ASHEVILLE, N.C., Oct. 29, 2015 — HomeTrust Bancshares, Inc. (NASDAQ:HTBI) (“Company”), the holding company of HomeTrust Bank, N.A., today announced preliminary net income of $2.6 million for the first quarter of fiscal year 2016, compared to $2.3 million for the same period a year ago. Increases of $2.0 million in net interest income and $600,000 in noninterest income was partially offset by a $1.3 million increase in noninterest expense and a nonrecurring $526,000 tax charge related to the decrease in North Carolina’s state corporate tax rate and the corresponding decrease in net deferred tax assets. Earnings before merger expenses, recovery of loan losses, and the above mentioned tax charge were $3.1 million for the first quarter of fiscal year 2016, compared to $3.0 million for the same period in the previous year.
The Company’s basic and diluted earnings per share increased to $0.14 from $0.12 per share for the three months ended September 30, 2015 compared to the same period in fiscal 2015. Diluted earnings per share before merger expenses, recovery of loan losses, and the tax charge were $0.17 compared to $0.16 for the same period in fiscal 2015.
For the three-month period ended September 30, 2015, the retail loan portfolio originations increased $12.6 million from $54.5 million to $67.1 million, or 23.1% compared to the same period in the previous year. For the three-month period ended September 30, 2015, the commercial loan portfolio originations increased $46.4 million from $51.1 million to $97.5 million, or 91.0% compared to the same period in the previous year. Commercial originations included $32.5 million of commercial construction loans which were not funded this quarter, but will provide loan growth in future quarters. For the three-month period ended September 30, 2015, loans originated for sale increased $5.8 million from $16.8 million to $22.6 million, or 34.5% compared to the same period in the previous year.
“Total organic loan growth for the first quarter of fiscal 2016 was $26.5 million, which is a growth rate of 6% annualized. Excluding the decrease of $6.7 million in one-to-four family mortgage loans which are paying down at an accelerated rate, organic loan growth this quarter was $33.2 million, or 8% annualized,” commented Dana Stonestreet, Chairman, President, and CEO. “In addition, tangible book value per share increased 6% annualized for the quarter. We will capitalize on the momentum our team is building as we continue to focus on growing our loan portfolio — leading to higher revenues, earnings, and stockholder value over time,” said Stonestreet.
On October 30, 2015, HomeTrust Bank will complete its consolidation of six branch offices in North Carolina and Tennessee as previously announced in July 2015. The closures are the result of a review of customer banking preferences and are located in markets with additional HomeTrust Bank branches. This consolidation will reduce operating expenses by approximately $1.2 million annually.
Income Statement Review
Net interest income was $20.6 million for the three months ended September 30, 2015 compared to $18.6 million for the three months ended September 30, 2014. The $2.0 million, or 10.6%, increase was a result of a $2.1 million increase in interest income that was partially offset by a $173,000 increase in interest expense compared to the same period in 2014.
Average interest-earning assets increased $581.4 million to $2.5 billion for the quarter ended September 30, 2015 compared to the same period in 2014, mainly from our new leveraging strategy, where additional short-term Federal Home Loan Bank (“FHLB”) borrowings are invested in various short-term assets (including FHLB stock). As expected, net interest margin (on a fully taxable-equivalent basis) for the three months ended September 30, 2015 decreased 62 basis points over the same period last year from 3.99% to 3.37% as a result of increasing average short-term FHLB borrowings by $446.0 million. The new leveraging strategy continues to generate additional net interest income from the proceeds, as well as dividend income from the required purchase of additional FHLB stock. The investments in short-term assets are yielding an average of 60 basis points, while the average cost of the borrowings is 21 basis points, which generated approximately $433,000 in net interest income during the quarter. Excluding the effect of these additional borrowings, the net interest margin was 4.02%.
Recent acquisitions and organic loan growth led to a $160.5 million increase in average loans, however at lower interest rates, which led to loan yields decreasing 22 basis points to 4.69% for the three months ended September 30, 2015 from 4.91% for the same period in the previous year. Interest income for loans also included $1.3 million and $661,000 in accretion of purchase discounts on acquired loans for the three months ended September 30, 2015 and 2014, respectively. The increase in other combined interest-earning assets was mainly a result of the leveraging strategy that produced $1.1 million in interest income during the quarter ended September 30, 2015. Total interest expense increased $173,000 for the quarter ended September 30, 2015 compared to the same period last year. This increase was primarily due to average interest-bearing liabilities increasing $549.3 million to $2.1 billion for the quarter ended September 30, 2015 compared to the same period in 2014. This increase was partially offset by the overall cost of funds continuing to decrease to 27 basis points from 32 basis points.
Noninterest income increased $600,000, or 21.7%, to $3.4 million for the three months ended September 30, 2015 from $2.8 million for the same period in the previous year, primarily due to a $637,000, or 60.0%, increase in fees and service charges on checking accounts resulting from the growth in the number of these accounts from recent acquisitions. Noninterest expense for the quarter ended September 30, 2015 increased $1.3 million, or 7.2%, to $19.8 million compared to $18.5 million for the quarter ended September 30, 2014. The increase was primarily related to our recent acquisitions, which led to a $1.0 million increase in salaries and employee benefits, a $406,000 increase in net occupancy expense, a $361,000 increase in amortization of core deposit intangibles, and a $930,000 increase in other expenses, which were partially offset by a $1.4 million decrease in merger-related expenses.
The Company’s income tax expense was $1.5 million for the three months ended September 30, 2015, an increase of $675,000 compared to $866,000 for the three months ended September 30, 2014. The increase was a result of additional pretax income and a nonrecurring charge of $526,000 during the quarter related to the decrease in value of our deferred tax assets based on recent decreases in North Carolina’s corporate tax rate. The rate was reduced to 4.0% in August 2015 with additional reductions possible to 3.0% through 2017 if certain state revenue triggers are achieved. The Company’s effective income tax rate for the quarter ended September 30, 2015 was 37.54% compared to 27.74% for the quarter ended September 30, 2014.
Balance Sheet Review
Total assets decreased $57.1 million, or 2.1%, to $2.7 billion at September 30, 2015 from $2.8 billion at June 30, 2015. Net loans receivable increased $56.8 million to $1.7 billion at September 30, 2015 driven by $26.5 million of organic growth and $30.3 million in purchased home equity lines of credit, net of repayments. The cumulative decrease of $101.3 million, or 12.1%, in cash and cash equivalents, commercial paper, certificates of deposit in other banks, and securities available for sale for the the first quarter in fiscal 2016 were part of a managed decrease to fund loans, pay out deposits as discussed below, and repurchase common stock. The decrease in other assets was a direct result of $8.0 million in loans sold at the end of the fourth quarter of fiscal 2015 and the receipt of proceeds in the beginning of July 2015.
Total deposits decreased $52.2 million, or 2.8%, to $1.8 billion at September 30, 2015 from $1.9 billion at June 30, 2015. The decrease was primarily due to a managed run off of $40.3 million in higher costing certificates of deposit.
Stockholders’ equity at September 30, 2015 decreased to $368.1 million from $371.1 million at June 30, 2015. The decrease was a result of 414,362 shares of common stock repurchased at an average cost of $17.79, or approximately $7.4 million, which was partially offset with $2.6 million in net income, and a $876,000 increase in unrealized gains on securities available for sale. As of September 30, 2015, HomeTrust Bank, N.A. 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 13.17%, 13.17%, 14.24%, and 10.26%, respectively. In addition, the Company was categorized as “well capitalized” at September 30, 2015 under applicable regulatory guidelines.
The allowance for loan losses was $22.1 million, or 1.27% of total loans, at September 30, 2015 compared to $22.4 million, or 1.33% of total loans, at June 30, 2015. The allowance for loan losses was 1.52% of total loans at September 30, 2015, excluding acquired loans.
There was no provision for losses on loans for the three months ended September 30, 2015 compared to a $250,000 recovery of loan losses for the same period in the previous year. Net loan charge-offs totaled $262,000 for the three months ended September 30, 2015 compared to $99,000 in net charge-offs for the same period during the prior fiscal year. Net charge-offs as a percentage of average loans increased to 0.06% for the quarter ended September 30, 2015 from 0.03% for the same period last fiscal year.
Nonperforming assets decreased $342,000 to $31.5 million, or 1.16% of total assets, at September 30, 2015, compared to $31.9 million, or 1.15% of total assets, at June 30, 2015. Nonperforming assets included $24.9 million in nonaccruing loans and $6.6 million in REO at September 30, 2015, compared to $24.9 million and $7.0 million, in nonaccruing loans and REO, respectively, at June 30, 2015. Included in nonperforming loans are $6.2 million of loans restructured from their original terms of which $2.9 million were current with respect to their modified payment terms. At September 30, 2015, $7.3 million, or 29.5%, of nonaccruing loans were current on their required loan payments. Purchased impaired loans aggregating $8.1 million acquired from recent acquisitions are excluded from nonaccruing loans due to the accretion of discounts established in accordance with the acquisition method of accounting for business combinations.
The ratio of classified assets to total assets decreased to 2.72% at September 30, 2015 from 2.90% at June 30, 2015. Classified assets decreased 8.1% to $74.2 million at September 30, 2015 compared to $81.1 million at June 30, 2015.
About HomeTrust Bancshares, Inc.
HomeTrust Bancshares, Inc. is the holding company for HomeTrust Bank, N.A. As of September 30, 2015, the Company had assets of $2.7 billion. The Bank, founded in 1926, is a nationally chartered, community-focused financial institution committed to providing value added relationship banking through 39 locations as well as online/mobile channels. Locations include: North Carolina (including the Asheville metropolitan area, the “Piedmont” region, Charlotte, and a loan production office in Raleigh), Upstate South Carolina (Greenville), East Tennessee (including Kingsport/Johnson City, Knoxville, and Morristown) and Southwest Virginia (including the Roanoke Valley). The Bank is the 5th 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 recent 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 filings with 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 presentation or our SEC filings 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 illustrated 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 2016 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