cost of funds increased 40 basis points to 0.95% for the current quarter as compared to the same quarter last year due primarily to the impact of the previously mentioned interest rate increases on our borrowings.
Noninterest income increased $1.4 million, or 31.7% to $5.6 million for the three months ended September 30, 2018 from $4.3 million for the same period in the previous year. The leading factors of the increase included a $557,000, or 30.2% increase in service charges on deposit accounts as a result of an increase in deposit accounts and related fees; an $896,000, or 81.3% increase in loan income and fees driven by an $883,000 increase in fees from the originations and sales of the guaranteed portion of U.S Small Business Administration (“SBA”) commercial loans; and an $88,000, or 14.9% increase in other noninterest income. Partially offsetting these increases was a $164,000 decline in gains from the sale of premises and equipment for the three months ended September 30, 2018 compared to the same period last year as there were no sales occurring during the current quarter.
Noninterest expense for the three months ended September 30, 2018 increased $997,000, or 4.8% to $21.9 million compared to $20.9 million for the three months ended September 30, 2017. The increase was primarily due to a $333,000, or 2.7% increase in salaries and employee benefits; a $304,000, or 19.7% increase in computer services; a $319,000, or 14.0% increase in other expenses, and a $259,000 increase in real estate owned (“REO”) related expenses for the quarter ended September 30, 2018 compared to the quarter ended September 30, 2017. Partially offsetting these increases was the cumulative decrease of $192,000 or 5.5% in net occupancy expense; marketing and advertising; and core deposit amortization for the three months ended September 30, 2018 compared to the same period last year. Deposit insurance premiums decreased $110,000, or 26.6% due to reduced premiums as a result of higher levels of capital and lower nonaccrual loans. For the three months ended September 30, 2018, there was a $179,000 loss on REO sales compared to a $146,000 gain in the corresponding quarter last year offsetting the $66,000 decrease in REO expenses as a result of fewer REO properties held.
For the three months ended September 30, 2018, the Company’s income tax expense declined to $2.2 million compared to $2.5 million for the three months ended September 30, 2017 despite the increase in pretax income. The Company’s federal income tax provision for the three months ended September 30, 2018 benefited from the impact of the Tax Cuts and Jobs Act enacted in December 2017 that lowered the corporate income tax rate from 34% to 21%.
Balance Sheet Review
Total assets increased $49.8 million, or 1.5% to $3.4 billion at September 30, 2018 from $3.3 billion at June 30, 2018. Total liabilities remained level at $2.9 billion at both September 30, 2018 and June 30, 2018. Deposit growth of $6.8 million, or 0.3%; a $40.0 million, or 6.3% increase in borrowings; and the cumulative decrease of $26.8 million, or 9.2% in cash and cash equivalents, certificates of deposit in other banks and investment securities were used to partially fund the $61.3 million, or 2.4% increase in total loans receivable, net of deferred loan fees and the $9.2 million, or 4.0% increase in commercial paper during the first three months of fiscal 2019. The increase in net loans receivable was driven by $76.8 million, or 13.0% annualized rate of organic loan growth partially offset by loan repayments. The $44.9 million, or 30.2% increase in commercial and industrial loans was driven by our new equipment finance line of business. The $4.9 million, or 83.4% increase in loans held for sale was due primarily to SBA loans originated during the period.
Stockholders’ equity at September 30, 2018 increased $4.9 million, or 1.2% to $414.2 million from $409.2 million at June 30, 2018. The increase was due to $7.8 million in net income and $768,000 in stock-based compensation, partially offset by 128,300 shares of common stock repurchased at an average cost of $29.03, or approximately $3.7 million in total and a $291,000 decrease in other comprehensive income representing unrealized losses on investment securities, net of tax. As of September 30, 2018, HomeTrust Bank was considered “well capitalized” in accordance with its regulatory capital guidelines and exceeded all regulatory capital requirements with Common Equity Tier 1, Tier 1 Risk-Based, Total Risk-Based, and Tier 1 Leverage capital ratios of 11.72%, 11.72%, 12.44%, and 10.52%, respectively. In addition, the Company exceeded all regulatory capital requirements as of that date.
The allowance for loan losses was $20.9 million, or 0.81% of total loans, at September 30, 2018 compared to $21.1 million, or 0.83% of total loans, at June 30, 2018. The allowance for loan losses to total gross loans excluding acquired loans was 0.88% at September 30, 2018, compared to 0.91% at June 30, 2018.
There was no provision for losses on loans for the three months ended September 30, 2018 and 2017 reflecting the decline in nonaccruing and classified loans offset by loan growth. Net loan charge-offs totaled $128,000 for the three months ended September 30, 2018, compared to net loan recoveries of $846,000 for the same period in fiscal 2018. Net charge-offs as a percentage of average loans increased to 0.02% for the three months ended September 30, 2018 from net recoveries of (0.14)% for the same period last year.
Nonperforming assets decreased $1.2 million, or 8.2% to $13.4 million, or 0.40% of total assets, at September 30, 2018 compared to $14.6 million, or 0.44% of total assets at June 30, 2018. Nonperforming assets included $10.1 million in nonaccruing loans and $3.3 million in REO at September 30, 2018, compared to $10.9 million and $3.7 million, in nonaccruing loans and REO, respectively, at June 30, 2018. Included in nonperforming loans are $4.0 million of loans restructured from their original terms of which $2.3 million were current at September 30, 2018, with respect to their modified payment terms. At September 30, 2018, $5.5 million, or 54.4% of nonaccruing loans were current on their required loan payments. Purchased impaired loans aggregating $2.9 million obtained through prior acquisitions are excluded from nonaccruing loans due to the accretion of discounts established in accordance with the acquisition method of accounting for business combinations. Nonperforming loans to total loans was 0.39% at September 30, 2018 compared to 0.43% at June 30, 2018.
The ratio of classified assets to total assets decreased to 0.93% at September 30, 2018 from 1.00% at June 30, 2018. Classified assets decreased 6.1% to $31.0 million at September 30, 2018 compared to $33.1 million at June 30, 2018. Our overall asset quality metrics continue to demonstrate our commitment to growing and maintaining a loan portfolio with a moderate risk profile.
About HomeTrust Bancshares, Inc.
HomeTrust Bancshares, Inc. is the holding company for HomeTrust Bank. As of September 30, 2018, the Company had assets of $3.4 billion. The Bank, founded in 1926, is a North Carolina state chartered, community-focused financial institution committed to providing value added relationship banking through 43 locations as well as online/mobile channels. Locations include: North Carolina (including the Asheville metropolitan area, the “Piedmont” region, Charlotte, and Raleigh/Cary), Upstate South Carolina (Greenville), East Tennessee (including Kingsport/Johnson City/Bristol, Knoxville, and Morristown) and Southwest Virginia (including the Roanoke Valley). The Bank is the 2nd largest community bank headquartered in North Carolina.
This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements often include words such as “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” Forward-looking statements are not historical facts but instead represent management’s current expectations and forecasts regarding future events, many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially, from those currently expected or projected in these forward-looking statements. Factors that could cause our actual results to differ materially from those described in the forward-looking statements, include expected cost savings, synergies and other financial benefits from our acquisitions might not be realized within the expected time frames or at all, and costs or difficulties relating to integration matters might be greater than expected; increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and other factors described in HomeTrust’s latest annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other documents filed with or furnished to the Securities and Exchange Commission – which are available on our website at www.htb.com and on the SEC’s website at www.sec.gov. Any of the forward-looking statements that we make in this press release or the documents we file with or furnish to the SEC are based upon management’s beliefs and assumptions at the time they are made and may turn out to be wrong because of inaccurate assumptions we might make, because of the factors described above or because of other factors that we cannot foresee. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for fiscal 2019 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect our operating and stock performance.
Dana L. Stonestreet – Chairman, President and Chief Executive Officer
Tony J. VunCannon – Executive Vice President, Chief Financial Officer, and Treasurer