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.
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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.
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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
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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. |
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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 | |||||
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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. |
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| 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. |
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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 | |||||||||
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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