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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, 2019

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.
[ ]
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol
Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share
HTBI
The NASDAQ Stock Market LLC





Item 2.02.  Results of Operations and Financial Condition
 
On October 29, 2019, HomeTrust Bancshares, Inc., the holding company for HomeTrust Bank, issued a press release reporting first quarter 2020 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, 2019


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, 2019

 
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


400696307_htbiimagea23.jpg

HomeTrust Bancshares, Inc. Reports Financial Results For The First Quarter Of Fiscal 2020

ASHEVILLE, N.C., October 29, 2019 – HomeTrust Bancshares, Inc. (NASDAQ: HTBI) ("Company"), the holding company of HomeTrust Bank ("Bank"), today announced preliminary net income increased 13.0% to $8.8 million for the first quarter of fiscal 2020, compared to $7.8 million for the same period a year ago. For the same periods, diluted earning per share increased 19.5% to $0.49 from $0.41 per diluted share.
Highlights for the quarter ended September 30, 2019 compared to the corresponding quarter in the previous year are as follows:
return on assets increased 5.3% to 0.99% from 0.94%;
return on equity increased 13.5% to 8.57% from 7.55%;
net interest income increased $801,000, or 3.0% to $27.1 million from $26.3 million;
noninterest income increased $2.0 million, or 36.5% to $7.7 million from $5.6 million;
organic net loan growth, which excludes one-to-four family loans transferred to held for sale and purchases of home equity lines of credit, was $73.0 million, or 11.3% annualized compared to $76.8 million, or 13.0% annualized;
total deposits increased $169.9 million, or 7.2% to $2.5 billion from $2.3 billion;
189,160 shares were repurchased during the quarter at an average price of $25.38 per share; and
quarterly cash dividends continued at $0.06 per share totaling $1.0 million.
“Fiscal 2020 is off to a strong start as accelerated revenues across all business product lines led to record net income for the quarter. Our newer lines of business of SBA loans and equipment finance increased noninterest income $672,000 while our legacy mortgage banking line of business had gains from the sale of mortgage loans totaling $1.3 million, a $499,000, or 65% increase over the same quarter in the prior year," said Dana Stonestreet, Chairman, President, and Chief Executive Officer. "We have continued the methodical execution of our plan to layer in outstanding markets, complimentary lines of business and seasoned revenue producers in all lines of business. The cumulative impact of this strategy continues to increase revenue, earnings and shareholder value."
Income Statement Review
Net interest income increased to $27.1 million for the quarter ended September 30, 2019, compared to $26.3 million for the comparative quarter in fiscal 2019. The $801,000, or 3.0% increase was due to a $4.0 million increase in interest and dividend income primarily driven by an increase in average interest-earning assets, which was partially offset by a $3.2 million increase in interest expense. Average interest-earning assets increased $221.2 million, or 7.2% to $3.3 billion for the quarter ended September 30, 2019 compared to $3.1 billion for the corresponding quarter in fiscal 2019. For the quarter ended September 30, 2019, the average balance of total loans receivable increased $191.7 million, or 6.2% compared to the same quarter last year primarily due to organic loan growth. The average balance of commercial paper and deposits in other banks increased $41.9 million, or 13.0% between the periods driven by increases in commercial paper investments. The average balance in other interest-earning assets increased $3.2 million, or 7.5% as a result of additional Small Business Investment Company ("SBIC") investments and the required purchase of additional shares of Federal Home Loan Bank ("FHLB") stock as our FHLB borrowings have increased. These increases were mainly funded by the decrease of $15.5 million, or 10.1% in average securities available for sale, and an increase in average interest-bearing liabilities, primarily deposits, of $239.4 million, or 9.5% as compared to the same quarter last year. Net interest margin (on a fully taxable-equivalent basis) for the three months ended September 30, 2019 decreased to 3.32% from 3.45% for the same period a year ago.
Total interest and dividend income increased $4.0 million, or 12.3% for the three months ended September 30, 2019 as compared to the same period last year, which was primarily driven by a $3.5 million, or 12.3% increase in loan interest income and a $396,000, or 21.3% increase in interest income from commercial paper and interest-bearing deposits in other banks. The additional loan

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interest income was driven by increases in both the average balance of loans receivable and loan yields compared to the prior year quarter. Average loan yields increased 20 basis points to 4.74% for the quarter ended September 30, 2019 from 4.54% in the corresponding quarter last year. For each of the quarters ended September 30, 2019 and 2018, average loan yields included six basis points from the accretion of purchase discounts on acquired loans. The incremental accretion and the impact to the yield on loans may change during any period based on the volume of prepayments, but it is expected to decrease over time as the balance of the purchase discount for acquired loans decreases. The total purchase discount for acquired loans was $6.3 million at September 30, 2019, compared to $6.7 million at June 30, 2019, and $8.5 million at September 30, 2018.
Total interest expense increased $3.2 million, or 52.7% for the quarter ended September 30, 2019 compared to the same period last year. The increase was driven by a $3.1 million, or 112.8% increase in deposit interest expense. The additional deposit interest expense was a result of our continued focus on increasing deposits as the average balance of interest-bearing deposits increased $201.8 million, or 10.8% along with a 54 basis point increase in the average cost of interest-bearing deposits for the quarter ended September 30, 2019 compared to the same quarter last year. Average borrowings for the quarter ended September 30, 2019 increased $37.6 million, or 5.8% and was offset by an eight basis point decrease in the average cost of borrowings compared to the same period last year. The overall average cost of funds increased 38 basis points to 1.33% for the current quarter compared to 0.95% in the same quarter last year due primarily to the impact of the deposit market interest rate increases on our interest-bearing liabilities.
Noninterest income increased $2.0 million, or 36.5% to $7.7 million for the three months ended September 30, 2019 from $5.6 million for the same period in the previous year. The leading factors of the increase included a $661,000, or 97.5% increase in other noninterest income primarily related to operating lease income from the new equipment finance line of business, a $499,000, or 64.6% increase in gains from the sale of mortgage loans, a $129,000, or 14.4% increase in gains from the sale of loans due to originations and sales of the guaranteed portion of U.S Small Business Administration (“SBA”) commercial loans, a $554,000, or 168.9% increase in loan income and fees primarily as a result of our adjustable rate conversion program and prepayment fees on equipment finance loans, and a $161,000, or 30.1% increase in BOLI income primarily from $134,000 of additional life insurance proceeds received for the three months ended September 30, 2019 compared to the same period last year.
Noninterest expense for the three months ended September 30, 2019 increased $1.7 million, or 7.5% to $23.5 million compared to $21.9 million for the three months ended September 30, 2018. The increase was primarily due to a $1.2 million, or 9.7% increase in salaries and employee benefits; a $510,000, or 19.5% increase in other expenses, mainly driven by depreciation from our equipment finance line of business; a $262,000, or 62.8% increase in marketing and advertising expense, which was used to promote deposit growth and other banking products; and a $175,000, or 9.5% increase in computer services. Partially offsetting these increases was a decrease of $304,000, or 100.0% in deposit insurance premiums as a result of credits issued by the Federal Deposit Insurance Corporation ("FDIC") and a $115,000, or 32.5% decrease in real estate owned ("REO") related expenses as a result of gain on sales for the three months ended September 30, 2019 compared to the same period last year.
For the three months ended September 30, 2019, the Company's income tax expense was $2.4 million compared to $2.2 million for the three months ended September 30, 2018. The increase in the Company’s federal income tax provision for the three months ended September 30, 2019 was due to an increase in taxable income. The effective tax rate for the three months ended September 30, 2019 and 2018 was 21.4% and 22.1%, respectively.
Balance Sheet Review
Total assets increased $179.1 million, or 5.2% to $3.7 billion at September 30, 2019 from $3.5 billion at June 30, 2019. Total liabilities increased $175.0 million, or 5.7% to $3.2 billion at September 30, 2019 from $3.1 billion at June 30, 2019. Deposit growth of $167.0 million, or 7.2% and a $5.0 million, or 0.7% increase in borrowings were used to fund the $74.7 million, or 2.7% net increase in total loans receivable including loans held for sale, the $43.9 million, or 36.1% increase in securities available for sale; the $12.9 million, or 5.3% increase in commercial paper as well as the $46.1 million, or 64.8% increase in cash and cash equivalents during the first three months of fiscal 2020. Loans held for sale increased with a corresponding decrease in total loans receivable as a result of approximately $256.8 million in one-to-four family loans being marketed for sale. This loan sale is expected to close in November 2019 and result in a gain. The Company is selling these lower rate one-to-four family loans to lower its loan to deposit ratio while increasing its net interest margin over time. Excluding these one-to-four family loans, loans held for sale increased $14.3 million as a result of SBA loans originations during the period.
As of July 1, 2019, the Company adopted the new lease accounting standard, which drove several changes on the balance sheet. Land totaling $2.1 million related to the Company's one finance lease (f/k/a capital lease) was reclassed from premises and equipment, net to other assets as a right of use ("ROU") asset and the corresponding liability was reclassed from a separate line on the balance sheet to other liabilities as a lease liability. The Company's operating leases led to approximately $5.1 million in ROU assets and corresponding lease liabilities, which are maintained in other assets and other liabilities, respectively.

2



Stockholders' equity at September 30, 2019 increased $4.2 million, or 1.0% to $413.1 million in comparison to $408.9 million at June 30, 2019. Changes within stockholders' equity included $8.8 million in net income, $781,000 in stock-based compensation, and a $227,000 increase in other comprehensive income representing an increase in unrealized gains on investment securities, net of tax, partially offset by 189,160 shares of common stock repurchased at an average cost of $25.38, or approximately $4.8 million in total, and $1.0 million related to cash dividends declared. As of September 30, 2019, HomeTrust Bank and the Company were considered "well capitalized" in accordance with their regulatory capital guidelines and exceeded all regulatory capital requirements.
On October 16, 2019, the Company announced the authorization of a new stock repurchase program where up to 889,123 shares, or 5% of the Company’s common stock at that date are eligible to be repurchased.
Asset Quality
The allowance for loan losses was $21.3 million, or 0.85% of total loans, at September 30, 2019 compared to $21.4 million, or 0.79% of total loans, at June 30, 2019. The allowance for loan losses to total gross loans excluding acquired loans was 0.92% at September 30, 2019, compared to 0.85% at June 30, 2019. The increase in the ratio of allowance for loan losses to gross loans was driven by approximately $256.8 million of one-to-four family loans being transferred to loans held for sale from total loans. The allowance recovered on these transferred loans was offset by the need to increase allowances within our commercial real estate and equipment finance portfolios.
There was no provision for loan losses for the three months ended September 30, 2019 or 2018. Net loan charge-offs totaled $115,000 for the three months ended September 30, 2019, compared to $128,000 for the same period in fiscal 2019, respectively. Net charge-offs as a percentage of average loans remained stable at 0.02% for the three months ended September 30, 2019 and 2018.
Nonperforming assets increased by $177,000, or 1.3% to $13.5 million, or 0.37% of total assets, at September 30, 2019 compared to $13.3 million, or 0.40% of total assets at June 30, 2019. Nonperforming assets included $10.9 million in nonaccruing loans and $2.6 million in REO at September 30, 2019, compared to $10.4 million and $2.9 million, in nonaccruing loans and REO, respectively, at June 30, 2019. Included in nonperforming loans are $4.2 million of loans restructured from their original terms of which $664,000 were current at September 30, 2019, with respect to their modified payment terms. Purchased impaired loans aggregating $1.2 million obtained through prior acquisitions are excluded from nonaccruing loans due to the accretion of discounts established in accordance with the acquisition method of accounting for business combinations. Nonperforming loans to total loans was 0.43% at September 30, 2019 and 0.38% at June 30, 2019.
The ratio of classified assets to total assets decreased to 0.84% at September 30, 2019 from 0.89% at June 30, 2019. Classified assets decreased to $30.7 million at September 30, 2019 compared to $30.9 million at June 30, 2019. Our overall asset quality metrics continue to demonstrate our commitment to growing and maintaining a loan portfolio with a moderate risk profile.

3



About HomeTrust Bancshares, Inc.
HomeTrust Bancshares, Inc. is the holding company for HomeTrust Bank. As of September 30, 2019, the Company had assets of $3.7 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/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 2020 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect our operating and stock performance.



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

4



Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
September 30, 2019
 
June 30, 2019(1)
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
Assets
 
 
 
 
 
 
 
 
 
Cash
$
52,082

 
$
40,909

 
$
40,633

 
$
44,425

 
$
39,872

Interest-bearing deposits
65,011

 
30,134

 
37,678

 
26,881

 
18,896

Cash and cash equivalents
117,093

 
71,043

 
78,311

 
71,306

 
58,768

Commercial paper
254,302

 
241,446

 
246,903

 
239,286

 
238,224

Certificates of deposit in other banks
50,117

 
52,005

 
56,209

 
51,936

 
58,384

Securities available for sale, at fair value
165,714

 
121,786

 
139,112

 
149,752

 
148,704

Other investments, at cost
45,900

 
45,378

 
51,122

 
44,858

 
43,996

Loans held for sale
289,319

 
18,175

 
14,745

 
13,095

 
10,773

Total loans, net of deferred loan fees
2,508,730

 
2,705,190

 
2,660,647

 
2,632,231

 
2,587,106

Allowance for loan losses
(21,314
)
 
(21,429
)
 
(24,416
)
 
(21,419
)
 
(20,932
)
Net loans
2,487,416

 
2,683,761

 
2,636,231

 
2,610,812

 
2,566,174

Premises and equipment, net
58,509

 
61,051

 
60,559

 
66,610

 
62,681

Accrued interest receivable
10,434

 
10,533

 
10,885

 
10,372

 
10,252

Real estate owned ("REO")
2,582

 
2,929

 
3,003

 
2,955

 
3,286

Deferred income taxes
24,257

 
26,523

 
28,832

 
28,533

 
30,942

Bank owned life insurance ("BOLI")
90,499

 
90,254

 
89,663

 
89,156

 
88,581

Goodwill
25,638

 
25,638

 
25,638

 
25,638

 
25,638

Core deposit intangibles
2,088

 
2,499

 
2,948

 
3,436

 
3,963

Other assets
31,441

 
23,157

 
13,576

 
5,354

 
3,593

Total Assets
$
3,655,309

 
$
3,476,178

 
$
3,457,737

 
$
3,413,099

 
$
3,353,959

Liabilities and Stockholders' Equity
 

 
 

 
 

 
 

 
 

Liabilities
 

 
 

 
 

 
 

 
 

Deposits
$
2,494,194

 
$
2,327,257

 
$
2,308,395

 
$
2,258,069

 
$
2,203,044

Borrowings
685,000

 
680,000

 
680,000

 
688,000

 
675,000

Other liabilities
63,047

 
60,025

 
62,112

 
56,060

 
61,720

Total liabilities
3,242,241

 
3,067,282

 
3,050,507

 
3,002,129

 
2,939,764

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 (2)
178

 
180

 
183

 
185

 
190

Additional paid in capital
186,359

 
190,315

 
196,824

 
203,660

 
214,803

Retained earnings
232,315

 
224,545

 
217,490

 
215,289

 
208,365

Unearned Employee Stock Ownership Plan ("ESOP") shares
(6,744
)
 
(6,877
)
 
(7,009
)
 
(7,142
)
 
(7,274
)
Accumulated other comprehensive income (loss)
960

 
733

 
(258
)
 
(1,022
)
 
(1,889
)
Total stockholders' equity
413,068

 
408,896

 
407,230

 
410,970

 
414,195

Total Liabilities and Stockholders' Equity
$
3,655,309

 
$
3,476,178

 
$
3,457,737

 
$
3,413,099

 
$
3,353,959

_________________________________
(1)
Derived from audited financial statements.
(2)
Shares of common stock issued and outstanding were 17,818,145 at September 30, 2019; 17,984,105 at June 30, 2019; 18,265,535 at March 31, 2019; 18,520,825 at December 31, 2018, and 18,939,280 at September 30, 2018.
 

5



Consolidated Statement of Income (Unaudited)
 
Three Months Ended
 
September 30,
 
June 30,
 
September
(Dollars in thousands)
2019
 
2019
 
2018
Interest and Dividend Income
 
 
 
 
 
Loans
$
32,266

 
$
31,861

 
$
28,728

Commercial paper and interest-bearing deposits
2,253

 
2,172

 
1,857

Securities available for sale
896

 
861

 
856

Other investments
832

 
926

 
839

Total interest and dividend income
36,247

 
35,820

 
32,280

Interest Expense
 

 
 
 
 

Deposits
5,853

 
4,996

 
2,750

Borrowings
3,321

 
3,935

 
3,258

Total interest expense
9,174

 
8,931

 
6,008

Net Interest Income
27,073

 
26,889

 
26,272

Provision for Loan Losses

 
200

 

Net Interest Income after Provision for Loan Losses
27,073

 
26,689

 
26,272

Noninterest Income
 

 
 
 
 

Service charges and fees on deposit accounts
2,443

 
2,368

 
2,401

Loan income and fees
882

 
665

 
328

Gain on sale of loans held for sale
2,299

 
2,132

 
1,670

BOLI income
697

 
529

 
536

Other, net
1,339

 
1,152

 
678

Total noninterest income
7,660

 
6,846

 
5,613

Noninterest Expense
 

 
 
 
 

Salaries and employee benefits
13,912

 
13,286

 
12,685

Net occupancy expense
2,342

 
2,408

 
2,326

Marketing and advertising
679

 
634

 
417

Telephone, postage, and supplies
802

 
830

 
769

Deposit insurance premiums

 
467

 
304

Computer services
2,024

 
1,940

 
1,849

Loss (gain) on sale and impairment of REO
(19
)
 
(61
)
 
179

REO expense
258

 
326

 
175

Core deposit intangible amortization
411

 
449

 
565

Other
3,124

 
3,136

 
2,614

Total noninterest expense
23,533

 
23,415

 
21,883

Income Before Income Taxes
11,200

 
10,120

 
10,002

Income Tax Expense
2,396

 
2,107

 
2,212

Net Income
$
8,804

 
$
8,013

 
$
7,790

 
 
 
 
 


6



Per Share Data
 
Three months ended
 
September 30,
 
June 30,
 
September 30,
 
2019
 
2019
 
2018
Net income per common share:(1)
 
 
 
 
 
Basic
$
0.51

 
$
0.45

 
$
0.43

Diluted
$
0.49

 
$
0.44

 
$
0.41

Average shares outstanding:
 
 
 
 
 
Basic
17,097,647

 
17,332,700

 
18,125,637

Diluted
17,753,657

 
17,984,958

 
18,880,476

Book value per share at end of period
$
23.18

 
$
22.74

 
$
21.87

Tangible book value per share at end of period (2)
$
21.65

 
$
21.20

 
$
20.35

Cash dividends declared per common share
$
0.06

 
$
0.06

 
$

Total shares outstanding at end of period
17,818,145

 
17,984,105

 
18,939,280

__________________________________________________
(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,
 
2019
 
2019
 
2018
Performance ratios: (1)
 
 
 
 
 
Return on assets (ratio of net income to average total assets)
0.99
%
 
0.92
%
 
0.94
%
Return on equity (ratio of net income to average equity)
8.57

 
7.87

 
7.55

Tax equivalent yield on earning assets(2)
4.43

 
4.49

 
4.23

Rate paid on interest-bearing liabilities
1.33

 
1.32

 
0.95

Tax equivalent average interest rate spread (2)
3.10

 
3.17

 
3.28

Tax equivalent net interest margin(2) (3)
3.32

 
3.38

 
3.45

Average interest-earning assets to average interest-bearing liabilities
119.41

 
119.16

 
121.97

Operating expense to average total assets
2.64

 
2.70

 
2.64

Efficiency ratio
67.75

 
69.41

 
68.63

Efficiency ratio - adjusted (4)
67.20

 
68.81

 
68.03

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

7



 
At or For the Three Months Ended
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
2019
 
2019
 
2019
 
2018
 
2018
Asset quality ratios:
 
 
 
 
 
 
 
 
 
Nonperforming assets to total assets(1)
0.37
%
 
0.38
%
 
0.41
%
 
0.37
 %
 
0.40
%
Nonperforming loans to total loans(1)
0.43

 
0.38

 
0.43

 
0.37

 
0.39

Total classified assets to total assets
0.84

 
0.89

 
1.00

 
0.97

 
0.93

Allowance for loan losses to nonperforming loans(1)
195.88

 
206.90

 
215.46

 
221.45

 
207.06

Allowance for loan losses to total loans
0.85

 
0.79

 
0.92

 
0.81

 
0.81

Allowance for loan losses to total gross loans excluding acquired loans(2)
0.92

 
0.85

 
0.99

 
0.89

 
0.88

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

 
0.47

 
0.38

 
(0.07
)
 
0.02

Capital ratios:
 
 
 
 
 
 
 
 
 
Equity to total assets at end of period
11.30
%
 
11.76
%
 
11.78
%
 
12.04
 %
 
12.35
%
Tangible equity to total tangible assets(2)
10.63

 
11.06

 
11.06

 
11.31

 
11.59

Average equity to average assets
11.54

 
11.72

 
11.93

 
12.20

 
12.43

__________________________________________

(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, 2019, there were $4.2 million of restructured loans included in nonaccruing loans and $2.6 million, or 24.0% 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,
 
2019
 
2018
 
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)
$
2,749,635

 
$
32,551

 
4.74
%
 
$
2,557,970

 
$
29,010

 
4.54
%
Commercial paper and deposits in other banks
363,123

 
2,253

 
2.48
%
 
321,217

 
1,856

 
2.31
%
Securities available for sale
138,709

 
896

 
2.58
%
 
154,249

 
856

 
2.22
%
Other interest-earning assets(3)
45,710

 
832

 
7.28
%
 
42,520

 
839

 
7.89
%
Total interest-earning assets
3,297,177

 
36,532

 
4.43
%
 
3,075,956

 
32,561

 
4.23
%
Other assets
264,375

 
 
 
 
 
245,855

 
 
 
 
Total assets
$
3,561,552

 
 
 
 
 
$
3,321,811

 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing checking accounts
441,524

 
319

 
0.29
%
 
459,895

 
270

 
0.23
%
Money market accounts
718,981

 
1,761

 
0.98
%
 
677,329

 
957

 
0.57
%
Savings accounts
172,393

 
52

 
0.12
%
 
208,289

 
68

 
0.13
%
Certificate accounts
744,956

 
3,721

 
2.00
%
 
530,507

 
1,455

 
1.10
%
Total interest-bearing deposits
2,077,854

 
5,853

 
1.13
%
 
1,876,020

 
2,750

 
0.59
%
Borrowings
683,413

 
3,321

 
1.94
%
 
645,859

 
3,258

 
2.02
%
  Total interest-bearing liabilities
2,761,267

 
9,174

 
1.33
%
 
2,521,879

 
6,008

 
0.95
%
Noninterest-bearing deposits
326,105

 
 
 
 
 
323,781

 
 
 
 
Other liabilities
63,101

 
 
 
 
 
63,282

 
 
 
 
Total liabilities
3,150,473

 
 
 
 
 
2,908,942

 
 
 
 
Stockholders' equity
411,079

 
 
 
 
 
412,868

 
 
 
 
Total liabilities and stockholders' equity
$
3,561,552

 
 
 
 
 
$
3,321,811

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earning assets
$
535,910

 
 
 
 
 
$
554,077

 
 
 
 
Average interest-earning assets to
 
 
 
 
 
 
 
 
 
 
 
average interest-bearing liabilities
119.41
%
 
 
 
 
 
121.97
%
 
 
 
 
Tax-equivalent:
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
 
$
27,358

 
 
 
 
 
$
26,553

 
 
Interest rate spread
 
 
 
 
3.10
%
 
 
 
 
 
3.28
%
Net interest margin(4)
 
 
 
 
3.32
%
 
 
 
 
 
3.45
%
Non-tax-equivalent:
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
 
$
27,073

 
 
 
 
 
$
26,272

 
 
Interest rate spread
 
 
 

 
3.07
%
 
 
 
 
 
3.25
%
Net interest margin(4)
 
 
 
 
3.28
%
 
 
 
 
 
3.42
%
__________________
(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 $285 and $281 for the three months ended September 30, 2019 and 2018, respectively, calculated based on a combined federal and state tax rate of 24%.
(3) The average other interest-earning assets consists of FRB stock, FHLB stock, and SBIC investments.
(4) Net interest income divided by average interest-earning assets.


9



Loans
(Dollars in thousands)
September 30, 2019
 
June 30, 2019
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
Retail consumer loans:
 
 
 
 
 
 
 
 
 
     One-to-four family
$
396,649

 
$
660,591

 
$
658,723

 
$
661,374

 
$
656,011

     HELOCs - originated
141,129

 
131,095

 
133,203

 
135,430

 
135,512

     HELOCs - purchased
104,324

 
116,972

 
128,832

 
138,571

 
150,733

     Construction and land/lots
85,319

 
80,602

 
76,153

 
74,507

 
75,433

     Indirect auto finance
147,808

 
153,448

 
162,127

 
170,516

 
173,305

     Consumer
11,400

 
19,756

 
19,374

 
13,520

 
13,139

Total retail consumer loans
886,629

 
1,162,464

 
1,178,412

 
1,193,918

 
1,204,133

Commercial loans:
 
 
 
 
 
 
 
 
 
     Commercial real estate
990,787

 
927,261

 
892,383

 
904,357

 
879,184

     Construction and development
203,494

 
210,916

 
214,511

 
198,738

 
198,809

     Commercial and industrial
158,706

 
160,471

 
154.47

 
143,201

 
150,362

     Equipment finance
154,479

 
132,058

 
109.175

 
81,380

 
43,377

     Municipal leases
114,382

 
112,016

 
112,067

 
111,135

 
111,951

Total commercial loans
1,621,848

 
1,542,722

 
1,482,607

 
1,438,812

 
1,383,683

Total loans
2,508,477

 
2,705,186

 
2,661,019

 
2,632,730

 
2,587,816

     Deferred loan costs (fees), net
253

 
4

 
(372
)
 
(499
)
 
(710
)
Total loans, net of deferred loan fees
2,508,730

 
2,705,190

 
2,660,647

 
2,632,231

 
2,587,106

     Allowance for loan losses
(21,314
)
 
(21,429
)
 
(24,416
)
 
(21,419
)
 
(20,932
)
Loans, net
$
2,487,416

 
$
2,683,761

 
$
2,636,231

 
$
2,610,812

 
$
2,566,174

Deposits
(Dollars in thousands)
September 30, 2019
 
June 30, 2019
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
Core deposits:
 
 
 
 
 
 
 
 
 
    Noninterest-bearing accounts
$
327,371

 
$
294,322

 
$
301,083

 
$
300,031

 
$
313,110

    NOW accounts
449,623

 
452,295

 
477,637

 
474,080

 
462,694

    Money market accounts
769,000

 
691,172

 
692,102

 
703,445

 
687,148

    Savings accounts
169,872

 
177,278

 
192,754

 
192,954

 
203,372

Total core deposits
1,715,866

 
1,615,067

 
1,663,576

 
1,670,510

 
1,666,324

Certificates of deposit
778,328

 
712,190

 
644,819

 
587,559

 
536,720

Total deposits
$
2,494,194

 
$
2,327,257

 
$
2,308,395

 
$
2,258,069

 
$
2,203,044


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; 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,
 
2019
 
2019
 
2018
Noninterest expense
$
23,533

 
$
23,415

 
$
21,883

 
 
 
 
 
 
Net interest income
$
27,073

 
$
26,889

 
$
26,272

Plus noninterest income
7,660

 
6,846

 
5,613

Plus tax equivalent adjustment
285

 
295

 
281

Less gain on sale of premises and equipment

 

 

Net interest income plus noninterest income – as adjusted
$
35,018

 
$
34,030


$
32,166

Efficiency ratio - adjusted
67.20
%
 
68.81
%
 
68.03
%
Efficiency ratio
67.75
%
 
69.41
%
 
68.63
%

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,
 
 
2019
 
2019
 
2019
 
2018
 
2018
Total stockholders' equity
 
$
413,068

 
$
408,896

 
$
407,230

 
$
410,970

 
$
414,195

Less: goodwill, core deposit intangibles, net of taxes
 
27,246

 
27,562

 
27,908

 
28,284

 
28,690

Tangible book value (1)
 
$
385,822

 
$
381,334

 
$
379,322

 
$
382,686


$
385,505

Common shares outstanding
 
17,818,145

 
17,984,105

 
18,265,535

 
18,520,825

 
18,939,280

Tangible book value per share
 
$
21.65

 
$
21.20

 
$
20.77

 
$
20.66

 
$
20.35

Book value per share
 
$
23.18

 
$
22.74

 
$
22.29

 
$
22.19

 
$
21.87

(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,
 
 
2019
 
2019
 
2019
 
2018
 
2018
 
 
(Dollars in thousands)
Tangible equity(1)
 
$
385,822

 
$
381,334

 
$
379,322

 
$
382,686

 
$
385,505

Total assets
 
3,655,309

 
3,476,178

 
3,457,737

 
3,413,099

 
3,353,959

Less: goodwill, core deposit intangibles, net of taxes
 
27,246

 
27,562

 
27,908

 
28,284

 
28,690

Total tangible assets(2)
 
$
3,628,063

 
$
3,448,616

 
$
3,429,829

 
$
3,384,815

 
$
3,325,269

Tangible equity to tangible assets
 
10.63
%
 
11.06
%
 
11.06
%
 
11.31
%
 
11.59
%
(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 the allowance for loan losses to total loans (excluding net deferred loan fees) 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,
 
 
2019
 
2019
 
2019
 
2018
 
2018
Total gross loans receivable (GAAP)
 
$
2,508,477

 
$
2,705,186

 
$
2,661,019

 
$
2,632,730

 
$
2,587,816

Less: acquired loans
 
206,937

 
214,046

 
223,101

 
236,389

 
253,695

Adjusted loans (non-GAAP)
 
$
2,301,540

 
$
2,491,140

 
$
2,437,918

 
$
2,396,341

 
$
2,334,121

 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses (GAAP)
 
$
21,314

 
$
21,429

 
$
24,416

 
$
21,419

 
$
20,932

Less: allowance for loan losses on acquired loans
 
194

 
201

 
201

 
199

 
295

Adjusted allowance for loan losses
 
$
21,120

 
$
21,228

 
$
24,215

 
$
21,220

 
$
20,637

Adjusted allowance for loan losses / Adjusted loans (non-GAAP)
 
0.92
%
 
0.85
%
 
0.99
%
 
0.89
%
 
0.88
%

12
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