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

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

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

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

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

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

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

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

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

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

Income Statement Review

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

Total interest and dividend income increased $5.3 million, or 18.1% for the three months ended March 31, 2019 as compared to the same period last year, which was primarily driven by a $4.4 million, or 16.8% increase in loan interest income and a $785,000, or 52.4% increase in interest income from commercial paper and interest-bearing deposits in other financial institutions. The additional loan interest income was driven by increases in both the average balance of loans receivable and loan yields compared to the prior year quarter. Average loan yields increased 29 basis points to 4.69% for the quarter ended March 31, 2019 from 4.40% in the corresponding quarter last year primarily due to the impact of increases in the targeted federal funds rate. Partially offsetting the increase in loan interest income was a $412,000, or 47.2% decrease in the accretion of purchase discounts on acquired loans as a result of reduced prepayments as compared to the same quarter last year. For the quarters ended March 31, 2019 and 2018, average loan yields included seven and 14 basis points, respectively, from the accretion of purchase discounts on acquired loans. The incremental accretion and the impact to loan yield will change during any period based on the volume of prepayments, but it is expected to decrease over time as the balance of the purchase discount for acquired loans decreases. The total purchase discount for acquired loans was $7.1 million at March 31, 2019, compared to $7.7 million at December 31, 2018 and $10.0 million at March 31, 2018.

Total interest expense increased $4.1 million, or 101.8% for the quarter ended March 31, 2019 compared to the same period last year. The increase was due to a $2.8 million, or 171.5% increase in deposit interest expense and a $1.3 million, or 55.0% increase in interest expense on borrowings. The additional deposit interest expense was a result of our focus on increasing deposits as the average balance of interest-bearing deposits increased $177.4 million, or 9.8% along with a 53 basis point increase in the average cost of interest-bearing deposits for the quarter ended March 31, 2019 compared to the same quarter last year. Average borrowings for the quarter ended March 31, 2019 increased $7.2 million, or 1.1% and the average cost of borrowings increased 77 basis points compared to the same period last year, driving the increase in interest expense on those borrowings. The overall average cost of funds increased 58 basis points to 1.23% for the current quarter compared to 0.65% in the same quarter last year due primarily to the impact of the previously mentioned interest rate increases on our interest-bearing liabilities.

Net interest income increased $4.5 million, or 6.0% to $80.0 million for the nine months ended March 31, 2019 compared to $75.4 million for the nine months ended March 31, 2018. Average interest-earning assets increased $168.4 million, or 5.7% to $3.1 billion for the nine months ended March 31, 2019 compared to $3.0 billion in the same period in 2018. The $208.7 million, or 8.7% increase in the average balance of loans receivable for the nine months ended March 31, 2019 compared to the same period last year was due primarily to organic loan growth. The average balance of other interest-earning assets increased $45.4 million, or 19.3% between the periods primarily due to increases in commercial paper investments. These increases were mainly funded by the cumulative decrease of $85.8 million, or 26.6% in average interest-earning deposits in other banks and securities available for sale, and an increase in average interest-bearing liabilities of $135.1 million, or 5.5%. Net interest margin (on a fully taxable-equivalent basis) for the nine months ended March 31, 2019 remained consistent at 3.45% compared to the same period last year.

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

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

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

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

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

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

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

For the nine months ended March 31, 2019, the Company’s income tax expense was $4.7 million compared to $24.7 million for the corresponding period last year. The Company’s corporate federal income tax rate for the nine months ended March 31, 2019 and 2018 was 21% and 27.5%, respectively. In the quarter ended December 31, 2017, following a revaluation of net deferred tax assets due to the Tax Act, the Company recorded additional income tax expense of $17.7 million.

Balance Sheet Review

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

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

Asset Quality

The allowance for loan losses was $24.4 million, or 0.92% of total loans, at March 31, 2019 compared to $21.1 million, or 0.83% of total loans, at June 30, 2018. The allowance for loan losses to total gross loans excluding acquired loans was 0.99% at March 31, 2019, compared to 0.91% at June 30, 2018. The increase in the allowance for loan losses is related to the $6.0 million commercial lending relationship discussed above.

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

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

The ratio of classified assets to total assets remained consistent at 1.00% at March 31, 2019 and June 30, 2018. Classified assets increased to $34.5 million at March 31, 2019 compared to $33.1 million at June 30, 2018, due to the inclusion of the commercial lending relationship discussed above. While the previously mentioned significant provision for loan losses negatively affected our earnings, we believe our overall asset quality metrics continue to demonstrate our commitment to growing and maintaining a loan portfolio with a moderate risk profile.

About HomeTrust Bancshares, Inc.

HomeTrust Bancshares, Inc. is the holding company for HomeTrust Bank. As of March 31, 2019, the Company had assets of $3.5 billion. The Bank, founded in 1926, is a North Carolina state chartered, community-focused financial institution committed to providing value added relationship banking through 43 locations as well as online/mobile channels. Locations include: North Carolina (including the Asheville metropolitan area, the “Piedmont” region, Charlotte, and Raleigh/Cary), Upstate South Carolina (Greenville), East Tennessee (including Kingsport/Johnson City/Bristol, Knoxville, and Morristown) and Southwest Virginia (including the Roanoke Valley). The Bank is the 2nd largest community bank headquartered in North Carolina.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements often include words such as “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” Forward-looking statements are not historical facts but instead represent management’s current expectations and forecasts regarding future events, many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially, from those currently expected or projected in these forward-looking statements. Factors that could cause our actual results to differ materially from those described in the forward-looking statements, include expected cost savings, synergies and other financial benefits from our acquisitions  might not be realized within the expected time frames or at all, and costs or difficulties relating to integration matters might be greater than expected; increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and other factors described in HomeTrust’s latest annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other documents filed with or furnished to the Securities and Exchange Commission – which are available on our website at www.htb.com and on the SEC’s website at www.sec.gov. Any of the forward-looking statements that we make in this press release or the documents we file with or furnish to the SEC are based upon management’s beliefs and assumptions at the time they are made and may turn out to be wrong because of inaccurate assumptions we might make, because of the factors described above or because of other factors that we cannot foresee. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for fiscal 2019 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect our operating and stock performance.

WEBSITE: WWW.HOMETRUSTBANCSHARES.COM 

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