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Section 1: 8-K (8-K)

Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 29, 2018

HOMETRUST BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
 
Maryland
 
001-35593
 
45-5055422
(State or other jurisdiction of incorporation)
 
(Commission File No.)
 
(IRS Employer Identification Number)

10 Woodfin Street, Asheville, North Carolina
 
 
 
28801
(Address of principal executive offices)
 
 
 
(Zip Code)

Registrant's telephone number, including area code: (828) 259-3939

 
 
Not Applicable
 
 
 
(Former name or former address, if changed since last report)
 


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company
[ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
[ ]






Item 2.02.  Results of Operations and Financial Condition
 
On October 29, 2018, HomeTrust Bancshares, Inc., the holding company for HomeTrust Bank, issued a press release reporting first quarter 2019 financial results.  A copy of the press release, including unaudited financial information released as a part thereof, is attached as Exhibit 99.1 to this Current Report on Form 8-K and incorporated by reference herein.
 
Item 9.01  Financial Statements and Exhibits
 
(d)           Exhibits
 
Press release dated October 29, 2018






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

HOMETRUST BANCSHARES, INC.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
October 29, 2018

 
By:
/s/ Tony J. VunCannon
 
 
 
Tony J. VunCannon
 
 
 
Executive Vice President, Chief Financial Officer, Corporate Secretary and Treasurer



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


395526548_htbiimagea18.jpg
HomeTrust Bancshares, Inc. Reports Financial Results For The First Quarter Of Fiscal 2019

ASHEVILLE, N.C., October 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

1



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.

2



Asset Quality

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.

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.




3



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

4



Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
September 30, 2018
 
June 30, 2018(2)
 
March 31,
2018
 
December 31,
2017
 
September 30, 2017
Assets
 
 
 
 
 
 
 
 
 
Cash
$
39,872

 
$
45,222

 
$
38,100

 
$
46,743

 
$
38,162

Interest-bearing deposits
18,896

 
25,524

 
41,296

 
51,922

 
40,809

Cash and cash equivalents
58,768

 
70,746

 
79,396

 
98,665

 
78,971

Commercial paper
238,224

 
229,070

 
239,435

 
199,722

 
199,774

Certificates of deposit in other banks
58,384

 
66,937

 
84,218

 
100,349

 
110,454

Securities available for sale, at fair value
148,704

 
154,993

 
160,971

 
167,669

 
182,053

Other investments, at cost
43,996

 
41,931

 
41,405

 
43,319

 
42,307

Loans held for sale
10,773

 
5,873

 
6,071

 
7,072

 
7,793

Total loans, net of deferred loan fees
2,587,106

 
2,525,852

 
2,445,755

 
2,418,014

 
2,394,755

Allowance for loan losses
(20,932
)
 
(21,060
)
 
(21,472
)
 
(21,090
)
 
(21,997
)
Net loans
2,566,174

 
2,504,792

 
2,424,283

 
2,396,924

 
2,372,758

Premises and equipment, net
62,681

 
62,537

 
62,725

 
62,435

 
62,614

Accrued interest receivable
10,252

 
9,344

 
9,216

 
9,371

 
9,340

Real estate owned ("REO")
3,286

 
3,684

 
5,053

 
4,818

 
5,941

Deferred income taxes
30,942

 
32,565

 
34,311

 
36,526

 
55,653

Bank owned life insurance ("BOLI")
88,581

 
88,028

 
87,532

 
86,984

 
86,561

Goodwill
25,638

 
25,638

 
25,638

 
25,638

 
25,938

Core deposit intangibles
3,963

 
4,528

 
5,131

 
5,773

 
6,454

Other assets
3,593

 
3,503

 
5,478

 
5,323

 
3,687

Total Assets
$
3,353,959

 
$
3,304,169

 
$
3,270,863

 
$
3,250,588

 
$
3,249,998

Liabilities and Stockholders' Equity
 

 
 

 
 

 
 

 
 
Liabilities
 

 
 

 
 

 
 

 
 
Deposits
$
2,203,044

 
$
2,196,253

 
$
2,180,324

 
$
2,108,208

 
$
2,100,310

Borrowings
675,000

 
635,000

 
625,000

 
685,000

 
679,800

Capital lease obligations
1,905

 
1,914

 
1,920

 
1,925

 
1,931

Other liabilities
59,815

 
61,760

 
62,066

 
60,094

 
62,458

Total liabilities
2,939,764

 
2,894,927

 
2,869,310

 
2,855,227

 
2,844,499

Stockholders' Equity
 

 
 

 
 

 
 

 
 
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued or outstanding

 

 

 

 

Common stock, $0.01 par value, 60,000,000 shares authorized (1)
190

 
191

 
190

 
190

 
190

Additional paid in capital
214,803

 
217,480

 
216,712

 
215,928

 
214,827

Retained earnings
208,365

 
200,575

 
193,368

 
187,241

 
197,907

Unearned Employee Stock Ownership Plan ("ESOP") shares
(7,274
)
 
(7,406
)
 
(7,538
)
 
(7,670
)
 
(7,803
)
Accumulated other comprehensive income (loss)
(1,889
)
 
(1,598
)
 
(1,179
)
 
(328
)
 
378

Total stockholders' equity
414,195

 
409,242

 
401,553

 
395,361

 
405,499

Total Liabilities and Stockholders' Equity
$
3,353,959

 
$
3,304,169

 
$
3,270,863

 
$
3,250,588

 
$
3,249,998

_________________________________
(1)
Shares of common stock issued and outstanding were 18,939,280 at September 30, 2018; 19,041,668 at June 30, 2018; 19,034,868 at March 31, 2018; 18,967,175 at December 31, 2017; and 18,968,675 at at September 30, 2017.
(2)
Derived from audited financial statements.

5



Consolidated Statement of Income (Unaudited)
 
Three Months Ended
 
September 30,
 
June 30,
 
September 30,
(Dollars in thousands)
2018
 
2018
 
2017
Interest and Dividend Income
 
 
 
 
 
Loans
$
28,728

 
$
27,337

 
$
25,250

Securities available for sale
856

 
877

 
971

Certificates of deposit and other interest-bearing deposits
1,857

 
1,969

 
1,169

Other investments
839

 
510

 
626

Total interest and dividend income
32,280

 
30,693

 
28,016

Interest Expense
 

 
 
 
 

Deposits
2,750

 
2,249

 
1,346

Borrowings
3,258

 
2,854

 
1,969

Total interest expense
6,008

 
5,103

 
3,315

Net Interest Income
26,272

 
25,590

 
24,701

Provision for Loan Losses

 

 

Net Interest Income after Provision for Loan Losses
26,272

 
25,590

 
24,701

Noninterest Income
 

 
 
 
 

Service charges and fees on deposit accounts
2,401

 
2,208

 
1,844

Loan income and fees
1,998

 
1,579

 
1,102

BOLI income
536

 
501

 
562

Gain from sale of premises and equipment

 

 
164

Other, net
678

 
926

 
590

Total noninterest income
5,613

 
5,214

 
4,262

Noninterest Expense
 

 
 
 
 

Salaries and employee benefits
12,685

 
11,918

 
12,352

Net occupancy expense
2,347

 
2,478

 
2,349

Marketing and advertising
417

 
372

 
453

Telephone, postage, and supplies
769

 
777

 
685

Deposit insurance premiums
304

 
373

 
414

Computer services
1,849

 
1,700

 
1,545

Loss (gain) on sale and impairment of REO
179

 
(25
)
 
(146
)
REO expense
175

 
308

 
241

Core deposit intangible amortization
565

 
603

 
719

Other
2,593

 
3,082

 
2,274

Total noninterest expense
21,883

 
21,586

 
20,886

Income Before Income Taxes
10,002

 
9,218

 
8,077

Income Tax Expense
2,212

 
2,011

 
2,510

Net Income
$
7,790

 
$
7,207

 
$
5,567

 
 
 
 
 


6



Per Share Data
 
Three months ended
 
September 30,
 
June 30,
 
September 30,
 
2018
 
2018
 
2017
Net income per common share:(1)
 
 
 
 
 
Basic
$
0.43

 
$
0.40

 
$
0.31

Diluted
$
0.41

 
$
0.38

 
$
0.30

Adjusted net income per common share:(2)
 
 
 
 
 
Basic
$
0.43

 
$
0.38

 
$
0.31

Diluted
$
0.41

 
$
0.36

 
$
0.30

 
 
 
 
 
 
Average shares outstanding:
 
 
 
 
 
Basic
18,125,637

 
18,121,690

 
17,966,994

Diluted
18,880,476

 
18,847,279

 
18,616,452

Book value per share at end of period
$
21.87

 
$
21.49

 
$
21.38

Tangible book value per share at end of period (2)
$
20.35

 
$
19.96

 
$
19.81

Total shares outstanding at end of period
18,939,280

 
19,041,668

 
18,968,675

__________________________________________________
(1)
Basic and diluted net income per common share have been prepared in accordance with the two-class method.
(2)
See Non-GAAP reconciliation tables below for adjustments.
Selected Financial Ratios and Other Data
 
 
Three Months Ended
 
 
September 30,
 
June 30,
 
September 30,
 
 
2018
 
2018
 
2017
Performance ratios: (1)
 
 
 
 
 
 
Return on assets (ratio of net income to average total assets)
 
0.94
%
 
0.88
%
 
0.70
%
Return on assets - adjusted(2)
 
0.94

 
0.83

 
0.70

Return on equity (ratio of net income to average equity)
 
7.55

 
7.12

 
5.55

Return on equity - adjusted(2)
 
7.55

 
6.75

 
5.58

Tax equivalent yield on earning assets(3)
 
4.23

 
4.10

 
3.90

Rate paid on interest-bearing liabilities
 
0.95

 
0.82

 
0.54

Tax equivalent average interest rate spread (3)
 
3.28

 
3.28

 
3.36

Tax equivalent net interest margin(3) (4)
 
3.45

 
3.43

 
3.44

Average interest-earning assets to average interest-bearing liabilities
 
121.97

 
121.27

 
120.67

Operating expense to average total assets
 
2.64

 
2.62

 
2.61

Efficiency ratio
 
68.63

 
70.08

 
72.11

Efficiency ratio - adjusted (2)
 
68.03

 
69.20

 
71.17

_____________________________
(1)
Ratios are annualized where appropriate.
(2)
See Non-GAAP reconciliation tables below for adjustments.
(3)
For the three months ended September 30, 2018, June 30, 2018, and September 30, 2017, the weighted average rate for municipal leases is adjusted for a 24%, 30%, and 37% combined federal and state tax rate, respectively since the interest from these leases is tax exempt.
(4)
Net interest income divided by average interest-earning assets.

7



 
At or For the Three Months Ended
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
2018
 
2018
 
2018
 
2017
 
2017
Asset quality ratios:
 
 
 
 
 
 
 
 
 
Nonperforming assets to total assets(1)
0.40
%
 
0.44
%
 
0.54
 %
 
0.59
%
 
0.62
 %
Nonperforming loans to total loans(1)
0.39

 
0.43

 
0.52

 
0.59

 
0.59

Total classified assets to total assets
0.93

 
1.00

 
1.29

 
1.39

 
1.50

Allowance for loan losses to nonperforming loans(1)
207.06

 
192.96

 
169.71

 
146.79

 
156.17

Allowance for loan losses to total loans
0.81

 
0.83

 
0.88

 
0.87

 
0.92

Allowance for loan losses to total gross loans excluding acquired loans(2)
0.88

 
0.91

 
0.97

 
0.97

 
1.01

Net charge-offs (recoveries) to average loans (annualized)
0.02

 
0.07

 
(0.06
)
 
0.15

 
(0.14
)
Capital ratios:
 
 
 
 
 
 
 
 
 
Equity to total assets at end of period
12.35
%
 
12.39
%
 
12.28
 %
 
12.16
%
 
12.48
 %
Tangible equity to total tangible assets(2)
11.59

 
11.61

 
11.48

 
11.34

 
11.67

Average equity to average assets
12.43

 
12.31

 
12.30

 
12.49

 
12.55

__________________________________________

(1)
Nonperforming assets include nonaccruing loans, consisting of certain restructured loans, and REO. There were no accruing loans more than 90 days past due at the dates indicated. At September 30, 2018, there were $4.0 million of restructured loans included in nonaccruing loans and $5.5 million, or 54.4% of nonaccruing loans were current on their loan payments. Purchased impaired loans acquired through bank acquisitions are excluded from nonaccruing loans due to the accretion of discounts in accordance with the acquisition method of accounting for business combinations.
(2)
See Non-GAAP reconciliation tables below for adjustments.


8



Average Balance Sheet Data
 
For the Three Months Ended September 30,
 
2018
 
2017
 
Average
Balance
Outstanding
 
Interest
Earned/
Paid
(2)
 
Yield/
Rate
(2)
 
Average
Balance
Outstanding
 
Interest
Earned/
Paid
(2)
 
Yield/
Rate
(2)
(Dollars in thousands)
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Loans receivable(1)
$
2,557,970

 
$
29,010

 
4.54
%
 
$
2,361,522

 
$
25,798

 
4.37
%
Deposits in other banks
92,514

 
415

 
1.80
%
 
159,152

 
536

 
1.35
%
Investment securities
154,249

 
856

 
2.22
%
 
189,920

 
972

 
2.05
%
Other interest-earning assets(3)
271,223

 
2,280

 
3.36
%
 
208,422

 
1,138

 
2.18
%
Total interest-earning assets
3,075,956

 
32,561

 
4.23
%
 
2,919,016

 
28,444

 
3.90
%
Other assets
245,855

 
 
 
 
 
278,869

 
 
 
 
Total assets
3,321,811

 
 
 
 
 
3,197,885

 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing checking accounts
459,895

 
270

 
0.23
%
 
462,928

 
216

 
0.19
%
Money market accounts
677,329

 
957

 
0.57
%
 
605,261

 
477

 
0.31
%
Savings accounts
208,289

 
68

 
0.13
%
 
232,940

 
78

 
0.13
%
Certificate accounts
530,507

 
1,455

 
1.10
%
 
449,839

 
575

 
0.51
%
Total interest-bearing deposits
1,876,020

 
2,750

 
0.59
%
 
1,750,968

 
1,346

 
0.31
%
Borrowings
645,859

 
3,258

 
2.02
%
 
668,091

 
1,969

 
1.18
%
  Total interest-bearing liabilities
2,521,879

 
6,008

 
0.95
%
 
2,419,059

 
3,315

 
0.55
%
Noninterest-bearing deposits
323,781

 
 
 
 
 
310,596

 
 
 
 
Other liabilities
63,282

 
 
 
 
 
66,808

 
 
 
 
Total liabilities
2,908,943

 
 
 
 
 
2,796,463

 
 
 
 
Stockholders' equity
412,868

 
 
 
 
 
401,422

 
 
 
 
Total liabilities and stockholders' equity
$
3,321,811

 
 
 
 
 
$
3,197,885

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earning assets
$
554,077

 
 

 
 
 
$
499,957

 
 
 
 
Average interest-earning assets to
 
 
 
 
 
 
 
 
 
 
 
average interest-bearing liabilities
121.97
%
 
 
 
 
 
120.67
%
 
 
 
 
Tax-equivalent:
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
 
$
26,553

 
 
 
 
 
$
25,129

 
 
Interest rate spread
 
 
 
 
3.28
%
 
 
 
 
 
3.35
%
Net interest margin(4)
 
 
 
 
3.45
%
 
 
 
 
 
3.44
%
Non-tax-equivalent:
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
 
$
26,272

 
 
 
 
 
$
24,581

 
 
Interest rate spread
 
 
 
 
3.25
%
 
 
 
 
 
3.27
%
Net interest margin(4)
 
 
 
 
3.42
%
 
 
 
 
 
3.37
%
__________________
(1) The average loans receivable, net balances include loans held for sale and nonaccruing loans.
(2) Interest income used in the average interest earned and yield calculation includes the tax equivalent adjustment of $281 and $548 for the three months ended September 30, 2018 and 2017, respectively, calculated based on a combined federal and state tax rate of 24% and 37%, respectively.
(3) The average other interest-earning assets consists of FRB stock, FHLB stock, Small Business Investment Company ("SBIC") investments, and commercial paper.
(4) Net interest income divided by average interest-earning assets.
 
 
 
 
 
 
 
 
 
 
 
 


9



Loans
(Dollars in thousands)
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
 
September 30, 2017
Retail consumer loans:
 
 
 
 
 
 
 
 
 
     One-to-four family
$
656,011

 
$
664,289

 
$
670,036

 
$
686,229

 
$
684,956

     HELOCs - originated
135,512

 
137,564

 
143,049

 
150,084

 
152,979

     HELOCs - purchased
150,733

 
166,276

 
165,680

 
162,181

 
162,518

     Construction and land/lots
75,433

 
65,601

 
68,121

 
60,805

 
54,969

     Indirect auto finance
173,305

 
173,095

 
160,664

 
150,042

 
142,915

     Consumer
13,139

 
12,379

 
11,317

 
9,699

 
8,814

Total retail consumer loans
1,204,133

 
1,219,204

 
1,218,867

 
1,219,040

 
1,207,151

Commercial loans:
 
 
 
 
 
 
 
 
 
     Commercial real estate
879,184

 
857,315

 
810,332

 
786,381

 
753,857

     Construction and development
198,809

 
192,102

 
184,179

 
185,921

 
209,672

     Commercial and industrial
193,739

 
148,823

 
132,337

 
127,709

 
124,722

     Municipal leases
111,951

 
109,172

 
101,108

 
100,205

 
100,638

Total commercial loans
1,383,683

 
1,307,412

 
1,227,956

 
1,200,216

 
1,188,889

Total loans
2,587,816

 
2,526,616

 
2,446,823

 
2,419,256

 
2,396,040

     Deferred loan fees, net
(710
)
 
(764
)
 
(1,068
)
 
(1,242
)
 
(1,285
)
Total loans, net of deferred loan fees
2,587,106

 
2,525,852

 
2,445,755

 
2,418,014

 
2,394,755

     Allowance for loan losses
(20,932
)
 
(21,060
)
 
(21,472
)
 
(21,090
)
 
(21,997
)
Loans, net
$
2,566,174

 
$
2,504,792

 
$
2,424,283

 
$
2,396,924

 
$
2,372,758

Deposits
(Dollars in thousands)
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
 
September 30, 2017
Core deposits:
 
 
 
 
 
 
 
 
 
    Noninterest-bearing accounts
$
313,110

 
$
317,822

 
$
303,875

 
$
313,493

 
$
304,144

    NOW accounts
462,694

 
471,364

 
496,934

 
489,668

 
464,992

    Money market accounts
687,148

 
677,665

 
659,791

 
638,259

 
642,351

    Savings accounts
203,372

 
213,250

 
220,497

 
224,732

 
230,944

Total core deposits
1,666,324

 
1,680,101

 
1,681,097

 
1,666,152

 
1,642,431

Certificates of deposit
536,720

 
516,152

 
499,227

 
442,056

 
457,879

Total
$
2,203,044

 
$
2,196,253

 
$
2,180,324

 
$
2,108,208

 
$
2,100,310


10



Non-GAAP Reconciliations
In addition to results presented in accordance with generally accepted accounting principles utilized in the United States ("GAAP"), this earnings release contains certain non-GAAP financial measures, which include: the efficiency ratio; tangible book value; tangible book value per share; tangible equity to tangible assets ratio; net income excluding certain state income tax expense, adjustments for the change in federal tax law, and gain from the sale of premises and equipment; earnings per share ("EPS"), return on assets ("ROA"), and return on equity ("ROE") excluding certain state income tax expense, adjustments for the change in federal tax law, and gain from the sale of premises and equipment; and the ratio of the allowance for loan losses to total loans excluding acquired loans. The Company believes these non-GAAP financial measures and ratios as presented are useful for both investors and management to understand the effects of certain items and provides an alternative view of the Company's performance over time and in comparison to the Company's competitors. These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for total stockholders' equity or operating results determined in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies. 

Set forth below is a reconciliation to GAAP of our efficiency ratio:
 
 
Three Months Ended
(Dollars in thousands)
 
September 30,
 
June 30,
 
September 30,
 
 
2018
 
2018
 
2017
Noninterest expense
 
$
21,883

 
$
21,586

 
$
20,886

 
 
 
 
 
 
 
Net interest income
 
$
26,272

 
$
25,590

 
$
24,701

Plus noninterest income
 
5,613

 
5,214

 
4,262

Plus tax equivalent adjustment
 
281

 
390

 
548

Less gain on sale of premises and equipment
 

 

 
164

Net interest income plus noninterest income – as adjusted
 
$
32,166

 
$
31,194


$
29,347

Efficiency ratio
 
68.03
%
 
69.20
%
 
71.17
%
Efficiency ratio (without adjustments)
 
68.63
%
 
70.08
%
 
72.11
%

Set forth below is a reconciliation to GAAP of tangible book value and tangible book value per share:
 
 
As of
(Dollars in thousands, except per share data)
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
 
2018
 
2018
 
2018
 
2017
 
2017
Total stockholders' equity
 
$
414,195

 
$
409,242

 
$
401,553

 
$
395,361

 
$
405,499

Less: goodwill, core deposit intangibles, net of taxes
 
28,690

 
29,125

 
29,589

 
30,083

 
29,704

Tangible book value (1)
 
$
385,505

 
$
380,117


$
371,964

 
$
365,278

 
$
375,795

Common shares outstanding
 
18,939,280

 
19,041,668

 
19,034,868

 
18,967,175

 
18,968,675

Tangible book value per share
 
$
20.35

 
$
19.96

 
$
19.54

 
$
19.26

 
$
19.81

Book value per share
 
$
21.87

 
$
21.49

 
$
21.10

 
$
20.84

 
$
21.38

(1)    Tangible book value is equal to total stockholders' equity less goodwill and core deposit intangibles, net of related deferred tax liabilities.

Set forth below is a reconciliation to GAAP of tangible equity to tangible assets:
 
 
As of
 
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
 
2018
 
2018
 
2018
 
2017
 
2017
 
 
(Dollars in thousands)
Tangible equity(1)
 
$
385,505

 
$
380,117

 
$
371,964

 
$
365,278

 
$
375,795

Total assets
 
3,353,959

 
3,304,169

 
3,270,863

 
3,250,588

 
3,249,998

Less: goodwill, core deposit intangibles, net of taxes
 
28,690

 
29,125

 
29,589

 
30,083

 
29,704

Total tangible assets(2)
 
$
3,325,269

 
$
3,275,044

 
$
3,241,274

 
$
3,220,505

 
$
3,220,294

Tangible equity to tangible assets
 
11.59
%
 
11.61
%
 
11.48
%

11.34
%
 
11.67
%
(1)    Tangible equity (or tangible book value) is equal to total stockholders' equity less goodwill and core deposit intangibles, net of related deferred tax liabilities.
(2)    Total tangible assets is equal to total assets less goodwill and core deposit intangibles, net of related deferred tax liabilities.





11



Set forth below is a reconciliation to GAAP of net income and earnings per share (EPS) as adjusted to exclude state tax expense rate change, federal tax law rate change, and gain from sale of premises and equipment:
 
 
Three Months Ended
(Dollars in thousands, except per share data)
 
September 30,
 
June 30,
 
September 30,
 
 
2018
 
2018
 
2017
State tax expense adjustment (1)
 

 
(275
)
 
133

Change in federal tax law adjustment (2)
 

 
(103
)
 

Gain from sale of premises and equipment
 

 

 
(164
)
Total adjustments
 

 
(378
)
 
(31
)
Tax effect
 

 

 
59

Total adjustments, net of tax
 

 
(378
)
 
28

 
 


 
 
 


Net income (GAAP)
 
7,790

 
7,207

 
5,567

 
 
 
 
 
 
 
Net income (non-GAAP)
 
$
7,790

 
$
6,829

 
$
5,595

 
 
 
 
 
 
 
Per Share Data
 
 
 
 
 
 
Average shares outstanding - basic
 
18,125,637

 
18,121,690

 
17,966,994

Average shares outstanding - diluted
 
18,880,476

 
18,847,279

 
18,616,452

 
 
 
 
 
 
 
Basic EPS
 
 
 
 
 
 
EPS (GAAP)
 
$
0.43

 
$
0.40

 
$
0.31

Non-GAAP adjustment
 

 
(0.02
)
 

EPS (non-GAAP)
 
$
0.43

 
$
0.38

 
$
0.31

 
 
 
 
 
 
 
Diluted EPS
 
 
 
 
 
 
EPS (GAAP)
 
$
0.41

 
$
0.38

 
$
0.30

Non-GAAP adjustment
 

 
(0.02
)
 

EPS (non-GAAP)
 
$
0.41

 
$
0.36

 
$
0.30

 
 
 
 
 
 
 
Average Balances
 
 
 
 
 
 
Average assets
 
$
3,321,811

 
$
3,289,437

 
$
3,197,885

Average equity
 
412,868

 
404,832

 
401,422

 
 
 
 
 
 
 
ROA
 
 
 
 
 
 
ROA (GAAP)
 
0.94
%
 
0.88
 %
 
0.70
%
Non-GAAP adjustment
 
%
 
(0.05
)%
 
%
ROA (non-GAAP)
 
0.94
%
 
0.83
 %
 
0.70
%
 
 
 
 
 
 
 
ROE
 
 
 
 
 
 
ROE (GAAP)
 
7.55
%
 
7.12
 %
 
5.55
%
Non-GAAP adjustment
 
%
 
(0.37
)%
 
0.03
%
ROE (non-GAAP)
 
7.55
%
 
6.75
 %
 
5.58
%
(1)
State tax adjustment is a result of various revaluations of state deferred tax assets.
(2)    Revaluation and related adjustments of net deferred tax assets due to the Tax Cuts and Jobs Act.

12




Set forth below is a reconciliation to GAAP of the allowance for loan losses to total loans and the allowance for loan losses as adjusted to exclude acquired loans:
 
 
As of
(Dollars in thousands)
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
 
2018
 
2018
 
2018
 
2017
 
2017
Total gross loans receivable (GAAP)
 
$
2,587,816

 
$
2,526,616

 
$
2,446,823

 
$
2,419,256

 
$
2,396,040

Less: acquired loans
 
253,695

 
271,801

 
288,847

 
311,508

 
338,933

Adjusted loans (non-GAAP)
 
$
2,334,121

 
$
2,254,815

 
$
2,157,976

 
$
2,107,748

 
$
2,057,107

 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses (GAAP)
 
$
20,932

 
$
21,060

 
$
21,472

 
$
21,090

 
$
21,997

Less: allowance for loan losses on acquired loans
 
295

 
483

 
459

 
566

 
1,197

Adjusted allowance for loan losses
 
$
20,637

 
$
20,577

 
$
21,013

 
$
20,524

 
$
20,800

Adjusted allowance for loan losses / Adjusted loans (non-GAAP)
 
0.88
%
 
0.91
%
 
0.97
%
 
0.97
%
 
1.01
%

13
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