HomeTrust Bancshares, Inc. Announces Financial Results for the Second Quarter of the Six-Month Transition Period Ending December 31, 2023* and Quarterly Dividend
ASHEVILLE, N.C., Jan. 24, 2024 (GLOBE NEWSWIRE) -- HomeTrust Bancshares, Inc. (NASDAQ: HTBI) ("Company"), the holding company of HomeTrust Bank ("Bank"), today announced preliminary net income for the second quarter of the six-month transition period ended December 31, 2023* and approval of its quarterly cash dividend.
For the quarter ended December 31, 2023 compared to the quarter ended September 30, 2023:
net income was $13.5 million compared to $14.8 million;
diluted earnings per share ("EPS") was $0.79 compared to $0.88;
annualized return on assets ("ROA") was 1.21% compared to 1.33%;
annualized return on equity ("ROE") was 10.81% compared to 12.23%;
net interest income was $41.9 million compared to $42.2 million;
net interest margin was 4.02% for both periods;
provision for credit losses was $3.4 million compared to $2.6 million;
noninterest income was $8.2 million compared to $8.6 million;
tax-free death benefit proceeds from life insurance of $1.6 million compared to $1.1 million;
recorded $288,000 in additional tax expense related to a partial restructuring of our bank owned life insurance ("BOLI") portfolio which was unique to the current quarter; and
cash dividends increased $0.01 per share, or 10.00%, to $0.11 per share totaling $1.9 million compared to $0.10 per share totaling $1.7 million.
For the six months ended December 31, 2023 compared to the six months ended December 31, 2022:
net income was $28.3 million compared to $22.9 million;
diluted EPS was $1.67 compared to $1.50;
annualized ROA was 1.27% compared to 1.28%;
annualized ROE was 11.51% compared to 11.32%;
net interest income was $84.1 million compared to $72.1 million;
net interest margin was 4.02% compared to 4.31%;
provision for credit losses was $5.9 million compared to $6.2 million;
noninterest income was $16.9 million compared to $15.9 million;
tax-free death benefit proceeds from life insurance of $2.7 million compared to $0; and
cash dividends of $0.21 per share totaling $3.5 million compared to $0.19 per share totaling $2.9 million.
The Company also announced today that its Board of Directors declared a quarterly cash dividend of $0.11 per common share payable on February 29, 2024 to shareholders of record as of the close of business on February 15, 2024.
"I am pleased HomeTrust maintained a net interest margin above 4.00% this quarter, which continues to be top quartile performance," said Hunter Westbrook, President and Chief Executive Officer. "Our margin is a direct result of HomeTrust's philosophy of prudent, sound, and profitable balance sheet management. We are optimistic that funding costs appear to be stabilizing; however, until our marginal spreads become more attractive, we will continue to be strategic as it relates to loan growth, while emphasizing the expansion of our core deposit base.
"As part of our internal focus on expense rationalization, we recently made the decision to cease indirect auto originations and right-size our mortgage banking line of business. These changes, which will take effect by the end of the first quarter, are expected to result in annual cost savings of $800,000. In addition, the restructuring of our BOLI portfolio into higher-yielding policies is expected to annually contribute $1.0 million in additional noninterest income. We believe these changes and strategies should help HomeTrust continue our strong financial performance."
WEBSITE: WWW.HTB.COM
*As previously announced, on July 24, 2023, the Board of Directors approved a change in the Company's fiscal year end from June 30 to December 31. The transition period of July 1, 2023 to December 31, 2023 will be covered on a Transition Report Form 10-KT.
Comparison of Results of Operations for the Three Months Ended December 31, 2023 and September 30, 2023 Net Income. Net income totaled $13.5 million, or $0.79 per diluted share, for the three months ended December 31, 2023 compared to $14.8 million, or $0.88 per diluted share, for the three months ended September 30, 2023, a decrease of $1.4 million, or 9.2%. The results for the three months ended December 31, 2023 compared to the quarter ended September 30, 2023 were negatively impacted by decreases of $237,000 and $379,000 in net interest income and noninterest income, respectively, and an increase of $790,000 in the provision for credit losses. Details of the changes in the various components of net income are further discussed below.
Net Interest Income. The following table presents the distribution of average assets, liabilities and equity, as well as interest income earned on average interest-earning assets and interest expense paid on average interest-bearing liabilities. All average balances are daily average balances. Nonaccruing loans have been included in the table as loans carrying a zero yield.
Three Months Ended
December 31, 2023
September 30, 2023
(Dollars in thousands)
Average Balance Outstanding
Interest Earned/ Paid
Yield/ Rate
Average Balance Outstanding
Interest Earned/ Paid
Yield/ Rate
Assets
Interest-earning assets
Loans receivable(1)
$
3,876,051
$
60,069
6.15
%
$
3,865,502
$
58,496
6.00
%
Debt securities available for sale
136,945
1,257
3.64
146,877
1,259
3.40
Other interest-earning assets(2)
121,366
1,493
4.88
148,386
2,110
5.64
Total interest-earning assets
4,134,362
62,819
6.03
4,160,765
61,865
5.90
Other assets
271,767
276,210
Total assets
$
4,406,129
$
4,436,975
Liabilities and equity
Interest-bearing liabilities
Interest-bearing checking accounts
$
594,805
$
1,209
0.81
%
$
597,856
$
1,117
0.74
%
Money market accounts
1,251,170
8,930
2.83
1,222,372
7,726
2.51
Savings accounts
198,522
45
0.09
207,489
46
0.09
Certificate accounts
818,698
8,105
3.93
789,668
7,540
3.79
Total interest-bearing deposits
2,863,195
18,289
2.53
2,817,385
16,429
2.31
Junior subordinated debt
10,005
239
9.48
9,979
236
9.38
Borrowings
156,619
2,368
6.00
208,157
3,040
5.79
Total interest-bearing liabilities
3,029,819
20,896
2.74
3,035,521
19,705
2.58
Noninterest-bearing deposits
837,048
861,788
Other liabilities
45,156
58,513
Total liabilities
3,912,023
3,955,822
Stockholders' equity
494,106
481,153
Total liabilities and stockholders' equity
$
4,406,129
$
4,436,975
Net earning assets
$
1,104,543
$
1,125,244
Average interest-earning assets to average interest-bearing liabilities
136.46
%
137.07
%
Non-tax-equivalent
Net interest income
$
41,923
$
42,160
Interest rate spread
3.29
%
3.32
%
Net interest margin(3)
4.02
%
4.02
%
Tax-equivalent(4)
Net interest income
$
42,264
$
42,475
Interest rate spread
3.32
%
3.35
%
Net interest margin(3)
4.06
%
4.05
%
(1) Average loans receivable balances include loans held for sale and nonaccruing loans. (2) Average other interest-earning assets consist of FRB stock, FHLB stock, SBIC investments and deposits in other banks. (3) Net interest income divided by average interest-earning assets. (4) Tax-equivalent results include adjustments to interest income of $341 and $315 for the three months ended December 31, 2023 and September 30, 2023, respectively, calculated based on a combined federal and state tax rate of 24%.
Total interest and dividend income for the three months ended December 31, 2023 increased $954,000, or 1.5%, compared to the three months ended September 30, 2023, which was driven by a $1.6 million, or 2.7%, increase in interest income on loans. The overall quarter-over-quarter increase in average yield was the result of both new loan originations at higher interest rates and adjustable rate loans. Accretion income on acquired loans of $405,000 and $378,000 was recognized during the same periods, respectively, and was included in interest income on loans.
Total interest expense for the three months ended December 31, 2023 increased $1.2 million, or 6.0%, compared to the three months ended September 30, 2023, the result of a $1.9 million, or 11.3%, increase in interest expense on deposits, partially offset by a $672,000, or 22.1%, decrease in interest expense on borrowings. The increase can be traced to increases in the average cost of funds across funding sources, offset by a decline in the average balance of borrowings.
The following table shows the effects that changes in average balances (volume), including differences in the number of days in the periods compared, and average interest rates (rate) had on the interest earned on interest-earning assets and interest paid on interest-bearing liabilities:
Increase / (Decrease) Due to
Total Increase/ (Decrease)
(Dollars in thousands)
Volume
Rate
Interest-earning assets
Loans receivable
$
160
$
1,413
$
1,573
Debt securities available for sale
(85
)
83
(2
)
Other interest-earning assets
(384
)
(233
)
(617
)
Total interest-earning assets
(309
)
1,263
954
Interest-bearing liabilities
Interest-bearing checking accounts
(6
)
98
92
Money market accounts
182
1,022
1,204
Savings accounts
(2
)
1
(1
)
Certificate accounts
277
288
565
Junior subordinated debt
1
2
3
Borrowings
(753
)
81
(672
)
Total interest-bearing liabilities
(301
)
1,492
1,191
Decrease in net interest income
$
(237
)
Provision for Credit Losses. The provision for credit losses is the amount of expense that, based on our judgment, is required to maintain the allowance for credit losses ("ACL") at an appropriate level under the current expected credit losses model.
The following table presents a breakdown of the components of the provision for credit losses:
Three Months Ended
(Dollars in thousands)
December 31, 2023
September 30, 2023
$ Change
% Change
Provision for credit losses
Loans
$
4,050
$
2,850
$
1,200
42
%
Off-balance-sheet credit exposure
(690
)
(280
)
(410
)
(146
)
Total provision for credit losses
$
3,360
$
2,570
$
790
31
%
For the quarter ended December 31, 2023, the "loans" portion of the provision for credit losses was primarily the result of the following, offset by net charge-offs of $2.8 million during the quarter:
$0.5 million benefit driven by changes in the loan mix.
$0.9 million provision due to changes in the projected economic forecast, specifically the national unemployment rate, and changes in qualitative adjustments.
$0.8 million increase in specific reserves on individually evaluated credits.
For the quarter ended September 30, 2023, the "loans" portion of the provision for credit losses was the result of the following, offset by net charge-offs of $2.6 million during the quarter:
$0.2 million benefit driven by changes in the loan mix.
$0.2 million provision due to changes in the projected economic forecast, specifically the national unemployment rate, and changes in qualitative adjustments.
$0.3 million increase in specific reserves on individually evaluated credits.
For the quarters ended December 31, 2023 and September 30, 2023, the amounts recorded for off-balance-sheet credit exposure were the result of changes in the balance of loan commitments, loan mix and the projected economic forecast as outlined above.
Noninterest Income. Noninterest income for the three months ended December 31, 2023 decreased $379,000, or 4.4%, when compared to the quarter ended September 30, 2023. Changes in the components of noninterest income are discussed below:
Three Months Ended
(Dollars in thousands)
December 31, 2023
September 30, 2023
$ Change
% Change
Noninterest income
Service charges and fees on deposit accounts
$
2,368
$
2,318
$
50
2
%
Loan income and fees
423
559
(136
)
(24
)
Gain on sale of loans held for sale
1,037
1,293
(256
)
(20
)
BOLI income
2,152
1,749
403
23
Operating lease income
1,592
1,785
(193
)
(11
)
Loss on sale of premises and equipment
(248
)
—
(248
)
(100
)
Other
924
923
1
—
Total noninterest income
$
8,248
$
8,627
$
(379
)
(4) %
Loan income and fees: The decrease was driven by lower servicing fees compared to the prior quarter.
Gain on sale of loans held for sale: The decrease was primarily driven by a decrease in the volume of U.S. Small Business Administration ("SBA") commercial loans sold. During the quarter ended December 31, 2023, $37.5 million in HELOCs were sold with gains of $322,000 during the quarter compared to $31.2 million sold with gains of $197,000 in the prior quarter. There were $20.5 million of residential mortgages originated for sale sold with gains of $417,000 in the current quarter compared to $20.4 million sold with gains of $251,000 for the quarter ended September 30, 2023. There were $5.6 million of sales of the guaranteed portion of SBA commercial loans with gains of $439,000 in the current quarter compared to $12.4 million sold and gains of $687,000 for the same period in the prior quarter. Lastly, our hedging of mandatory commitments on the residential mortgage loan pipeline resulted in a loss of $142,000 compared to a gain of $158,000 in the same periods, respectively
BOLI income: The increase was the result of higher tax-free gains on death benefit proceeds in excess of the cash surrender value of the policies. There were $1.6 million in gains during the current quarter compared to $1.1 million for the prior quarter.
Loss on sale of premises and equipment: During the three months ended December 31, 2023, the Company recognized $625,000 of expense to impair the remaining right of use asset associated with a previously closed branch, partially offset by a $380,000 gain on the sale of a parcel of land.
Noninterest Expense. Noninterest expense for the three months ended December 31, 2023 increased $217,000, or 0.7%, when compared to the three months ended September 30, 2023. Changes in the components of noninterest expense are discussed below:
Three Months Ended
(Dollars in thousands)
December 31, 2023
September 30, 2023
$ Change
% Change
Noninterest expense
Salaries and employee benefits
$
16,256
$
16,514
$
(258
)
(2
)%
Occupancy expense, net
2,443
2,489
(46
)
(2
)
Computer services
3,002
3,173
(171
)
(5
)
Telephone, postage and supplies
603
652
(49
)
(8
)
Marketing and advertising
625
487
138
28
Deposit insurance premiums
702
717
(15
)
(2
)
Core deposit intangible amortization
860
859
1
—
Other
5,290
4,673
617
13
Total noninterest expense
$
29,781
$
29,564
$
217
1
%
Marketing and advertising: The increase is the result of differences in the timing of when expenses are incurred quarter-over-quarter.
Other: The increase is primarily the result of $321,000 in fraud losses during the current quarter versus a $16,000 net recovery of previously recorded losses in the prior quarter. In addition, the current quarter includes $115,000 of expenses incurred related to the previously discussed staff reductions in our mortgage banking and indirect auto finance lines of business.
Income Taxes. The amount of income tax expense is influenced by the amount of pre-tax income, tax-exempt income, changes in the statutory rate and the effect of changes in valuation allowances maintained against deferred tax benefits. The effective tax rates for the three months ended December 31, 2023 and September 30, 2023 were 20.9% and 20.5%, respectively. In both periods, the effective tax rate was positively impacted by tax-free gains on BOLI death benefit proceeds, while in the current quarter $288,000 in additional tax expense was recorded related to a partial restructuring of our BOLI portfolio where we both reduced the size of the portfolio and reinvested a portion of the funds in higher-yielding policies.
Comparison of Results of Operations for the Six Months Ended December 31, 2023 and December 31, 2022 Net Income. Net income totaled $28.3 million, or $1.67 per diluted share, for the six months ended December 31, 2023 compared to $22.9 million, or $1.50 per diluted share, for the six months ended December 31, 2022, an increase of $5.4 million, or 23.8%. The results for the six months ended December 31, 2023 compared to the same period last year were positively impacted by a $12.0 million, or 16.7%, increase in net interest income, partially offset by a $3.5 million, or 11.8%, increase in salaries and employee benefits expense and a $1.7 million increase in core deposit intangible amortization as a result of the Company's February 11, 2023 merger with Quantum Capital Corp., and its wholly-owned subsidiary, Quantum National Bank, hereafter referred to as the "Quantum merger". Details of the changes in the various components of net income are further discussed below.
Net Interest Income. The following table presents the distribution of average assets, liabilities and equity, as well as interest income earned on average interest-earning assets and interest expense paid on average interest-bearing liabilities. All average balances are daily average balances. Nonaccruing loans have been included in the table as loans carrying a zero yield.
Six Months Ended December 31,
2023
2022
(Dollars in thousands)
Average Balance Outstanding
Interest Earned/ Paid
Yield/ Rate
Average Balance Outstanding
Interest Earned/ Paid
Yield/ Rate
Assets
Interest-earning assets
Loans receivable(1)
$
3,870,776
$
118,565
6.08
%
$
2,939,677
$
72,240
4.87
%
Commercial paper
—
—
—
124,351
1,300
2.07
Debt securities available for sale
141,911
2,516
3.52
151,417
1,829
2.40
Other interest-earning assets(2)
134,876
3,603
5.30
100,125
1,960
3.88
Total interest-earning assets
4,147,563
124,684
5.96
3,315,570
77,329
4.63
Other assets
273,989
239,636
Total assets
$
4,421,552
$
3,555,206
Liabilities and equity
Interest-bearing liabilities
Interest-bearing checking accounts
$
596,330
$
2,326
0.77
%
$
640,851
$
838
0.26
%
Money market accounts
1,236,771
16,657
2.67
961,045
2,456
0.51
Savings accounts
203,005
91
0.09
237,509
89
0.07
Certificate accounts
804,183
15,644
3.86
460,803
1,615
0.70
Total interest-bearing deposits
2,840,289
34,718
2.42
2,300,208
4,998
0.43
Junior subordinated debt
9,992
475
9.43
—
—
—
Borrowings
182,388
5,408
5.88
13,795
266
3.83
Total interest-bearing liabilities
3,032,669
40,601
2.66
2,314,003
5,264
0.45
Noninterest-bearing deposits
849,418
793,349
Other liabilities
51,835
46,501
Total liabilities
3,933,922
3,153,853
Stockholders' equity
487,630
401,353
Total liabilities and stockholders' equity
$
4,421,552
$
3,555,206
Net earning assets
$
1,114,894
$
1,001,567
Average interest-earning assets to average interest-bearing liabilities
136.76
%
143.28
%
Non-tax-equivalent
Net interest income
$
84,083
$
72,065
Interest rate spread
3.30
%
4.18
%
Net interest margin(3)
4.02
%
4.31
%
Tax-equivalent(4)
Net interest income
$
84,739
$
72,639
Interest rate spread
3.33
%
4.21
%
Net interest margin(3)
4.05
%
4.35
%
(1) Average loans receivable balances include loans held for sale and nonaccruing loans. (2) Average other interest-earning assets consist of FRB stock, FHLB stock, SBIC investments and deposits in other banks. (3) Net interest income divided by average interest-earning assets. (4) Tax-equivalent results include adjustments to interest income of $656 and $574 for the six months ended December 31, 2023 and 2022, respectively, calculated based on a combined federal and state tax rate of 24%.
Total interest and dividend income for the six months ended December 31, 2023 increased $47.4 million, or 61.2%, compared to the six months ended December 31, 2022, which was driven by a $46.3 million, or 64.1%, increase in interest income on loans, a $1.6 million, or 83.8%, increase in interest income on other interest-earning assets, and a $687,000, or 37.6%, increase in interest income on debt securities available for sale, partially offset by a $1.3 million decrease in commercial paper as none was held during the current period. Accretion income on acquired loans, included in loan interest income, increased $410,000 to $783,000 for the six months ended December 31, 2023 compared to $373,000 recognized during the same period in the period year.
Total interest expense for the six months ended December 31, 2023 increased $35.3 million, or 671.3%, compared to the six months ended December 31, 2022. The increase was the result of both increases in the average cost of funds across funding sources and an increase in average deposits and borrowings outstanding.
The following table shows the effects that changes in average balances (volume), including differences in the number of days in the periods compared, and average interest rates (rate) had on the interest earned on interest-earning assets and interest paid on interest-bearing liabilities:
Increase / (Decrease) Due to
Total Increase/ (Decrease)
(Dollars in thousands)
Volume
Rate
Interest-earning assets
Loans receivable
$
22,881
$
23,444
$
46,325
Commercial paper
(1,300
)
—
(1,300
)
Debt securities available for sale
(115
)
802
687
Other interest-earning assets
680
963
1,643
Total interest-earning assets
22,146
25,209
47,355
Interest-bearing liabilities
Interest-bearing checking accounts
(58
)
1,546
1,488
Money market accounts
705
13,496
14,201
Savings accounts
(13
)
15
2
Certificate accounts
1,203
12,826
14,029
Junior subordinated debt
475
—
475
Borrowings
3,251
1,891
5,142
Total interest-bearing liabilities
5,563
29,774
35,337
Increase in net interest income
$
12,018
Provision for Credit Losses. The following table presents a breakdown of the components of the provision for credit losses:
Six Months Ended December 31,
(Dollars in thousands)
2023
2022
$ Change
% Change
Provision for credit losses
Loans
$
6,900
$
6,119
$
781
13
%
Off-balance-sheet credit exposure
(970
)
358
(1,328
)
(371
)
Commercial paper
—
(250
)
250
100
Total provision for credit losses
$
5,930
$
6,227
$
(297
)
(5
)%
For the six months ended December 31, 2023, the "loans" portion of the provision for credit losses was the result of the following, offset by net charge-offs of $5.5 million during the period:
$0.8 million benefit driven by changes in the loan mix.
$1.1 million provision due to changes in the projected economic forecast, specifically the national unemployment rate, and changes in qualitative adjustments.
$1.1 million increase in specific reserves on individually evaluated credits.
For the six months ended December 31, 2022, the "loans" portion of the provision for credit losses was the result of the following, offset by net charge-offs of $1.9 million during the period:
$1.3 million provision specific to fintech portfolios which have a riskier credit profile than loans originated in-house. The elevated credit risk is offset by the higher yields earned on the portfolios.
$2.9 million provision driven by loan growth and changes in the loan mix.
$1.5 million provision due to changes in the projected economic forecast, specifically the national unemployment rate, and changes in qualitative adjustments.
$1.5 million reduction of specific reserves on individually evaluated credits, which was tied to two relationships which were fully charged-off during the period.
For the six months ended December 31, 2023 and December 31, 2022, the amounts recorded for off-balance-sheet credit exposure were the result of changes in the balance of loan commitments, loan mix and the projected economic forecast as outlined above.
Noninterest Income. Noninterest income for the six months ended December 31, 2023 increased $1.0 million, or 6.5%, when compared to the same period last year. Changes in the components of noninterest income are discussed below:
Six Months Ended December 31,
(Dollars in thousands)
2023
2022
$ Change
% Change
Noninterest income
Service charges and fees on deposit accounts
$
4,686
$
4,861
$
(175
)
(4) %
Loan income and fees
982
1,217
(235
)
(19
)
Gain on sale of loans held for sale
2,330
2,688
(358
)
(13
)
BOLI income
3,901
1,021
2,880
282
Operating lease income
3,377
2,741
636
23
Gain (loss) on sale of premises and equipment
(248
)
1,115
(1,363
)
(122
)
Other
1,847
2,209
(362
)
(16
)
Total noninterest income
$
16,875
$
15,852
$
1,023
6
%
Loan income and fees: The decrease was driven by lower prepayment penalties, partially offset by an increase in other servicing fees during the period.
Gain on sale of loans held for sale: The decrease was primarily driven by a decrease in the premium received on SBA loans sold during the current period. During the six months ended December 31, 2023, there were $68.7 million of HELOCs sold during the current period with gains of $519,000 compared to $64.2 million sold with gains of $542,000 in the same period in the prior year. There were $40.9 million of residential mortgages originated for sale sold with gains of $668,000 compared to $28.2 million sold with gains of $676,000 in the prior year. There were $18.0 million of sales of the guaranteed portion of SBA commercial loans with gains of $1.1 million in the current period compared to $20.3 million sold with gains of $1.5 million during the same period in the prior year.
BOLI income: The increase was primarily the result of a $2.7 million tax-free gain on death benefit proceeds in excess of the cash surrender value of the policies. No such gains were recognized in the prior year.
Operating lease income: The increase in operating lease income was the result of higher contractual earnings due to an increase in the average balance of assets being leased during the six months ended December 31, 2023 when compared to the prior period.
Gain (loss) on sale of premises and equipment: During the six months ended December 31, 2023, the Company recognized $625,000 of expense to impair the remaining right of use asset associated with a previously closed branch, partially offset by a $380,000 gain on the sale of a parcel of land. During the six months ended December 31, 2022, two properties were sold for a combined gain of $1.6 million, partially offset by $420,000 of expense to partially impair the right of use asset associated with a previously closed branch.
Other: The decrease was the result of a $721,000 gain recognized in the prior period on the sale of closely held equity securities which the Company obtained through a prior bank acquisition. No such sales occurred in the current year. Partially offsetting the prior period gain, investment services income increased $162,000 during the current prior period.
Noninterest Expense. Noninterest expense for the six months ended December 31, 2023 increased $7.2 million, or 13.8%, when compared to the same period last year. Changes in the components of noninterest expense are discussed below:
Six Months Ended December 31,
(Dollars in thousands)
2023
2022
$ Change
% Change
Noninterest expense
Salaries and employee benefits
$
32,770
$
29,299
$
3,471
12
%
Occupancy expense, net
4,932
4,824
108
2
Computer services
6,175
5,559
616
11
Telephone, postage and supplies
1,255
1,178
77
7
Marketing and advertising
1,112
1,071
41
4
Deposit insurance premiums
1,419
1,088
331
30
Core deposit intangible amortization
1,719
60
1,659
2,765
Merger-related expense
—
724
(724
)
(100
)
Other
9,963
8,362
1,601
19
Total noninterest expense
$
59,345
$
52,165
$
7,180
14
%
Salaries and employee benefits: The year-over-year increase in expense can be tied to the Quantum merger.
Computer services: The increase in expense between periods was primarily due to a $377,000 increase in processing charges, partially related to operations acquired as a result of the Quantum merger, and further investments in technology.
Deposit insurance premium: The increase in expense was due to increases in the assessment rate the Company is charged for deposit insurance as well as growth in the assessment base, mainly due to deposits assumed through the Quantum merger.
Core deposit intangible amortization: The increase in amortization expense was a result of a $12.2 million core deposit intangible associated with the Quantum merger, which is being amortized on an accelerated basis over ten years.
Merger-related expense: The prior year period included costs incurred related to due diligence and legal work performed which was associated with the Quantum merger. No such expense was incurred in the current period.
Other: The increase period-over-period is primarily the result of $533,000 of additional depreciation expense on equipment subject to operating leases and a $183,000 increase in fraud losses, in addition to small increases across several other expense categories.
Income Taxes. The amount of income tax expense is influenced by the amount of pre-tax income, tax-exempt income, changes in the statutory rate and the effect of changes in valuation allowances maintained against deferred tax benefits. The effective tax rates for the six months ended December 31, 2023 and 2022 were 20.7% and 22.6%, respectively. The decline in the effective tax rate was primarily driven by the tax-free gain on BOLI death benefit proceeds.
Balance Sheet Review Total assets increased by $65.1 million to $4.7 billion and total liabilities increased by $36.4 million to $4.2 billion, respectively, at December 31, 2023 as compared to June 30, 2023. The majority of these changes were the result of an increase in deposits, which, combined with maturing investments, were used to fund growth in loans held for sale and provide additional liquidity.
At the end of the period we executed a partial restructuring of our BOLI portfolio, surrendering policies with a cash surrender value of $47.6 million and re-investing $31.3 million of these funds in higher-yielding policies. The net effect was a $16.3 million reduction in BOLI while recording a $47.6 million receivable for the proceeds as included in other assets.
Stockholders' equity increased $28.7 million, or 6.1%, to $499.9 million at December 31, 2023 as compared to June 30, 2023, as a result of $28.3 million in net income. In addition, the improvement in the accumulated other comprehensive loss was driven by a $2.5 million reduction of the unrealized loss on available for sale securities as a result of movement in market interest rates.
As of December 31, 2023, the Bank was considered "well capitalized" in accordance with its regulatory capital guidelines and exceeded all regulatory capital requirements.
Asset Quality The ACL on loans was $48.6 million, or 1.34% of total loans, at December 31, 2023 compared to $47.2 million, or 1.29% of total loans, as of June 30, 2023. The drivers of this change are discussed in the "Comparison of Results of Operations for the Six Months Ended December 31, 2023 and December 31, 2022 – Provision for Credit Losses" section above.
Net loan charge-offs totaled $5.5 million for the six months ended December 31, 2023 compared to $1.9 million for the same period last year. Annualized net charge-offs as a percentage of average loans were 0.29% for the six months ended December 31, 2023 compared to 0.13% for the same period last year. The charge-offs recognized the past two quarters have been concentrated in our equipment finance and SBA portfolios, with the quarter-over-quarter increase primarily driven by smaller over-the-road truck loans in the equipment finance portfolio.
Nonperforming assets, made up entirely of nonaccrual loans for both periods, increased $11.0 million to $19.3 million, or 0.41% of total assets, at December 31, 2023 compared to $8.3 million, or 0.18% of total assets, at June 30, 2023. This increase was primarily driven by increases of $4.0 million in non-owner occupied commercial real estate ("NOO CRE"), $3.6 million in equipment finance, and $1.2 million in home equity loans. One NOO CRE hotel loan represented $3.1 million of this change, while the increase in equipment finance loans was due to the above referenced smaller over-the-road truck loans. The ratio of nonperforming loans to total loans was 0.53% at December 31, 2023 compared to 0.23% at June 30, 2023.
The ratio of classified assets to total assets increased to 0.90% at December 31, 2023 compared to 0.53% at June 30, 2023 as classified assets increased $17.5 million to $42.0 million at December 31, 2023 compared to $24.5 million at June 30, 2023. This increase was primarily driven by increases of $10.2 million in NOO CRE, $5.4 million in equipment finance, and $2.1 million in commercial and industrial loans. The increase in NOO CRE loans included an accruing $8.9 million hotel relationship and the previously referenced $3.1 million nonaccrual loan, offset by the payoff of $2.8 million in loans, while the increase in equipment finance loans was due to the above referenced smaller over-the-road truck loans, the majority of which are on nonaccrual.
About HomeTrust Bancshares, Inc. HomeTrust Bancshares, Inc. is the holding company for the Bank. As of December 31, 2023, the Company had assets of $4.7 billion. The Bank, founded in 1926, is a North Carolina state chartered, community-focused financial institution committed to providing value added relationship banking with over 30 locations as well as online/mobile channels. Locations include: North Carolina (including the Asheville metropolitan area, the "Piedmont" region, Charlotte, and Raleigh/Cary), South Carolina (Greenville and Charleston), East Tennessee (including Kingsport/Johnson City, Knoxville, and Morristown), Southwest Virginia (including the Roanoke Valley) and Georgia (Greater Atlanta).
Forward-Looking Statements This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact, but instead are based on certain assumptions including statements with respect to the Company's beliefs, plans, objectives, goals, expectations, assumptions, and statements about future economic performance and projections of financial items. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated or implied by forward-looking statements. The factors that could result in material differentiation include, but are not limited to the impact of bank failures or adverse developments involving other banks and related negative press about the banking industry in general on investor and depositor sentiment; the remaining effect of the COVID-19 pandemic on general economic and financial market conditions and on public health, both nationally and in the Company's market areas; expected revenues, cost savings, synergies and other benefits from merger and acquisition activities, including the Company's recent merger with Quantum Capital Corp., might not be realized to the extent anticipated, within the anticipated time frames, or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; goodwill impairment charges might be incurred; increased competitive pressures; changes in the interest rate environment; changes in general economic conditions, both nationally and in our market areas; legislative and regulatory changes; and the effects of inflation, a potential recession, and other factors described in the Company'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 the Company's website at www.htb.com and on the SEC's website at www.sec.gov. Any of the forward-looking statements that the Company makes in this press release or in the documents the Company files with or furnishes 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, the factors described above or other factors that management cannot foresee. The Company does not undertake, and specifically disclaims 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.
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
December 31, 2023
September 30, 2023
June 30, 2023(1)
March 31, 2023
December 31, 2022
Assets
Cash
$
18,307
$
18,090
$
19,266
$
18,262
$
15,825
Interest-bearing deposits
328,833
306,924
284,231
296,151
149,209
Cash and cash equivalents
347,140
325,014
303,497
314,413
165,034
Certificates of deposit in other banks
34,722
35,380
33,152
33,102
29,371
Debt securities available for sale, at fair value
126,950
134,348
151,926
157,718
147,942
FHLB and FRB stock
18,393
19,612
20,208
19,125
13,661
SBIC investments, at cost
13,789
14,586
14,927
13,620
12,414
Loans held for sale, at fair value
3,359
4,616
6,947
1,209
518
Loans held for sale, at the lower of cost or fair value
198,433
200,834
161,703
89,172
72,777
Total loans, net of deferred loan fees and costs
3,640,022
3,659,914
3,658,823
3,649,333
2,985,623
Allowance for credit losses – loans
(48,641
)
(47,417
)
(47,193
)
(47,503
)
(38,859
)
Loans, net
3,591,381
3,612,497
3,611,630
3,601,830
2,946,764
Premises and equipment, net
70,937
72,463
73,171
74,107
65,216
Accrued interest receivable
16,902
16,513
14,829
13,813
11,076
Deferred income taxes, net
11,796
9,569
10,912
10,894
11,319
BOLI
88,257
106,059
106,572
105,952
96,335
Goodwill
34,111
34,111
34,111
33,682
25,638
Core deposit intangibles, net
9,059
9,918
10,778
11,637
32
Other assets
107,404
56,477
53,124
49,596
48,918
Total assets
$
4,672,633
$
4,651,997
$
4,607,487
$
4,529,870
$
3,647,015
Liabilities and stockholders' equity
Liabilities
Deposits
$
3,661,373
$
3,640,961
$
3,601,168
$
3,675,599
$
3,048,020
Junior subordinated debt
10,021
9,995
9,971
9,945
—
Borrowings
433,763
452,263
457,263
320,263
130,000
Other liabilities
67,583
64,367
67,899
62,821
58,840
Total liabilities
4,172,740
4,167,586
4,136,301
4,068,628
3,236,860
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)
174
174
174
174
157
Additional paid in capital
172,366
171,663
171,222
170,670
128,486
Retained earnings
333,401
321,799
308,651
295,325
290,271
Unearned Employee Stock Ownership Plan ("ESOP") shares
(4,497
)
(4,629
)
(4,761
)
(4,893
)
(5,026
)
Accumulated other comprehensive loss
(1,551
)
(4,596
)
(4,100
)
(3,034
)
(3,733
)
Total stockholders' equity
499,893
484,411
471,186
458,242
410,155
Total liabilities and stockholders' equity
$
4,672,633
$
4,651,997
$
4,607,487
$
4,526,870
$
3,647,015
(1) Derived from audited financial statements. (2) Shares of common stock issued and outstanding were 17,387,069 at December 31, 2023; 17,380,307 at September 30, 2023; 17,366,673 at June 30, 2023; 17,370,063 at March 31, 2023; and 15,673,595 at December 31, 2022.
Consolidated Statements of Income (Unaudited)
Three Months Ended
Six Months Ended
(Dollars in thousands)
December 31, 2023
September 30, 2023
December 31, 2023
December 31, 2022
Interest and dividend income
Loans
$
60,069
$
58,496
$
118,565
$
72,240
Commercial paper
—
—
—
1,300
Debt securities available for sale
1,257
1,259
2,516
1,829
Other investments and interest-bearing deposits
1,493
2,110
3,603
1,960
Total interest and dividend income
62,819
61,865
124,684
77,329
Interest expense
Deposits
18,289
16,429
34,718
4,998
Junior subordinated debt
239
236
475
—
Borrowings
2,368
3,040
5,408
266
Total interest expense
20,896
19,705
40,601
5,264
Net interest income
41,923
42,160
84,083
72,065
Provision for credit losses
3,360
2,570
5,930
6,227
Net interest income after provision for credit losses
38,563
39,590
78,153
65,838
Noninterest income
Service charges and fees on deposit accounts
2,368
2,318
4,686
4,861
Loan income and fees
423
559
982
1,217
Gain on sale of loans held for sale
1,037
1,293
2,330
2,688
BOLI income
2,152
1,749
3,901
1,021
Operating lease income
1,592
1,785
3,377
2,741
Gain (loss) on sale of premises and equipment
(248
)
—
(248
)
1,115
Other
924
923
1,847
2,209
Total noninterest income
8,248
8,627
16,875
15,852
Noninterest expense
Salaries and employee benefits
16,256
16,514
32,770
29,299
Occupancy expense, net
2,443
2,489
4,932
4,824
Computer services
3,002
3,173
6,175
5,559
Telephone, postage and supplies
603
652
1,255
1,178
Marketing and advertising
625
487
1,112
1,071
Deposit insurance premiums
702
717
1,419
1,088
Core deposit intangible amortization
860
859
1,719
60
Merger-related expenses
—
—
—
724
Other
5,290
4,673
9,963
8,362
Total noninterest expense
29,781
29,564
59,345
52,165
Income before income taxes
17,030
18,653
35,683
29,525
Income tax expense
3,566
3,820
7,386
6,668
Net income
$
13,464
$
14,833
$
28,297
$
22,857
Per Share Data
Three Months Ended
Six Months Ended
December 31, 2023
September 30, 2023
December 31, 2023
December 31, 2022
Net income per common share(1)
Basic
$
0.79
$
0.88
$
1.67
$
1.51
Diluted
$
0.79
$
0.88
$
1.67
$
1.50
Average shares outstanding
Basic
16,820,369
16,792,177
16,806,273
15,008,092
Diluted
16,827,460
16,800,901
16,814,176
15,145,701
Book value per share at end of period
$
28.75
$
27.87
$
28.75
$
26.17
Tangible book value per share at end of period(2)
$
26.39
$
25.47
$
26.39
$
24.53
Cash dividends declared per common share
$
0.11
$
0.10
$
0.21
$
0.19
Total shares outstanding at end of period
17,387,069
17,380,307
17,387,069
15,673,595
(1) Basic and diluted net income per common share have been prepared in accordance with the two-class method. (2) See Non-GAAP reconciliations below for adjustments.
Selected Financial Ratios and Other Data
Three Months Ended
Six Months Ended
December 31, 2023
September 30, 2023
December 31, 2023
December 31, 2022
Performance ratios(1)
Return on assets (ratio of net income to average total assets)
1.21
%
1.33
%
1.27
%
1.28
%
Return on equity (ratio of net income to average equity)
10.81
12.23
11.51
11.32
Yield on earning assets
6.03
5.90
5.96
4.66
Rate paid on interest-bearing liabilities
2.74
2.58
2.66
0.45
Average interest rate spread
3.29
3.32
3.30
4.21
Net interest margin(2)
4.02
4.02
4.02
4.35
Average interest-earning assets to average interest-bearing liabilities
136.46
137.07
136.76
143.28
Noninterest expense to average total assets
2.68
2.64
2.66
2.91
Efficiency ratio
59.36
58.21
58.78
59.33
Efficiency ratio – adjusted(3)
60.52
59.12
59.81
59.36
(1) Ratios are annualized where appropriate. (2) Net interest income divided by average interest-earning assets. (3) See Non-GAAP reconciliations below for adjustments.
At or For the Three Months Ended
December 31, 2023
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
Asset quality ratios
Nonperforming assets to total assets(1)
0.41
%
0.25
%
0.18
%
0.18
%
0.17
%
Nonperforming loans to total loans(1)
0.53
0.32
0.23
0.22
0.21
Total classified assets to total assets
0.90
0.76
0.53
0.49
0.50
Allowance for credit losses to nonperforming loans(1)
251.60
400.41
567.56
600.47
629.40
Allowance for credit losses to total loans
1.34
1.30
1.29
1.30
1.30
Net charge-offs to average loans (annualized)
0.29
0.27
0.13
0.01
0.25
Capital ratios
Equity to total assets at end of period
10.70
%
10.41
%
10.23
%
10.12
%
11.25
%
Tangible equity to total tangible assets(2)
9.91
9.60
9.39
9.27
10.62
Average equity to average assets
11.03
10.84
10.79
11.14
11.50
(1) Nonperforming assets include nonaccruing loans and REO. There were no accruing loans more than 90 days past due at the dates indicated. At December 31, 2023, $2.4 million, or 12.3%, of nonaccruing loans were current on their loan payments. (2) See Non-GAAP reconciliations below for adjustments. Loans
(Dollars in thousands)
December 31, 2023
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
Commercial real estate loans
Construction and land development
$
305,269
$
352,143
$
356,674
$
368,756
$
328,253
Commercial real estate – owner occupied
536,545
526,534
529,721
524,247
340,824
Commercial real estate – non-owner occupied
875,694
880,348
901,685
926,991
690,241
Multifamily
88,623
83,430
81,827
85,285
69,156
Total commercial real estate loans
1,806,131
1,842,455
1,869,907
1,905,279
1,428,474
Commercial loans
Commercial and industrial
237,255
237,366
245,428
229,840
194,679
Equipment finance
465,573
470,387
462,211
440,345
426,507
Municipal leases
150,292
147,821
142,212
138,436
135,922
Total commercial loans
853,120
855,574
849,851
808,621
757,108
Residential real estate loans
Construction and land development
96,646
103,381
110,074
105,617
100,002
One-to-four family
584,405
560,399
529,703
518,274
400,595
HELOCs
185,878
185,289
187,193
193,037
194,296
Total residential real estate loans
866,929
849,069
826,970
816,928
694,893
Consumer loans
113,842
112,816
112,095
118,505
105,148
Total loans, net of deferred loan fees and costs
3,640,022
3,659,914
3,658,823
3,649,333
2,985,623
Allowance for credit losses – loans
(48,641
)
(47,417
)
(47,193
)
(47,503
)
(38,859
)
Loans, net
$
3,591,381
$
3,612,497
$
3,611,630
$
3,601,830
$
2,946,764
Deposits
(Dollars in thousands)
December 31, 2023
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
Core deposits
Noninterest-bearing accounts
$
784,950
$
827,362
$
825,481
$
872,492
$
726,416
NOW accounts
591,270
602,804
611,105
678,178
638,896
Money market accounts
1,246,807
1,195,482
1,241,840
1,299,503
992,083
Savings accounts
194,486
202,971
212,220
228,390
230,896
Total core deposits
2,817,513
2,828,619
2,890,646
3,078,563
2,588,291
Certificates of deposit
843,860
812,342
710,522
597,036
459,729
Total
$
3,661,373
$
3,640,961
$
3,601,168
$
3,675,599
$
3,048,020
The following bullet points provide further information regarding the composition of our deposit portfolio as of December 31, 2023:
Total deposits increased $20.4 million, or 0.6%, during the quarter.
The balance of uninsured deposits was $907.4 million, or 24.8% of total deposits, which included $268.0 million of collateralized deposits to municipalities.
The balance of brokered deposits was $355.8 million, or 9.7% of total deposits.
Commercial and consumer depositors represented 51% and 49% of total deposits, respectively.
The average balance of our deposit accounts was $34,000.
Our largest 25 depositors made up $579.7 million, or 15.8% of total deposits.
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 and the tangible equity to tangible assets ratio. 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 provide an alternative view of its performance 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 the Company's efficiency ratio:
Three Months Ended
Six Months Ended
(Dollars in thousands)
December 31, 2023
September 30, 2023
December 31, 2023
December 31, 2022
Noninterest expense
$
29,781
$
29,564
$
59,345
$
52,165
Less: merger-related expenses
—
—
—
724
Noninterest expense – adjusted
$
29,781
$
29,564
$
59,345
$
51,441
Net interest income
$
41,923
$
42,160
$
84,083
$
72,065
Plus: tax-equivalent adjustment
341
315
656
574
Plus: noninterest income
8,248
8,627
16,875
15,852
Less: BOLI death benefit proceeds in excess of cash surrender value
1,554
1,092
2,646
721
Less: gain (loss) on sale of premises and equipment
(248
)
—
(248
)
1,115
Net interest income plus noninterest income – adjusted
$
49,206
$
50,010
$
99,216
$
86,655
Efficiency ratio
59.36
%
58.21
%
58.78
%
59.33%
Efficiency ratio – adjusted
60.52
%
59.12
%
59.81
%
59.36%
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)
December 31, 2023
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
Total stockholders' equity
$
499,893
$
484,411
$
471,186
$
458,242
$
410,155
Less: goodwill, core deposit intangibles, net of taxes
41,086
41,748
42,410
42,642
25,663
Tangible book value
$
458,807
$
442,663
$
428,776
$
415,600
$
384,492
Common shares outstanding
17,387,069
17,380,307
17,366,673
17,370,063
15,673,595
Book value per share
$
28.75
$
27.87
$
27.13
$
26.38
$
26.17
Tangible book value per share
$
26.39
$
25.47
$
24.69
$
23.93
$
24.53
Set forth below is a reconciliation to GAAP of tangible equity to tangible assets:
As of
(Dollars in thousands)
December 31, 2023
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
Tangible equity(1)
$
458,807
$
442,663
$
428,776
$
415,600
$
384,492
Total assets
4,672,633
4,651,997
4,607,487
4,526,870
3,647,015
Less: goodwill, core deposit intangibles, net of taxes
41,086
41,748
42,410
42,642
25,663
Total tangible assets
$
4,631,547
$
4,610,249
$
4,565,077
$
4,484,228
$
3,621,352
Tangible equity to tangible assets
9.91%
9.60%
9.39%
9.27%
10.62%
(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.
Contact:
C. Hunter Westbrook – President and Chief Executive Officer
Tony J. VunCannon – Executive Vice President, Chief Financial Officer, Corporate Secretary and Treasurer
828-259-3939
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