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

Company Release - 10/30/2017 4:15 PM ET

ASHEVILLE, N.C., Oct. 30, 2017 (GLOBE NEWSWIRE) -- HomeTrust Bancshares, Inc. (NASDAQ:HTBI) ("Company"), the holding company of HomeTrust Bank ("Bank"), today announced preliminary net income of $5.6 million for the quarter ended September 30, 2017, a $1.7 million, or 45.6% increase over net income of $3.8 million for the same period a year ago. The Company's diluted earnings per share increased $0.08, or 36.4% to $0.30 for the three months ended September 30, 2017 compared to $0.22 per share for the same period in fiscal 2017. The increase in net income largely reflects the acquisition of TriSummit Bancorp, Inc. and its wholly-owned subsidiary TriSummit Bank ("TriSummit") effective January 1, 2017 and additional increases in net interest income from organic loan growth.

For the quarter ended September 30, 2017 compared to the corresponding quarter in the previous year:

  • commercial loan portfolio originations increased $87.1 million, or 113.1% from $77.0 million to $164.1 million;
  • retail loan portfolio originations increased $5.8 million, or 7.8% from $74.6 million to $80.4 million; and
  • organic net loan growth, which excludes loans acquired through acquisitions and purchases of home equity lines of credit ("HELOCs"), was $43.2 million or 7.9% annualized.

“Our solid performance this quarter continues to demonstrate the successful execution of our strategic plan,” said Dana Stonestreet, Chairman, President, and CEO. “Our strong growth in loans and core deposits along with increased noninterest income and disciplined expense management have led to positive trends across all of our performance ratios. I could not be more proud of the HomeTrust team that continues to capitalize on the momentum in our new growing urban markets that is transforming HomeTrust from a rural mutual savings bank to a regional commercial bank. The cumulative impact of our team's work over the past five years has positioned the Bank to make fiscal 2018 an inflection point for our financial performance and stockholder returns."

Income Statement Review

Net interest income was $24.6 million for the quarter ended September 30, 2017 compared to $21.1 million for the comparative quarter in fiscal 2017. The $3.4 million, or 16.3% increase was primarily due to a $5.1 million increase in interest income driven by an increase in average-interest earning assets. Average interest-earning assets increased $391.6 million, or 15.5% to $2.9 billion for the quarter ended September 30, 2017 compared to $2.5 billion for the corresponding quarter in fiscal 2017. The average balance of loans receivable for the quarter ended September 30, 2017 increased $513.4 million, or 27.8% due to the TriSummit acquisition and increased organic net loan growth, which was mainly funded by the cumulative decrease of $121.8 million, or 17.9% in average interest-earning deposits with banks, securities available for sale, and other interest-earning assets, an increase in average deposits of $256.0 million, or 14.2%, and an increase in average Federal Home Loan Bank ("FHLB") borrowings of $134.2 million, or 25.1% as compared to the same quarter last year.  Net interest margin (on a fully taxable-equivalent basis) for the three months ended September 30, 2017 and 2016 was 3.44%. We continue to utilize our leveraging strategy, where additional short-term FHLB borrowings are invested in various short-term liquid assets to generate additional net interest income, as well as increased dividend income from the required purchase of additional FHLB stock. During the three months ended September 30, 2017 our leveraging strategy produced an additional $967,000 in interest income at an average yield of 1.58%, while the average cost of the borrowings was 1.18%, resulting in approximately $245,000 in net interest income. During the same quarter in the prior fiscal year, our leveraging strategy produced an additional $999,000 in interest income at an average yield of 1.01%, while the average cost of the borrowings was 0.42%, resulting in approximately $589,000 in net interest income. Excluding the effects of the leveraging strategy, the net interest margin would be 3.72% and 3.97% for the quarters ended September 30, 2017 and 2016, respectively.

Total interest income increased $5.1 million, or 22.4% for the three months ended September 30, 2017 as compared to the same period last year, which was primarily driven by a $4.8 million, or 23.3% increase in loan interest income. The additional loan interest income was primarily due to the increase in the average balance of loans receivable which was partially offset by a $1.1 million, or 57.6% decrease in the accretion of purchase discounts on acquired loans to $775,000 for the quarter ended September 30, 2017 from $1.8 million for the same quarter in fiscal 2017, as a result of full repayments of several loans with large discounts in the previous fiscal year. This decrease in purchase discount accretion led to a 19 basis point decrease in average loan yields to 4.37% for the quarter ended September 30, 2017 from 4.56% in the corresponding quarter last year. Excluding the effects of the accretion on purchase discounts on acquired loans, loan yields increased eight basis points to 4.24% for the quarter ended September 30, 2017 compared to 4.16% in the same period last year.

Total interest expense increased $1.7 million, or 100.4% for the quarter ended September 30, 2017 compared to the same period last year. This increase was primarily related to average borrowings, consisting of short-term FHLB advances, increasing by $134.2 million to $668.1 million primarily due to funding for loan growth as well as a 76 basis point increase in the average cost of borrowings during the quarter as compared to the same quarter last year. In addition, the TriSummit acquisition and recent deposit marketing initiatives contributed to a $186.9 million increase in the average balance of interest-bearing deposits. The overall average cost of funds increased 24 basis points to 0.55% 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.

Noninterest income increased $336,000, or 7.9% to $4.6 million for the three months ended September 30, 2017 from $4.2 million for the same period in the previous year, primarily due to a $125,000, or 6.5% increase in service charges on deposit accounts, a $126,000, or 12.9% increase in loan income from the gain on the sale of mortgage loans and various commercial loan-related fees, and a $306,000, or 75.9% increase in other income primarily driven by gains on an investment in a small business investment company.

Noninterest expense for the three months ended September 30, 2017 increased $2.0 million, or 10.2% to $21.1 million compared to $19.1 million for the three months ended September 30, 2016. Salaries and employee benefits increased $1.7 million, or 15.5% primarily as a result of the TriSummit acquisition and a $434,000 increase in stock-based compensation expense primarily driven by the increase in the Company's stock price during the three months ended September 30, 2017 compared to the same period in fiscal 2017. In addition, the TriSummit acquisition led to additional noninterest expenses as shown in the cumulative increase of $775,000, or 9.9% in net occupancy expense, core deposit intangible amortization, and other expenses. These increases in noninterest expense were partially offset by the absence of $307,000 in merger-related expenses, and a $178,000, or 65.2% decrease in real estate owned ("REO") related expenses for the quarter ended September 30, 2017 compared to the same period last year. We continue to actively market our REO properties in an effort to minimize holding costs.

For the three months ended September 30, 2017, the Company's income tax expense was $2.5 million, an increase of $86,000, or 3.5% compared to $2.4 million for the three months ended September 30, 2016, reflecting an increase in taxable income. For the three months ended September 30, 2017 and 2016, the Company incurred a charge of $133,000 and $490,000 related to the decrease in value of our deferred tax assets based on decreases in North Carolina's corporate tax rate. The Company's effective income tax rate for the three months ended September 30, 2017 was 31.1% compared to 38.8% for the three months ended September 30, 2016.

Balance Sheet Review

Total assets were $3.2 billion at September 30, 2017 as well as June 30, 2017. Total liabilities remained constant as well at $2.8 billion at both dates. Deposit growth of $51.9 million, or 2.5% and the cumulative decrease of $47.5 million, or 11.3% in cash and cash equivalents, certificates of deposits in other banks, and securities available for sale during the first quarter of fiscal 2018 were used to fund the $43.3 million, or 1.8% increase in total loans, the $49.9 million, or 33.3% increase in commercial paper, and reduce borrowings by $16.7 million, or 2.4%. The increase in net loans receivable was driven by $43.2 million of organic net loan growth. The increase of $2.2 million in loans held for sale was a result of volume increases from our expanded mortgage operations into newer market areas.

Total deposits increased $51.9 million, or 2.5%, during the quarter to $2.1 billion at September 30, 2017. The increase was primarily due to an increase of $56.1 million in our core deposits (which excludes certificates of deposit) as a result of recent deposit gathering initiatives, which were partially offset by a $4.3 million managed run off in our higher costing certificates of deposit and brokered deposits.

Stockholders' equity at September 30, 2017 increased $7.8 million, or 2.0% to $405.5 million from $397.6 million at June 30, 2017. The increase was primarily driven by $5.6 million in net income, $1.2 million representing stock-based compensation, and $680,000 in a cumulative adjustment for the adoption of Accounting Standard Update 2016-09, "Improvements to Employee Share-Based Payment Accounting." As of September 30, 2017, HomeTrust Bank was considered "well capitalized" in accordance with its regulatory capital guidelines and exceeded all regulatory capital requirements with Common Equity Tier 1, Tier 1 Risk-Based, Total Risk-Based, and Tier 1 Leverage capital ratios of 11.53%, 11.53%, 12.35%, and 10.05%, respectively.  In addition, the Company exceeded all regulatory capital requirements as of that date.

Asset Quality

The allowance for loan losses was $22.0 million, or 0.92% of total loans, at September 30, 2017 compared to $21.2 million, or 0.90% of total loans, at June 30, 2017. The allowance for loan losses to total gross loans excluding acquired loans was 1.01% at September 30, 2017, compared to 1.03% at June 30, 2017.

There was no provision for losses on loans for the three months ended September 30, 2017 and 2016. Net loan recoveries totaled $846,000 for the three months ended September 30, 2017 compared to net charge-offs of $341,000 for the same period during the prior fiscal year. Net recoveries as a percentage of average loans increased to (0.14)% for the quarter ended September 30, 2017 from net charge-offs of 0.07% for the same period last fiscal year.

Nonperforming assets remained constant at $20.0 million, or 0.62% of total assets, at September 30, 2017 and June 30, 2017, and were $22.7 million, or 0.82% of total assets, a year ago. Nonperforming assets included $14.1 million in nonaccruing loans and $5.9 million in REO at September 30, 2017, compared to $13.7 million and $6.3 million, in nonaccruing loans and REO, respectively, at June 30, 2017. Included in nonperforming loans are $5.2 million of loans restructured from their original terms of which $3.1 million were current at September 30, 2017, with respect to their modified payment terms. At September 30, 2017, $5.6 million, or 40.1% of nonaccruing loans were current on their required loan payments. Purchased impaired loans aggregating $6.5 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 was 0.59% at September 30, 2017 compared to 0.58% at June 30, 2017, and 0.90% at September 30, 2016.

The ratio of classified assets to total assets decreased to 1.50% at September 30, 2017 from 1.57% at June 30, 2017. Classified assets decreased 3.0% to $48.7 million at September 30, 2017 compared to $50.2 million at June 30, 2017 and were $57.1 million at September 30, 2016. Our overall asset quality metrics continue to demonstrate our commitment to growing and maintaining a high quality loan portfolio.

About HomeTrust Bancshares, Inc.

HomeTrust Bancshares, Inc. is the holding company for HomeTrust Bank. As of September 30, 2017, the Company had assets of $3.2 billion. The Bank, founded in 1926, is a North Carolina state chartered, community-focused financial institution committed to providing value added relationship banking through 42 locations as well as online/mobile channels. Locations include: North Carolina (including the Asheville metropolitan area, the "Piedmont" region, Charlotte, and Raleigh), Upstate South Carolina (Greenville), East Tennessee (including Kingsport/Johnson City/Bristol, Knoxville, and Morristown) and Southwest Virginia (including the Roanoke Valley). The Bank is the 2nd largest community bank headquartered in North Carolina. 

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements often include words such as "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events, many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially, from those currently expected or projected in these forward-looking statements. Factors that could cause our actual results to differ materially from those described in the forward-looking statements, include expected cost savings, synergies and other financial benefits from our acquisition of TriSummit 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


Consolidated Balance Sheets (Unaudited)

(Dollars in thousands)September 30,
2017
 June 30,
 2017
 March 31,
2017
 December 31,
2016
 September 30,
2016
Assets         
Cash$38,162  $41,982  $36,978  $40,105  $32,081 
Interest-bearing deposits40,809  45,003  43,296  5,044  28,482 
Cash and cash equivalents78,971  86,985  80,274  45,149  60,563 
Commercial paper199,774  149,863  169,918  179,939  220,682 
Certificates of deposit in other banks110,454  132,274  138,646  150,147  153,431 
Securities available for sale, at fair value182,053  199,667  211,347  181,049  193,701 
Other investments, at cost38,651  39,355  35,269  32,341  31,509 
Loans held for sale7,793  5,607  4,328  4,998  8,832 
Total loans, net of deferred loan fees2,394,755  2,351,470  2,281,685  1,955,604  1,881,481 
Allowance for loan losses(21,997) (21,151) (21,097) (20,986) (20,951)
Net loans2,372,758  2,330,319  2,260,588  1,934,618  1,860,530 
Premises and equipment, net62,614  63,648  64,172  54,496  53,981 
Accrued interest receivable9,340  8,758  8,849  7,792  7,729 
Real estate owned ("REO")5,941  6,318  6,279  5,648  5,715 
Deferred income taxes55,653  57,387  59,661  52,259  52,087 
Bank owned life insurance ("BOLI")86,561  85,981  85,371  81,033  80,444 
Goodwill25,638  25,638  25,638  13,098  12,673 
Core deposit intangibles6,454  7,173  7,931  5,868  6,486 
Other assets7,343  7,560  7,175  25,805  5,746 
Total Assets$3,249,998  $3,206,533  $3,165,446  $2,774,240  $2,754,109 
Liabilities and Stockholders' Equity         
Liabilities         
Deposits$2,100,310  $2,048,451  $2,084,759  $1,786,165  $1,793,528 
Borrowings679,800  696,500  626,000  560,000  536,500 
Capital lease obligations1,931  1,937  1,942  1,947  1,953 
Other liabilities62,458  61,998  61,999  58,352  57,727 
Total liabilities2,844,499  2,808,886  2,774,700  2,406,464  2,389,708 
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  190  189  180  180 
Additional paid in capital214,827  213,459  211,731  189,169  186,960 
Retained earnings197,907  191,660  186,894  186,620  183,637 
Unearned Employee Stock Ownership Plan ("ESOP") shares(7,803) (7,935) (8,067) (8,199) (8,332)
Accumulated other comprehensive income (loss)378  273  (1) 6  1,956 
Total stockholders' equity405,499  397,647  390,746  367,776  364,401 
Total Liabilities and Stockholders' Equity$3,249,998  $3,206,533  $3,165,446  $2,774,240  $2,754,109 
 
(1) Shares of common stock issued and outstanding at September 30, 2017 was 18,968,675; at June 30, 2017 was 18,967,875; at March 31, 2017 was 18,947,176; at December 31, 2016 was 18,000,750; and at September 30, 2016 was 17,999,150.


Consolidated Statement of Income (Unaudited)

 Three Months Ended
 September 30, June 30, September 30,
(Dollars in thousands)2017 2017 2016
Interest and Dividend Income     
Loans$25,250  $24,971  $20,480 
Securities available for sale971  997  880 
Certificates of deposit and other interest-bearing deposits1,169  875  1,044 
Other investments506  448  387 
Total interest and dividend income27,896  27,291  22,791 
Interest Expense     
Deposits1,346  1,233  1,099 
Borrowings1,969  1,491  555 
Total interest expense3,315  2,724  1,654 
Net Interest Income24,581  24,567  21,137 
Provision for Loan Losses     
Net Interest Income after Provision for Loan Losses24,581  24,567  21,137 
Noninterest Income     
Service charges and fees on deposit accounts2,039  1,862  1,914 
Loan income and fees1,102  951  976 
BOLI income562  512  562 
Gain from sales of securities available for sale  22   
Gain from sale of premises and equipment164    385 
Other, net710  711  404 
Total noninterest income4,577  4,058  4,241 
Noninterest Expense     
Salaries and employee benefits12,352  11,725  10,691 
Net occupancy expense2,349  2,583  2,061 
Marketing and advertising453  407  430 
Telephone, postage, and supplies685  818  612 
Deposit insurance premiums414  493  279 
Computer services1,545  1,854  1,427 
Loss (gain) on sale and impairment of REO(146) 12  129 
REO expense241  145  144 
Core deposit intangible amortization719  758  650 
Merger-related expenses  69  307 
Other2,469  2,795  2,400 
Total noninterest expense21,081  21,659  19,130 
Income Before Income Taxes8,077  6,966  6,248 
Income Tax Expense2,510  2,200  2,424 
Net Income$5,567  $4,766  $3,824 


Per Share Data

  Three Months Ended
  September 30, June 30, September 30,
  2017 2017 2016
Net income per common share:      
Basic $0.31  $0.26  $0.22 
Diluted $0.30  $0.25  $0.22 
Adjusted net income per common share:(1)      
Basic $0.31  $0.26  $0.25 
Diluted $0.30  $0.25  $0.25 
       
Average shares outstanding:      
Basic 17,966,994  17,936,511  17,208,682 
Diluted 18,616,452  18,568,587  17,451,295 
Book value per share at end of period $21.38  $20.96  $20.25 
Tangible book value per share at end of period (1) $19.81  $19.37  $19.31 
Total shares outstanding at end of period 18,968,675  18,967,875  17,999,150 
 
(1) See Non-GAAP reconciliation tables below for adjustments.


Selected Financial Ratios and Other Data

  Three Months Ended
  September 30, June 30, September 30,
  2017 2017 2016
Performance ratios: (1)      
Return on assets (ratio of net income to average total assets) 0.70% 0.61% 0.55%
Return on assets - adjusted(4) 0.70  0.61  0.62 
Return on equity (ratio of net income to average equity) 5.55  4.83  4.22 
Return on equity - adjusted(4) 5.58  4.88  4.74 
Tax equivalent yield on earning assets(2) 3.90  3.91  3.70 
Rate paid on interest-bearing liabilities 0.54  0.46  0.31 
Tax equivalent average interest rate spread (2) 3.36  3.45  3.39 
Tax equivalent net interest margin(2) (3) 3.44  3.53  3.44 
Tax equivalent net interest margin - adjusted(4) 3.72  3.82  3.97 
Average interest-earning assets to average interest-bearing liabilities 120.67  119.99  120.47 
Operating expense to average total assets 2.64  2.76  2.77 
Efficiency ratio 72.30  75.66  75.38 
Efficiency ratio - adjusted (4) 71.36  73.98  73.58 
 
(1) Ratios are annualized where appropriate.
(2) The weighted average rate for municipal leases is adjusted for a 34% federal tax rate 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.


 At or For the Three Months Ended
 September 30, June 30, March 31, December 31, September 30,
 2017 2017 2017 2016 2016
Asset quality ratios:         
Nonperforming assets to total assets(1)0.62% 0.62% 0.63% 0.78% 0.82%
Nonperforming loans to total loans(1)0.59  0.58  0.61  0.82  0.90 
Total classified assets to total assets1.50  1.57  1.67  1.97  2.07 
Allowance for loan losses to nonperforming loans(1)156.17  154.77  152.74  131.11  123.21 
Allowance for loan losses to total loans0.92  0.90  0.92  1.07  1.11 
Allowance for loan losses to total gross loans excluding acquired loans(2)1.01  1.03  1.10  1.16  1.22 
Net charge-offs (recoveries) to average loans (annualized)(0.14) (0.01) (0.02) (0.01) 0.07 
Capital ratios:         
Equity to total assets at end of period12.48% 12.40% 12.34% 13.26% 13.23%
Tangible equity to total tangible assets(2)11.67  11.57  11.49  12.73  12.70 
Average equity to average assets12.55  12.59  12.36  13.23  13.10 
 
(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, 2017, there were $5.2 million of restructured loans included in nonaccruing loans and $5.6 million, or 40.1% 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.


Average Balance Sheet Data

 For the Three Months Ended September 30,
 2017 2016
 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)$2,361,522  $25,798  4.37% $1,848,086  $21,070  4.56%
Deposits in other financial institutions159,152  536  1.35% 191,716  497  1.04%
Investment securities189,920  972  2.05% 196,889  880  1.79%
Other interest-earning assets(3)208,422  1,138  2.18% 290,722  934  1.29%
Total interest-earning assets2,919,016  28,444  3.90% 2,527,413  23,381  3.70%
Other assets278,869      237,509     
Total assets$3,197,885      $2,764,922     
Liabilities and equity:           
Interest-bearing liabilities:           
Interest-bearing checking accounts462,928  216  0.19% 403,823  173  0.17%
Money market accounts605,261  477  0.31% 519,250  347  0.27%
Savings accounts232,940  78  0.13% 210,179  70  0.13%
Certificate accounts449,839  575  0.51% 430,791  509  0.47%
Total interest-bearing deposits1,750,968  1,346  0.31% 1,564,043  1,099  0.28%
Borrowings668,091  1,969  1.18% 533,889  555  0.42%
 Total interest-bearing liabilities2,419,059  3,315  0.55% 2,097,932  1,654  0.31%
Noninterest-bearing deposits310,596      241,510     
Other liabilities66,808      63,184     
Total liabilities2,796,463      2,402,626     
Stockholders' equity401,422      362,296     
Total liabilities and stockholders' equity$3,197,885      $2,764,922     
            
Net earning assets$499,957      $429,481     
Average interest-earning assets to           
average interest-bearing liabilities120.67%     120.47%    
Tax-equivalent:           
Net interest income  $25,129      $21,727   
Interest rate spread    3.35%     3.39%
Net interest margin(4)    3.44%     3.44%
Non-tax-equivalent:           
Net interest income  $24,581      $21,137   
Interest rate spread    3.27%     3.29%
Net interest margin(4)    3.37%     3.35%
 
(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 $548,000 and $590,000 for the three months ended September 30, 2017 and 2016, respectively, calculated based on a federal tax rate of 34%.
(3) The average other interest-earning assets consists of FRB stock, FHLB stock, and commercial paper.
(4) Net interest income divided by average interest-earning assets.


Loans

(Dollars in thousands)September 30,
2017
 June 30,
2017
 March 31,
2017
 December 31,
2016
 September 30,
2016
Retail consumer loans:         
One-to-four family$684,956  $684,089  $683,383  $608,118  $613,568 
HELOCs - originated152,979  157,068  160,083  156,615  161,679 
HELOCs - purchased162,518  162,407  160,829  173,511  169,007 
Construction and land/lots54,969  50,136  46,856  42,628  40,100 
Indirect auto finance142,915  140,879  132,959  129,132  122,115 
Consumer8,814  7,900  7,729  5,852  5,348 
Total retail consumer loans1,207,151  1,202,479  1,191,839  1,115,856  1,111,817 
Commercial loans:         
Commercial real estate753,857  730,408  706,277  531,321  487,997 
Construction and development209,672  197,966  177,087  129,370  109,507 
Commercial and industrial124,722  120,387  105,299  77,352  70,393 
Municipal leases100,638  101,175  101,776  101,730  101,400 
Total commercial loans1,188,889  1,149,936  1,090,439  839,773  769,297 
Total loans2,396,040  2,352,415  2,282,278  1,955,629  1,881,114 
Deferred loan costs (fees), net(1,285) (945) (593) (25) 367 
Total loans, net of deferred loan fees2,394,755  2,351,470  2,281,685  1,955,604  1,881,481 
Allowance for loan losses(21,997) (21,151) (21,097) (20,986) (20,951)
Loans, net$2,372,758  $2,330,319  $2,260,588  $1,934,618  $1,860,530 


Deposits

(Dollars in thousands) September 30,
2017
 June 30,
2017
 March 31,
2017
 December 31,
2016
 September 30,
2016
Core deposits:         
Noninterest-bearing accounts$304,144  $310,172  $301,654  $244,148  $243,723 
NOW accounts464,992  469,377  480,405  413,867  407,109 
Money market accounts642,351  569,607  564,195  520,138  516,396 
Savings accounts230,944  237,149  249,330  210,283  208,992 
Total core deposits1,642,431  1,586,305  1,595,584  1,388,436  1,376,220 
Certificates of deposit457,879  462,146  489,175  397,729  417,308 
Total$2,100,310  $2,048,451  $2,084,759  $1,786,165  $1,793,528 


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 merger-related expenses, certain state income tax expense, and gain from the sale of premises and equipment; earnings per share ("EPS"), return on assets ("ROA"), and return on equity ("ROE") excluding merger-related expenses, certain state income tax expense, 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.

Management elected to obtain additional FHLB borrowings beginning in November 2014 as part of a plan to increase net interest income. The Company believes that showing the effects of the additional borrowings on net interest income and net interest margins is useful to both management and investors as these measures are commonly used to measure financial institutions performance and against peers.

The Company believes these measures facilitate comparison of the quality and composition of the Company's capital and earnings ability over time and in comparison to its 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,
  2017 2017 2016
Noninterest expense $21,081  $21,659  $19,130 
Less merger-related expenses   69  307 
Noninterest expense – as adjusted $21,081  $21,590  $18,823 
       
Net interest income $24,581  $24,567  $21,137 
Plus noninterest income 4,577  4,058  4,241 
Plus tax equivalent adjustment 548  579  590 
Less realized gain on securities   22   
Less gain on sale of premises and equipment 164    385 
Net interest income plus noninterest income – as adjusted $29,542  $29,182  $25,583 
Efficiency ratio 71.36% 73.98% 73.58%
Efficiency ratio (without adjustments) 72.30% 75.66% 75.38%

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,
  2017 2017 2017 2016 2016
Total stockholders' equity $405,499  $397,647  $390,746  $367,776  $364,401 
Less: goodwill, core deposit intangibles, net of taxes 29,704  30,157  30,635  16,795  16,759 
Tangible book value $375,795  $367,490  $360,111  $350,981  $347,642 
Common shares outstanding 18,968,675  18,967,875  18,947,176  18,000,750  17,999,150 
Tangible book value per share $19.81  $19.37  $19.01  $19.50  $19.31 
Book value per share $21.38  $20.96  $20.62  $20.43  $20.25 

Set forth below is a reconciliation to GAAP of tangible equity to tangible assets:

  At or For the Three Months Ended
  September 30, June 30, March 31, December 31, September 30,
  2017 2017 2017 2016 2016
  (Dollars in thousands)
Tangible equity(1) $375,795  $367,490  $360,111  $350,981  $347,642 
Total assets 3,249,998  3,206,533  3,165,446  2,774,240  2,754,109 
Less: goodwill, core deposit intangibles, net of taxes 29,704  30,157  30,635  16,795  16,759 
Total tangible assets(2) $3,220,294  $3,176,376  $3,134,811  $2,757,445  $2,737,350 
Tangible equity to tangible assets 11.67% 11.57% 11.49% 12.73% 12.70%
 
(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.

Set forth below is a reconciliation to GAAP of net interest income and net interest margin as adjusted to exclude additional FHLB borrowings and proceeds from such borrowings: 

 Three Months Ended September 30,
 2017 2016
 Average
Balance
Outstanding
 Interest
Earned /
Paid
 Yield/ Rate Average
Balance
Outstanding
 Interest
Earned /
Paid
 Yield/ Rate
Interest-earning assets$2,919,016  $28,444  3.90% $2,527,413  $23,381  3.70%
Less: Interest-earning assets funded by additional FHLB borrowings (1)245,000  967  1.58% 395,000  999  1.01%
Interest-earning assets - adjusted$2,674,016  $27,477  4.11% $2,132,413  $22,382  4.20%
            
Interest-bearing liabilities$2,419,059  $3,315  0.55% $2,097,932  $1,654  0.31%
Less: Additional FHLB borrowings245,000  722  1.18% 395,000  410  0.42%
Interest-bearing liabilities - adjusted$2,174,059  $2,593  0.48% $1,702,932  $1,244  0.29%
            
Tax equivalent net interest income and net interest margin  $25,129  3.44%   $21,727  3.44%
Tax equivalent net interest income and net interest margin - adjusted  24,884  3.72%   21,138  3.97%
Difference  $245  (0.28)%   $589  (0.53)%
 
(1) Proceeds from the additional borrowings were invested in various interest-earning assets, including: deposits with the Federal Reserve Bank, FHLB stock, certificates of deposit in other banks, and commercial paper.


Set forth below is a reconciliation to GAAP of net income and earnings per share (EPS) as adjusted to exclude merger-related expenses, state tax expense 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,
  2017 2017 2016
Merger-related expenses $  $69  $307 
State tax expense adjustment (1) 133    490 
Gain from sale of premises and equipment (164)   (385)
Total adjustments (31) 69  412 
Tax effect (2) 59  (26) 58 
Total adjustments, net of tax 28  43  470 
       
Net income (GAAP) 5,567  4,766  3,824 
       
Net income (non-GAAP) $5,595  $4,809  $4,294 
       
Per Share Data      
Average shares outstanding - basic 17,966,994  17,936,511  17,208,682 
Average shares outstanding - diluted 18,616,452  18,568,587  17,451,295 
       
Basic EPS      
EPS (GAAP) $0.31  $0.26  $0.22 
Non-GAAP adjustment     0.03 
EPS (non-GAAP) $0.31  $0.26  $0.25 
       
Diluted EPS      
EPS (GAAP) $0.30  $0.25  $0.22 
Non-GAAP adjustment     0.03 
EPS (non-GAAP) $0.30  $0.25  $0.25 
       
Average Balances      
Average assets $3,197,885  $3,133,998  $2,764,922 
Average equity 401,422  394,527  362,296 
       
ROA      
ROA (GAAP) 0.70% 0.61% 0.55%
Non-GAAP adjustment % % 0.07%
ROA (non-GAAP) 0.70% 0.61% 0.62%
       
ROE      
ROE (GAAP) 5.55% 4.83% 4.22%
Non-GAAP adjustment 0.03% 0.05% 0.52%
ROE (non-GAAP) 5.58% 4.88% 4.74%
 
(1) State tax adjustment is a result of a decrease in value of our deferred tax assets stemming from recent decreases in North Carolina's corporate tax rate.
(2) Tax amounts have been adjusted for certain nondeductible merger-related expenses.

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,
  2017 2017 2017 2016 2016
Total gross loans receivable (GAAP) $2,396,040  $2,352,415  $2,282,278  $1,955,629  $1,881,481 
Less: acquired loans 338,933  374,538  403,971  169,234  192,745 
Adjusted loans (non-GAAP) $2,057,107  $1,977,877  $1,878,307  $1,786,395  $1,688,736 
           
Allowance for loan losses (GAAP) $21,997  $21,151  $21,097  $20,986  $20,951 
Less: allowance for loan losses on acquired loans 1,197  727  474  336  356 
Adjusted allowance for loan losses $20,800  $20,424  $20,623  $20,650  $20,595 
Adjusted allowance for loan losses / Adjusted loans (non-GAAP) 1.01% 1.03% 1.10% 1.16% 1.22%

 

Source: HomeTrust Bancshares, Inc.