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HomeTrust Bancshares, Inc. Reports Financial Results For The Second Quarter Of Fiscal 2018

ASHEVILLE, N.C., Jan. 29, 2018 — HomeTrust Bancshares, Inc. (NASDAQ:HTBI) (“Company”), the holding company of HomeTrust Bank (“Bank”), today announced a preliminary net loss of $10.7 million for the quarter ended December 31, 2017, driven by an estimated $17.7 million deferred tax revaluation resulting from enactment of the Tax Cuts and Jobs Act (the “Tax Act”), compared to net income of $3.0 million for the same period a year ago. The Company’s diluted loss per share was $0.59 for the three months ended December 31, 2017 compared to earnings per share of $0.17 for the same period in fiscal 2017. Loss on assets was 1.31% for the three months ended December 31, 2017 compared to a return on assets of 0.43% for the same period in fiscal 2017. Net loss totaled $5.1 million for the six months ended December 31, 2017, compared to net income of $6.8 million for the same period in fiscal 2017. Diluted loss per share was $0.28 for the six months ended December 31, 2017 compared to earnings per share of $0.39 for the same period last year. Loss on assets was 0.32% for the six months ended December 31, 2017 compared to a return on assets of 0.49% for the same period in fiscal 2017. The Tax Act, which among other things, reduced the federal corporate tax rate to 21% effective January 1, 2018 requiring the Company to revalue net deferred tax assets. The resulting estimated $17.7 million deferred tax revaluation was reflected as an increase to the Company’s income tax expense.

For the quarter ended December 31, 2017 compared to the corresponding quarter in the previous year and before the change in the federal tax rate and prior year merger-related expenses:

  • net income increased 134.2% to $7.0 million from $3.0 million;
  • diluted earnings per share increased 123.5% to $0.38 from $0.17; and
  • return on assets increased 100.0% to 0.86% from 0.43%.

For the six months ended December 31, 2017 compared to the same period a year ago and before the change in the federal tax rate, merger-related expenses, certain state income tax expenses, and gains from the sale of premises and equipment:

  • net income increased 72.9% to $12.6 million from $7.3 million;
  • diluted earnings per share increased 58.1% to $0.68 from $0.43; and
  • return on assets increased 47.2% to 0.78% from 0.53%.

“The cumulative impact of our team’s work over the past five years continues to position HomeTrust to make fiscal 2018 an inflection point for our financial performance as evidenced by our core results for the quarter end and year-to-date December 2017,” said Dana Stonestreet, Chairman, President, and CEO. “The increase in core earnings continues to reflect the execution of our strategic plan, organic loan growth, and our successful integration of TriSummit Bank (“TriSummit”) during 2017. While strategic acquisitions have played a key role in expanding our markets, our continued growth is not dependent on mergers and acquisition activity – we are focused on leveraging our new teams of revenue producers in our expanded footprint to continue our solid growth.  In the past twelve months, we have hired 22 revenue producers and expect to add another 15 in the year ahead.  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.”

Income Statement Review

Net interest income was $25.2 million for the quarter ended December 31, 2017 compared to $20.4 million for the comparative quarter in fiscal 2017. The $4.8 million, or 23.6% increase was primarily due to a $6.8 million increase in interest and dividend income driven by an increase in average interest-earning assets. Average interest-earning assets increased $452.9 million, or 18.0% to $3.0 billion for the quarter ended December 31, 2017 compared to $2.5 billion for the corresponding quarter in fiscal 2017. The average balance of loans receivable for the quarter ended December 31, 2017 increased $495.9 million, or 26.0% due to the TriSummit acquisition and organic net loan growth, which was mainly funded by the cumulative decrease of $43.0 million, or 7.0% in average interest-earning deposits with banks, securities available for sale, and other interest-earning assets, an increase in average deposits of $307.9 million, or 17.2%, and an increase in average Federal Home Loan Bank (“FHLB”) borrowings of $130.7 million, or 23.9% as compared to the same quarter last year. Net interest margin (on a fully taxable-equivalent basis) for the three months ended December 31, 2017 increased to 3.44% from 3.33% for the same period a year ago. We continue to utilize our leveraging strategy, where designated short-term FHLB borrowings are invested in various short-term liquid assets to generate additional net interest income, as well as the required purchase of additional FHLB stock which generates increased dividend income. During the three months ended December 31, 2017 our leveraging strategy produced an additional $1.1 million in interest and dividend income at an average yield of 1.66%, while the average cost of the borrowings was 1.23%, resulting in approximately $274,000 in net interest income. During the same quarter in the prior fiscal year, our leveraging strategy produced an additional $908,000 in interest and dividend income at an average yield of 1.07%, while the average cost of the borrowings was 0.44%, resulting in approximately $530,000 in net interest income. Excluding the effects of the leveraging strategy, the tax equivalent net interest margin would be 3.73% and 3.75% for the quarters ended December 31, 2017 and 2016, respectively.

Total interest and dividend income increased $6.8 million, or 30.8% for the three months ended December 31, 2017 as compared to the same period last year, which was primarily driven by a $6.3 million, or 31.6% increase in loan interest income, a $364,000, or 38.8% increase in certificates of deposit and other interest-bearing deposits, and a $110,000, or 28.1% increase in other investment income. The additional loan interest income was primarily due to the increase in the average balance of loans receivable as well as an increase in the average loan yields due to increases in the federal funds rate over the past 12 months. Average loan yields increased 13 basis points to 4.41% for the quarter ended December 31, 2017 from 4.28% in the corresponding quarter from last year. In addition, there was a $146,000, or 18.9% increase in the accretion of purchase discounts on acquired loans to $920,000 for the quarter ended December 31, 2017 from $774,000 for the same quarter in fiscal 2017 as a result of prepayments. For the quarters ended December 31, 2017 and 2016, the average loan yields included 15 and 16 basis points, respectively, from the accretion of purchase discounts on acquired loans.

Total interest expense increased $2.0 million, or 119.5% for the quarter ended December 31, 2017 compared to the same period last year. This increase was primarily related to the TriSummit acquisition and recent deposit gathering initiatives contributing to a $250.9 million, or 16.3% increase in the average balance of interest-bearing deposits. In addition, average borrowings, consisting primarily of short-term FHLB advances, increased by $130.7 million to $677.0 million due to funding for loan growth along with a 78 basis point increase in the average cost of such borrowings during the quarter as compared to the same quarter last year. The overall average cost of funds increased 27 basis points to 0.58% 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.

Net interest income increased $8.3 million or 19.9% to $49.8 million for the six months ended December 31, 2017 compared to $41.6 million for the six months ended December 31, 2016. Average interest-earning assets increased $422.2 million, or 16.7% to $2.9 billion for the six months ended December 31, 2017 compared to $2.5 billion in the same period in 2016. The $504.7 million, or 26.9% increase in average balance of loans receivable for the six months ended December 31, 2017 was due to the TriSummit acquisition and increased organic loan growth, which was mainly funded by the cumulative decrease of $82.4 million, or 12.8% in average interest-earning deposits with banks, securities available for sale, and other interest-earning assets and an increase in average deposits of 282.0 million, or 15.7% and an increase in average FHLB borrowings of $132.4 million, or 24.5%. Net interest margin (on a fully taxable-equivalent basis) for the six months ended December 31, 2017 increased five basis points to 3.43% from 3.38% for last year. For the six months ended December 31, 2017, our leveraging strategy produced an additional $2.0 million in interest and dividend income at an average yield of 1.62%, while the average cost of the borrowings was 1.20%, resulting in approximately $519,000 in net interest income. Our leveraging strategy produced an additional $1.9 million in interest and dividend income at an average yield of 1.04% during the corresponding period in fiscal 2017, while the average cost of the borrowings was 0.43%, resulting in approximately $1.1 million in net interest income. Excluding the effects of the leveraging strategy, the tax equivalent net interest margin would be 3.71% and 3.86% for the six months ended December 31, 2017 and 2016, respectively.

Total interest income increased $11.9 million, or 26.5% for the six months ended December 31, 2017 as compared to the same period last year. The increase was primarily driven by an $11.0 million, or 27.4% increase in loan interest income, a $490,000, or 24.7% increase in certificates of deposit and other interest-bearing deposits, and a $229,000, or 29.4% increase in other investment 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 $908,000 decrease in the accretion of purchase discounts on acquired loans to $1.7 million for the six months ended December 31, 2017 from $2.6 million for the same period in fiscal 2017, as a result of full repayments of several loans with large discounts in the previous year. Overall, average loan yields decreased four basis points to 4.38% for the six months ended December 31, 2017 from 4.42% in fiscal 2017. Excluding the effects of the accretion on purchase discounts on acquired loans, loan yields increased nine basis points to 4.23% for the six months ended December 31, 2017 compared to 4.14% in the same period last year.

Total interest expense increased $3.6 million, or 110.0% for the six months ended December 31, 2017 compared to the same period last year. This increase was primarily related to the increase in average borrowings and the corresponding 77 basis point increase in the average cost of those borrowings, resulting in additional interest expense of $2.9 million for the six months ended December 31, 2017 as compared to the same period in the prior year. The overall increase in average interest-bearing deposits and the seven basis point increase in cost of funds resulted in an additional $747,000 in interest expense for the six months ended December 31, 2017 compared to the corresponding period last year.

Noninterest income increased $846,000, or 21.5% to $4.8 million for the three months ended December 31, 2017 from $3.9 million for the same period in the previous year. The leading factors of the increase included a $299,000, or 15.9% increase in service charges on deposit accounts as a result of the increase in deposit accounts as well as a $424,000, or 45.3% increase in loan income from the gain on sale of mortgage loans and various commercial loan-related fees driven by the new SBA loan line of business.

Noninterest income increased $1.2 million, or 14.4% to $9.4 million for the six months ended December 31, 2017 from $8.2 million for the same period, primarily due to a $424,000, or 11.2% increase in service charges on deposit accounts; a $549,000, or 28.7% increase in loan income from the gain on sale of mortgage loans and various commercial loan-related fees; and $414,000, or 40.6% increase in other income. Partially offsetting these increases was a $221,000, or 57.4% decrease in gains from the sale of fixed assets for the six months ended December 31, 2017 compared to the same period last year.

Noninterest expense for the three months ended December 31, 2017 increased $695,000, or 3.4% to $21.2 million compared to $20.5 million for the three months ended December 31, 2016. The TriSummit acquisition led to additional noninterest expenses as shown in the cumulative increase of $973,000, or 17.4% in net occupancy expense; telephone, postage,and supplies; core deposit intangible amortization; and other expenses. Deposit insurance premiums increased $216,000, or 106.4% as the net asset base has increased. These increases in noninterest expense were partially offset by the absence of $27,000 in merger-related expenses, a $140,000, or 30.5% decrease in marketing and advertising expense, and a $408,000, or 56.9% decrease in real estate owned (“REO”) related expenses for the quarter ended December 31, 2017 compared to the same period last year. For the three months ended December 31, 2017, there was a $235,000 decrease on writedowns and losses from REO sales compared to the corresponding quarter last year; and a $173,000 decrease in REO expenses as a result of fewer REO properties held.

Noninterest expense for the six months ended December 31, 2017 increased $2.6 million, or 6.7% to $42.3 million compared to $39.6 million for the six months ended December 31, 2016. Salaries and employee benefits increased $1.8 million, or 8.0% primarily as a result of the TriSummit acquisition. The TriSummit acquisition was the leading factor in the $1.5 million, or 13.0% cumulative increase in net occupancy expense; telephone, postage,and supplies; core deposit intangible amortization; and other expenses. Partially offsetting these increases was the absence of $334,000 in merger-related expenses, and a $587,000, or 59.2% decrease in REO related expenses for the six months ended December 31, 2017 compared to the same period last year, which was driven by a $42,000 gain on the sale of REO compared to a $469,000 loss on the sale of REO in the corresponding period in the prior year.

For the three months ended December 31, 2017, the Company’s income tax expense was $19.5 million compared to $893,000 for the three months ended December 31, 2016, which was a direct result of the Tax Act. As previously mentioned, the reduction in the corporate tax rate required the Company to revalue net deferred tax assets, resulting in a $17.7 million adjustment through income tax expense. In addition, our June 30 fiscal year end required the use of a blended rate as prescribed by the Internal Revenue Code. The blended federal rate of 27.5% was effective retroactively to July 1, 2017 and will be used for the entire fiscal year ended June 30, 2018.  As a result of this blended rate, income tax expense for the quarter ended December 31, 2017 includes approximately $418,000 in tax benefit from adjusting the federal income tax rate to 27.5% from 34% for the first quarter of the fiscal year. Excluding the effect of the revaluation of net deferred tax assets, the additional income tax expense was due to higher taxable income.

For the six months ended December 31, 2017, the Company’s income tax expense was $22.0 million compared to $3.3 million for the corresponding period last year as a result of the deferred tax revaluation and to a lesser extent, higher taxable income. In addition, for the six months ended December 31, 2017 and 2016, the Company incurred a charge of $133,000 and $490,000, respectively, related to the decrease in value of our deferred tax assets based on decreases in North Carolina’s corporate tax rate.

Balance Sheet Review

Total assets increased $44.0 million, or 1.4% to $3.3 billion at December 31, 2017 from $3.2 billion at June 30, 2017. Total liabilities increased $46.3 million, or 1.6% to $2.9 billion at December 31, 2017 from $2.8 billion at June 30, 2017. Deposit growth of $59.8 million, or 2.9% and the cumulative decrease of $63.9 million, or 19.3% in certificates of deposit in other banks and securities available for sale during the first six months of fiscal 2018 were used to partially fund the $66.5 million, or 2.8% increase in total loans, the $49.9 million, or 33.3% increase in commercial paper, and reduce borrowings by $11.5 million, or 1.7%. The increase in net loans receivable was driven by $66.8 million or 6.1% annualized of organic net loan growth. The $11.7 million, or 13.4% increase in cash and cash equivalents was mainly due to the additional funds held at the Federal Reserve Bank. The $20.9 million, or 36.4% decrease in deferred income taxes was driven by the previously mentioned revaluation as a result of the Tax Act and the use of net operating losses as our taxable income continues to increase.

Total deposits increased $59.8 million, or 2.9%, during the six months ended December 31, 2017 to $2.1 billion. The increase was primarily due to an increase of $79.8 million in our core deposits (which excludes certificates of deposit) as a result of recent deposit gathering initiatives, partially offset by a $20.1 million managed run off in our higher costing certificates of deposit and brokered deposits.

Stockholders’ equity at December 31, 2017 decreased $2.3 million, or 0.6% to $395.4 million from $397.6 million at June 30, 2017. The decrease was primarily driven by $5.1 million in net losses, and a $601,000 decrease in other comprehensive income, partially offset by $2.0 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 December 31, 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 11.72%, 11.72%, 12.51%, and 9.94%, respectively.  In addition, the Company exceeded all regulatory capital requirements as of that date. The estimated $17.7 million deferred tax revaluation did not have a material impact on the Company’s regulatory capital ratios.

Asset Quality

The allowance for loan losses was $21.1 million, or 0.87% of total loans, at December 31, 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 0.97% at December 31, 2017, compared to 1.03% at June 30, 2017.

There was no provision for losses on loans for the six months ended December 31, 2017 and 2016. Net loan charge-offs totaled $61,000 and $306,000 for the six months ended December 31, 2017 and 2016, respectively. Net charge-offs as a percentage of average loans decreased to 0.01% for the six months ended December 31, 2017 from 0.03% for the same period last fiscal year.

Nonperforming assets decreased $800,000, or 4.1% to $19.2 million, or 0.59% of total assets, at December 31, 2017 compared to $20.0 million, or 0.62% of total assets at June 30, 2017, and were $21.7 million, or 0.78% of total assets, a year ago. Nonperforming assets included $14.4 million in nonaccruing loans and $4.8 million in REO at December 31, 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 $4.8 million of loans restructured from their original terms of which $2.1 million were current at December 31, 2017, with respect to their modified payment terms. At December 31, 2017, $4.6 million, or 32.1% of nonaccruing loans were current on their required loan payments. Purchased impaired loans aggregating $4.6 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 0.59% at December 31, 2017 compared to 0.58% at June 30, 2017, and 0.82% at December 31, 2016.

The ratio of classified assets to total assets decreased to 1.39% at December 31, 2017 from 1.57% at June 30, 2017. Classified assets decreased 10.4% to $45.0 million at December 31, 2017 compared to $50.2 million at June 30, 2017 and were $54.8 million at December 31, 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 December 31, 2017, the Company had assets of $3.3 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.

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.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.

WEBSITE: WWW.HOMETRUSTBANCSHARES.COM

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