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HomeTrust Bancshares, Inc. Reports Fourth Quarter and Fiscal Year 2018 Financial Results

ASHEVILLE, N.C., July 26, 2018 (GLOBE NEWSWIRE) — HomeTrust Bancshares, Inc. (NASDAQ:HTBI) (“Company”), the holding company of HomeTrust Bank (“Bank”), today announced preliminary net income of $7.2 million, or $0.38 per diluted share for the quarter ended June 30, 2018, compared to $4.8 million, or $0.25 per diluted share for the same period a year ago. Return on assets was 0.88% for the three months ended June 30, 2018 compared to 0.61% for the same period in fiscal 2017. Net income totaled $8.2 million, or $0.44 per diluted share for the year ended June 30, 2018, compared to $11.8 million, or $0.65 per diluted share for fiscal year 2017. Return on assets was 0.25% for the year ended June 30, 2018, compared to 0.40% in the prior year. Earnings for the year ended June 30, 2018 included a $17.9 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 fiscal year 2017, which was partially offset by the absence of merger-related expenses, which totaled $7.8 million in fiscal year 2017.

For the quarter ended June 30, 2018 compared to the corresponding quarter in the previous year and before the write-down of deferred tax assets from the change in the federal tax rate, merger-related expenses, and certain state income tax expenses (non-GAAP):

  • net income increased 42.0% to $6.8 million from $4.8 million;
  • diluted earnings per share increased 44.0% to $0.36 from $0.25; and
  • return on assets increased 36.1% to 0.83% from 0.61%.

For the year ended June 30, 2018 compared to the year ended June 30, 2017 and before the write-down of deferred tax assets from the change in the federal tax rate, merger-related expenses, certain state income tax expenses, and gains from the sale of premises and equipment (non-GAAP):

  • net income increased 51.3% to $25.9 million from $17.1 million;
  • diluted earnings per share increased 46.8% to $1.38 from $0.94; and
  • return on assets increased 37.9% to 0.80% from 0.58%.

The reconciliation of non-GAAP measures, which the Company believes facilitates the assessment of its banking operations and peer comparability, is included in tabular form at the end of this release.

For the year ended June 30, 2018 compared to the year ended June 30, 2017:

  • commercial loan portfolio originations increased $49.0 million, or 9.0% from $541.5 million to $590.5 million;
  • retail loan portfolio originations increased $18.2 million, or 5.9% from $305.4 million to $323.6 million;

“Fiscal 2018 was truly an inflection point for our financial performance as evidenced by our core results,” said Dana Stonestreet, Chairman, President and CEO. “We continued our focus on organic loan and deposit growth while remixing our balance sheet to maximize earnings. We enhanced our franchise value by hiring numerous high-performing revenue producers throughout key urban markets; fully developing our new SBA and equipment finance lines of business; and through the opening of a commercial loan production office in Greensboro, NC and a de novo full service branch in Cary, NC. As a result, we had a record year of over $1 billion in loan originations and net organic loan growth of 8%; SBA loan sales generated over $1 million in noninterest income during the year; and our brand new equipment finance line of business had $20 million in originations in the past quarter. We will continue to capitalize on this momentum in fiscal 2019 to enhance our financial performance and create additional shareholder value.”

Income Statement Review

Net interest income increased to $25.6 million for the quarter ended June 30, 2018 compared to $24.6 million for the comparative quarter in fiscal 2017. The $1.0 million, or 4.2% increase was primarily due to a $3.4 million increase in interest and dividend income driven by an increase in average interest-earning assets, which was partially offset by a $2.4 million increase in interest expense. Average interest-earning assets increased $180.8 million, or 6.3% to $3.0 billion for the quarter ended June 30, 2018 compared to $2.9 billion for the corresponding quarter in fiscal 2017. For the quarter ended June 30, 2018, the average balance of total loans receivable increased $157.5 million, or 6.8% due to organic loan growth. The average balance of all other interest-earning assets increased $43.3 million, or 8.1% primarily due to increases in commercial paper investments. These increases were mainly funded by increases in average interest-bearing deposits of $125.9 million, or 7.2% and average noninterest bearing deposits of $21.6 million, or 7.3% as compared to the same quarter last year. Net interest margin (on a fully taxable-equivalent basis) for the three months ended June 30, 2018 decreased to 3.43% from 3.53% for the same period a year ago. We continue to utilize our leveraging strategy, where designated short-term Federal Home Loan Bank (“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; however, we have reduced the amount of assets purchased and liabilities assumed as part of the leveraging strategy during the past year and expect to continue reducing these amounts commensurate with anticipated organic loan growth. During the three months ended June 30, 2018 our leveraging strategy produced an additional $1.0 million in interest and dividend income at an average yield of 2.58%, while the average cost of the borrowings was 1.91%, resulting in approximately $263,000 in net interest income. During the same quarter in the prior fiscal year, our leveraging strategy produced an additional $848,000 in interest and dividend income at an average yield of 1.38%, while the average cost of the borrowings was 0.95%, resulting in approximately $265,000 in net interest income. Excluding the effects of the leveraging strategy, the tax equivalent net interest margin would be 3.57% and 3.82% for the quarters ended June 30, 2018 and 2017, respectively.

Total interest and dividend income increased $3.4 million, or 12.5% for the three months ended June 30, 2018 as compared to the same period last year, which was primarily driven by a $2.4 million, or 9.5% increase in loan interest income and a $1.1 million, or 125.0% increase in interest income from certificates of deposit and other interest-bearing deposits, partially offset by a $120,000, or 12.0% decrease in interest income from securities available for sale. The additional loan interest income was primarily due to the increase in the average balance of loans receivable and an increase in loan yields. Average loan yields increased seven basis points to 4.48% for the quarter ended June 30, 2018 from 4.41% in the corresponding quarter from last year primarily due to loans recently originated at higher rates and was partially offset by a $710,000, or 54.3% 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 June 30, 2018 and 2017, the average loan yields included 10 and 23 basis points, respectively, from the accretion of purchase discounts on acquired loans.

Total interest expense increased $2.4 million, or 87.3% for the quarter ended June 30, 2018 compared to the same period last year, which primarily related to deposit gathering initiatives along with an 20 basis point increase in the average cost of deposits. The overall average cost of funds increased 36 basis points to 0.82% 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 $9.4 million or 10.4% to $100.6 million for the year ended June 30, 2018 compared to $91.2 million for the year ended June 30, 2017. Average interest-earning assets increased $292.3 million, or 10.9% to $3.0 billion for the year ended June 30, 2018 compared to $2.7 billion in the prior year. The $338.5 million, or 16.3% increase in average balance of total loans receivable for the year ended June 30, 2018 was due to a full year’s impact of the TriSummit Bank acquisition and increased organic loan growth. This increase was mainly funded by the cumulative decrease of $46.2 million, or 7.6% in all other average interest-earning assets, an increase in average interest-bearing deposits of $152.2 million, or 9.2%, and an increase in average borrowings, consisting primarily of short-term FHLB advances of $80.4 million, or 13.9%. Net interest margin (on a fully taxable-equivalent basis) for the year ended June 30, 2018 decreased six basis points to 3.43% from 3.49% for last year. For the year ended June 30, 2018, our leveraging strategy produced an additional $4.1 million in interest and dividend income at an average yield of 1.90%, while the average cost of the borrowings was 1.39%, resulting in approximately $1.1 million in net interest income. Our leveraging strategy produced an additional $3.6 million in interest and dividend income at an average yield of 1.14% during fiscal year 2017, while the average cost of the borrowings was 0.58%, resulting in approximately $1.8 million in net interest income. Excluding the effects of the leveraging strategy, the tax equivalent net interest margin would be 3.66% and 3.88% for the years ended June 30, 2018 and 2017, respectively.

Total interest and dividend income increased $17.3 million, or 17.4% for the year ended June 30, 2018 as compared to the year ended June 30, 2017. The increase was primarily driven by a $15.0 million, or 16.7% increase in loan interest income, a $2.2 million, or 59.4% increase in certificates of deposit and other interest-bearing deposits, and a $354,000, or 21.3% increase in other investment income partially offset by a $315,000, or 7.9% decrease in interest income from securities available for sale. The additional loan interest income was primarily due to the increase in the average balance of loans receivable, which was partially offset by a $3.0 million decrease in the accretion of purchase discounts on acquired loans to $3.2 million for the year ended June 30, 2018 from $6.1 million for fiscal year 2017, as a result of full repayments of several loans with large discounts in the previous year. This decrease caused average loan yields to decrease three basis points to 4.41% for the year ended June 30, 2018 from 4.44% in fiscal 2017. Excluding the effects of the accretion on purchase discounts on acquired loans, loan yields increased 13 basis points to 4.28% for the year ended June 30, 2018 compared to 4.15% in fiscal 2017.

Total interest expense increased $7.8 million, or 94.9% for the year ended June 30, 2018 compared to the prior fiscal year. This increase was primarily related to the increase in average interest-bearing deposits and borrowings coupled with the increased cost of nine and 78 basis points for the years ended June 30, 2018 and 2017, respectively. The overall cost of funds increased 28 basis points to 0.65% for the year ended June 30, 2018 compared to 0.37% in the last fiscal year.

Noninterest income increased $1.1 million, or 27.1% to $5.4 million for the three months ended June 30, 2018 from $4.2 million for the same period in the previous year. The leading factors of the increase included a $338,000, or 16.6% increase in service charges on deposit accounts as a result of the increase in deposit accounts and related fees; a $628,000, or 66.0% increase in loan income from the gain on sale of mortgage loans and various commercial loan-related fees driven by the commencing of originations and sales of the guaranteed portion of U.S Small Business Administration (“SBA”) commercial loans; and a $215,000, or 30.2% increase in other noninterest income mainly from investments in small business investment companies (“SBIC”).

Noninterest income increased $3.6 million, or 22.1% to $19.7 million for the year ended June 30, 2018 from $16.1 million for the year ended June 30, 2017, primarily due to a $1.1 million, or 14.2% increase in service charges on deposit accounts; a $1.8 million, or 49.6% increase in loan income from the gain on sale of mortgage loans and various commercial loan-related fees; and $879,000, or 38.9% increase in other noninterest income. Partially offsetting these increases was a $221,000, or 57.4% decrease in gains from the sale of premises and equipment for the year ended June 30, 2018 compared to last fiscal year.

Noninterest expense for the quarters ended June 30, 2018 and 2017 remained consistent at $21.8 million.

Noninterest expense for the year ended June 30, 2018 decreased $4.9 million, or 5.5% to $85.3 million compared to $90.3 million for the year ended June 30, 2017. The decrease was primarily driven by the absence of the previously mentioned $7.8 million of merger-related expenses; a $192,000, or 11.5% decrease in marketing and advertising; a $210,000, or 3.2% decrease in computer services; and a $222,000, or 15.7% decrease in real estate owned (“REO”) related expenses primarily as a result of fewer REO properties held. Partially offsetting these decreases were the additional expenses related to the TriSummit acquisition, a new commercial loan production office in Greensboro, NC, new SBA and equipment finance lines of business, and the opening of a de novo branch in Cary, NC as shown in the cumulative increase of $3.4 million, or 5.0% in salaries and employee benefits; net occupancy expense; telephone, postage, and supplies; and other expenses for the year ended June 30, 2018 compared to last year. Deposit insurance premiums increased $241,000, or 17.5% as the net asset base has increased.

For the quarter ended June 30, 2018, the Company’s income tax expense was $2.0 million compared to $2.2 million for the quarter ended June 30, 2017. The decrease was primarily driven by the reduction in the federal corporate tax rate to 27.5% for the quarter ended June 30, 2018 from 34.0% for the quarter ended June 30, 2017. The Company also had a $275,000 benefit related to the revaluation of various state deferred tax assets with no comparable benefit in the corresponding quarter in the prior year. In  addition, as a result of the Tax Act, we incurred an additional $103,000 in income tax expense for the quarter ended June 30, 2018 to adjust the tax valuation allowance on our alternative minimum tax (“AMT”) credits in accordance with Internal Revenue Service guidelines.  Our fiscal year end requires the use of a blended federal tax rate as prescribed by the Internal Revenue Code, which is 27.5% and was used through June 30, 2018. Beginning on July 1, 2018, the Company began using the new federal corporate tax rate of 21%.

For the year ended June 30, 2018, the Company’s income tax expense was $26.7 million compared to $5.2 million for the year ended June 30, 2017. The increase was mainly driven by the reduction in the federal corporate tax rate, which required the Company to revalue net deferred tax assets and establish the tax valuation allowance on our AMT credits as discussed above, resulting in a $17.9 million adjustment through income tax expense; and to a lesser extent higher pre-tax income. In addition, for the year ended June 30, 2018, the Company had a benefit of $142,000 and a charge of $490,000 for the year ended June 30, 2017 related to revaluation of various state deferred tax assets.

Balance Sheet Review

Total assets increased $97.6 million, or 3.0% to $3.3 billion at June 30, 2018 from $3.2 billion at June 30, 2017. Total liabilities increased $86.0 million, or 3.1% to $2.9 billion at June 30, 2018 from $2.8 billion at June 30, 2017. Deposit growth of $147.8 million, or 7.2% and the cumulative decrease of $126.3 million, or 30.1% in cash and cash equivalents, certificates of deposit in other financial institutions and investment securities during the year ended June 30, 2018 were used to partially fund the $174.4 million, or 7.4% increase in total loans receivable, the $79.2 million, or 52.9% increase in commercial paper, and reduce borrowings by $61.5 million, or 8.8%. The increase in net loans receivable was driven by $170.5 million of organic loan growth. The $24.8 million, or 43.3% decrease in deferred income taxes was driven primarily by the previously mentioned write-down of deferred tax assets and to a lesser extent, the use of net operating losses as our taxable income increased.

Total deposits increased $147.8 million, or 7.2%, during the year ended June 30, 2018 to $2.2 billion. The increase was primarily due to a $93.8 million increase in our core deposits (which exclude certificates of deposit) from growth initiatives and a $54.0 million increase in certificates of deposit, which primarily related to additional brokered deposits.

Stockholders’ equity at June 30, 2018 increased $11.2 million, or 2.8% to $409.2 million from $397.6 million at June 30, 2017. The increase was primarily driven by $8.2 million in net income, $3.0 million in 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,” partially offset by a $1.9 million decrease in other comprehensive income representing unrealized losses on investment securities, net of tax. As of June 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 11.70%, 11.70%, 12.45%, and 10.33%, respectively.  In addition, the Company exceeded all regulatory capital requirements as of that date. The $17.9 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 0.83% of total loans, at June 30, 2018 compared to $21.2 million, or 0.90% of total loans, at June 30, 2017. The allowance for loan losses to gross loans, excluding acquired loans, was 0.91% at June 30, 2018,  compared to 1.03% at June 30, 2017.

There was no provision for losses on loans for the three months or year ended June 30, 2018 and 2017 reflecting continued improvements in our asset quality, offset by loan growth. Net loan charge-offs totaled $412,000 for the three months ended June 30, 2018 as compared to $54,000 in net recoveries for the same period during the prior fiscal year. Net loan charge-offs decreased to $91,000 for the year ended June 30, 2018 from $141,000 for fiscal 2017. Net charge-offs as a percentage of average loans were 0.07% for the quarter ended June 30, 2018 compared to net recoveries of (0.01)% for the same period last fiscal year. Net charge-offs as a percentage of average loans decreased to 0.00% for the year ended June 30, 2018 from 0.01% for last fiscal year. Our year over year improvements across all credit metrics continue to demonstrate our commitment to growing and maintaining a high quality loan portfolio.

Nonperforming assets decreased 27.0% to $14.6 million, or 0.44% of total assets, at June 30, 2018, compared to $20.0 million, or 0.62% of total assets, at June 30, 2017. Nonperforming assets included $10.9 million in nonaccruing loans and $3.7 million in REO at June 30, 2018, compared to $13.7 million and $6.3 million, in nonaccruing loans and REO, respectively, at June 30, 2017. Included in nonperforming loans are $4.2 million of loans restructured from their original terms of which $2.6 million were current at June 30, 2018, with respect to their modified payment terms. The decrease in nonaccruing loans was primarily due to continued improvement in credit quality throughout the loan portfolio and loans returning to performing status as payment history and the borrower’s financial status improved. At June 30, 2018, $5.6 million, or 51.6%, of nonaccruing loans were current on their required loan payments. Purchased impaired loans aggregating $3.4 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 decreased to 0.43% at June 30, 2018 from 0.58% at June 30, 2017.

The ratio of classified assets to total assets decreased to 1.00% at June 30, 2018 from 1.57% at June 30, 2017. Classified assets decreased 34.2% to $33.1 million at June 30, 2018 compared to $50.2 million at June 30, 2017.

About HomeTrust Bancshares, Inc.

HomeTrust Bancshares, Inc. is the holding company for HomeTrust Bank. As of June 30, 2018, 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 43 locations as well as online/mobile channels. Locations include: North Carolina (including the Asheville metropolitan area, the “Piedmont” region, Charlotte, Cary, 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