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CST: 23/09/2019 14:43:50   

HomeTrust Bancshares, Inc. Reports Financial Results For The Third Quarter Of Fiscal 2019

151 Days ago

ASHEVILLE, N.C., April 24, 2019 (GLOBE NEWSWIRE) -- HomeTrust Bancshares, Inc. (NASDAQ: HTBI) ("Company"), the holding company of HomeTrust Bank ("Bank"), today announced preliminary net income for the third quarter of fiscal 2019.

For the quarter ended March 31, 2019 compared to the corresponding quarter in the previous year:

  • net income was $3.3 million, compared to $6.1 million;
  • diluted earnings per share ("EPS") was $0.18, compared to a $0.32;
  • return on assets ("ROA") was 0.39%, compared to 0.76%;
  • net interest income increased $1.2 million, or 4.8% to $26.6 million from $25.4 million;
  • noninterest income increased $857,000, or 18.9% to $5.4 million from $4.5 million;
  • provision for loan losses increased to $5.5 million from $0;
  • organic net loan growth, which excludes purchases of home equity lines of credit, was $38.5 million, or 6.2% annualized compared to $24.2 million, or 4.3% annualized; and
  • quarterly cash dividends continued at $0.06 per share totaling $1.1 million.

For the nine months ended March 31, 2019 compared to the corresponding period in the previous year:

  • net income was $19.1 million, compared to $1.0 million;
  • diluted EPS was $1.02, compared to a $0.06;
  • ROA was 0.76%, compared to 0.04%;
  • net interest income increased $4.5 million, or 6.0% to $80.0 million from $75.4 million;
  • noninterest income increased $2.8 million, or 21.4% to $16.1 million from $13.3 million;
  • provision for loan losses increased to $5.5 million from $0; and
  • organic net loan growth was $171.8 million, or 9.7% annualized compared to $91.0 million, or 5.5% annualized.

Earnings during the three and nine months ended March 31, 2019 were negatively impacted by a significant charge-off and specific reserve related to one $6.0 million customer relationship, which resulted in a $5.5 million provision for loan losses. In addition, earnings for the nine months ended March 31, 2018 included an $18.0 million write-down of deferred tax assets following a deferred tax revaluation resulting from enactment of the Tax Cuts and Jobs Act (the "Tax Act”) with no comparable charge in the current period.

At the end of March, the Company became aware that a commercial borrower operating as a heavy equipment contractor with $6.0 million of outstanding borrowings from the Bank had unexpectedly ceased operations. Based on further investigation and certain actions taken by the principal of the borrower subsequent to quarter end, the Company believes that the Bank’s collateral, consisting primarily of accounts receivable, has substantially deteriorated. As a result of this investigation and further subsequent developments, based on the estimated value of the remaining collateral, the Company recorded a $2.6 million loan charge-off and a $3.4 million specific reserve in the allowance for loan losses related to this lending relationship. The Company is taking action to enforce its rights against the borrower, guarantors and its collateral, including to preserve and recover the borrower’s assets, where appropriate.

“Although our earnings were negatively affected by this single commercial relationship, which reduced net income by approximately $4.2 million for the quarter, on an after-tax basis, we believe our credit metrics and overall credit performance remain strong," said Dana Stonestreet, Chairman, President, and Chief Executive Officer. “Excluding this lending relationship, we had positive trends in nonaccrual loans, classified assets, and delinquencies quarter over quarter."

Mr. Stonestreet continued, "Our core revenues this quarter continued to thrive and were bolstered by our new equipment finance and SBA lines of business. Our equipment finance originations were $34.6 million for the quarter and $113.4 million year to date, while the gain on sale of SBA loans added $843,000 in noninterest income for the quarter and over $2.0 million for the year. I couldn't be more proud of the high level of collaboration and teamwork across all lines of business throughout the Bank's operations, as we continue to focus on providing exceptional service to our customers while building franchise value for our shareholders."

Income Statement Review

Net interest income increased to $26.6 million for the quarter ended March 31, 2019, compared to $25.4 million for the comparative quarter in fiscal 2018. The $1.2 million, or 4.8% increase was due to a $5.3 million increase in interest and dividend income primarily driven by an increase in average interest-earning assets, which was partially offset by a $4.1 million increase in interest expense. Average interest-earning assets increased $196.0 million, or 6.6% to $3.2 billion for the quarter ended March 31, 2019 compared to $3.0 billion for the corresponding quarter in fiscal 2018. For the quarter ended March 31, 2019, the average balance of total loans receivable increased $218.4 million, or 9.0% compared to the same quarter last year primarily due to organic loan growth. The average balance of other interest-earning assets increased $40.8 million, or 16.0% between the periods primarily due to increases in commercial paper investments. These increases were mainly funded by the cumulative decrease of $63.2 million, or 21.6% in average interest-earning deposits in other banks and securities available for sale, and an increase in average interest-bearing liabilities, primarily deposits, of $184.6 million, or 7.5% as compared to the same quarter last year. Net interest margin (on a fully taxable-equivalent basis) for the three months ended March 31, 2019 decreased to 3.39% from 3.46% for the same period a year ago.

Total interest and dividend income increased $5.3 million, or 18.1% for the three months ended March 31, 2019 as compared to the same period last year, which was primarily driven by a $4.4 million, or 16.8% increase in loan interest income and a $785,000, or 52.4% increase in interest income from commercial paper and interest-bearing deposits in other financial institutions. The additional loan 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 29 basis points to 4.69% for the quarter ended March 31, 2019 from 4.40% in the corresponding quarter last year primarily due to the impact of increases in the targeted federal funds rate. Partially offsetting the increase in loan interest income was a $412,000, or 47.2% decrease in the accretion of purchase discounts on acquired loans as a result of reduced prepayments as compared to the same quarter last year. For the quarters ended March 31, 2019 and 2018, average loan yields included seven and 14 basis points, respectively, from the accretion of purchase discounts on acquired loans. The incremental accretion and the impact to loan yield will 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 $7.1 million at March 31, 2019, compared to $7.7 million at December 31, 2018 and $10.0 million at March 31, 2018.

Total interest expense increased $4.1 million, or 101.8% for the quarter ended March 31, 2019 compared to the same period last year. The increase was due to a $2.8 million, or 171.5% increase in deposit interest expense and a $1.3 million, or 55.0% increase in interest expense on borrowings. The additional deposit interest expense was a result of our focus on increasing deposits as the average balance of interest-bearing deposits increased $177.4 million, or 9.8% along with a 53 basis point increase in the average cost of interest-bearing deposits for the quarter ended March 31, 2019 compared to the same quarter last year. Average borrowings for the quarter ended March 31, 2019 increased $7.2 million, or 1.1% and the average cost of borrowings increased 77 basis points compared to the same period last year, driving the increase in interest expense on those borrowings. The overall average cost of funds increased 58 basis points to 1.23% for the current quarter compared to 0.65% in the same quarter last year due primarily to the impact of the previously mentioned interest rate increases on our interest-bearing liabilities.

Net interest income increased $4.5 million, or 6.0% to $80.0 million for the nine months ended March 31, 2019 compared to $75.4 million for the nine months ended March 31, 2018. Average interest-earning assets increased $168.4 million, or 5.7% to $3.1 billion for the nine months ended March 31, 2019 compared to $3.0 billion in the same period in 2018. The $208.7 million, or 8.7% increase in the average balance of loans receivable for the nine months ended March 31, 2019 compared to the same period last year was due primarily to organic loan growth. The average balance of other interest-earning assets increased $45.4 million, or 19.3% between the periods primarily due to increases in commercial paper investments. These increases were mainly funded by the cumulative decrease of $85.8 million, or 26.6% in average interest-earning deposits in other banks and securities available for sale, and an increase in average interest-bearing liabilities of $135.1 million, or 5.5%. Net interest margin (on a fully taxable-equivalent basis) for the nine months ended March 31, 2019 remained consistent at 3.45% compared to the same period last year.

Total interest and dividend income increased $15.0 million, or 17.4% for the nine months ended March 31, 2019 as compared to the same period last year. The increase was primarily driven by an $12.3 million, or 15.8% increase in loan interest income, a $2.1 million, or 53.8% increase in interest income from commercial paper and interest-bearing deposits in other financial institutions, and a $791,000, or 42.0% increase in other investments 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 $912,000, or 35.5% decrease in the accretion of purchase discounts on acquired loans to $1.7 million from $2.6 million as a result of reduced prepayments for the nine months ended March 31, 2019 as compared to the same period last year. Average loan yields increased 27 basis points to 4.65% for the nine months ended March 31, 2019 from 4.38% in the corresponding period last year. For the nine months ended March 31, 2019 and 2018, average loan yields included nine and 14 basis points, respectively, from the accretion of purchase discounts on acquired loans.

Total interest expense increased $10.5 million, or 95.6% for the nine months ended March 31, 2019 compared to the same period last year. This increase was primarily related to the $141.3 million, or 7.9% increase in average interest-bearing deposits and the corresponding 41 basis point increase in the average cost of those deposits, resulting in additional deposit interest expense of $6.3 million for the nine months ended March 31, 2019 as compared to the same period in the prior year. In addition, average borrowings decreased $6.2 million, or 0.9%, however, an 86 basis point increase in the average cost of those borrowings resulted in an additional $4.2 million in interest expense from borrowings for the nine months ended March 31, 2019 as compared to the same period in the prior year. The overall cost of funds increased 51 basis points to 1.11% for the nine months ended March 31, 2019 compared to 0.60% in the corresponding period last year.

Noninterest income increased $857,000, or 18.9% to $5.4 million for the three months ended March 31, 2019 from $4.5 million for the same period in the previous year. The leading factors of the increase included a $330,000, or 17.1% increase in service charges on deposit accounts as a result of an increase in deposit accounts and related fees; a $392,000, or 36.3% 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, and a $349,000, or 53.9% increase in other noninterest income primarily related to operating lease income from the new equipment finance line of business. Partially offsetting these increases was a $196,000, or 59.4% decline in loan income and fees for the three months ended March 31, 2019 compared to the same period last year.

Noninterest income increased $2.8 million, or 21.4% to $16.1 million for the nine months ended March 31, 2019 from $13.3 million for the same period in the previous year. Driving the increase was a $1.5 million, or 25.6% increase in service charges on deposit accounts; a $1.1 million, or 37.9% increase on gain on sale of loans primarily due to originations and sales of SBA commercial loans; and a $593,000, or 32.4% increase in other noninterest income primarily related to operating lease income. Partially offsetting these increases was $153,000, or 16.8% decrease in loan income and fees and an $164,000 decline in gains from the sale of premises and equipment for the nine months ended March 31, 2019 compared to the same period last year as there were no sales occurring during the current period.

Noninterest expense for the three months ended March 31, 2019 increased $1.9 million, or 9.1% to $23.0 million compared to $21.1 million for the three months ended March 31, 2018. The increase was primarily due to a $1.5 million, or 12.9% increase in salaries and employee benefits; a $380,000, or 23.8% increase in computer services; a $66,000, or 19.8% increase in marketing and advertising; a $89,000, or 3.7% increase in net occupancy expense; and a $209,000, or 8.4% increase in other expenses, mainly driven by the expansion of our SBA and equipment finance lines of business. Partially offsetting these increases was the cumulative decrease of $408,000, or 19.3% in telephone, postage, and supplies expense; deposit insurance premiums, real estate owned ("REO") related expenses; and core deposit intangibles amortization for the three months ended March 31, 2019 compared to the same period last year.

Noninterest expense for the nine months ended March 31, 2019 increased $3.8 million, or 6.0% to $66.7 million compared to $62.9 million for the nine months ended March 31, 2018. The increase was primarily due to a $2.7 million, or 7.6% increase in salaries and employee benefits; a $984,000, or 20.8% increase in computer services; a $368,000, or 5.1% increase in other expenses; a $139,000, or 15.3% increase in REO related expenses; and a cumulative increase of $307,000, or 2.9% in net occupancy, marketing and advertising, and telephone, postage, and supplies expense. Partially offsetting these increases was a $462,000, or 22.6% decrease in core deposit intangible amortization and a $287,000, or 23.0% decrease in deposit insurance premiums for the nine months ended March 31, 2019 compared to the same period last year.

For the three months ended March 31, 2019, the Company's income tax expense was $185,000 compared to $2.7 million for the three months ended March 31, 2018. The decrease in the Company’s federal income tax provision for the three months ended March 31, 2019 was due to lower taxable income, the reversal of a $325,000 tax valuation allowance related to the Company's alternative minimum tax ("AMT") credits, and from the impact of the Tax Act that lowered the corporate federal income tax rate from 34% to 21%.

For the nine months ended March 31, 2019, the Company's income tax expense was $4.7 million compared to $24.7 million for the corresponding period last year. The Company’s corporate federal income tax rate for the nine months ended March 31, 2019 and 2018 was 21% and 27.5%, respectively. In the quarter ended December 31, 2017, following a revaluation of net deferred tax assets due to the Tax Act, the Company recorded additional income tax expense of $17.7 million.

Balance Sheet Review

Total assets increased $153.6 million, or 4.6% to $3.5 billion at March 31, 2019 from $3.3 billion at June 30, 2018. Total liabilities increased $155.6 million, or 5.4% to $3.1 billion at March 31, 2019 from $2.9 billion at June 30, 2018. Deposit growth of $112.1 million, or 5.1%; a $45.0 million, or 7.1% increase in borrowings; and the cumulative decrease of $26.6 million, or 12.0% in certificates of deposit in other banks and investment securities were used to fund the $131.4 million, or 5.2% increase in total loans receivable, net of deferred loan fees, the $17.8 million, or 7.8% increase in commercial paper, the $8.8 million, or 151.1% increase in loans held for sale, and the $9.2 million, or 21.9% increase in other investments, net during the nine months of fiscal 2019. The increase in net loans receivable from June 30, 2018, was primarily driven by organic net loan growth of $171.8 million, or 9.71% annualized. The $114.8 million, or 77.2% increase in commercial and industrial loans was driven by our new equipment finance line of business. In addition, commercial real estate loans increased during the nine months ended March 31, 2019, by $35.1 million or 4.1%. The increase in loans held for sale was due primarily to SBA loans originated during the period.

Stockholders' equity at March 31, 2019 decreased $2.0 million, or 0.5% to $407.2 million in comparison to $409.2 million at June 30, 2018. Changes within stockholders' equity included $19.1 million in net income, $2.2 million in stock-based compensation, and a $1.3 million increase in other comprehensive income representing a reduction in unrealized losses on investment securities, net of tax, partially offset by 857,155 shares of common stock repurchased at an average cost of $27.21, or approximately $23.3 million in total, and $2.2 million related to cash dividends. As of March 31, 2019, HomeTrust Bank and the Company were considered "well capitalized" in accordance with their regulatory capital guidelines and exceeded all regulatory capital requirements.

Asset Quality

The allowance for loan losses was $24.4 million, or 0.92% of total loans, at March 31, 2019 compared to $21.1 million, or 0.83% of total loans, at June 30, 2018. The allowance for loan losses to total gross loans excluding acquired loans was 0.99% at March 31, 2019, compared to 0.91% at June 30, 2018. The increase in the allowance for loan losses is related to the $6.0 million commercial lending relationship discussed above.

There was a $5.5 million provision for loan losses for the three and nine months ended March 31, 2019 compared to no provision for the corresponding periods in fiscal 2018. This provision for loan losses relates to a $3.4 million specific reserve and a $2.6 million loan charge-off related to the $6.0 million commercial loan relationship discussed above. Net loan charge-offs totaled $2.5 million and $2.1 million for the three and nine months ended March 31, 2019, respectively, compared to net loan recoveries of $382,000 and $321,000 for the same periods in fiscal 2018, respectively. Net charge-offs as a percentage of average loans increased to 0.38% and 0.11% for the three and nine months ended March 31, 2019, respectively, from net recoveries of (0.06%) and (0.02)% for the same periods last year, respectively.

Nonperforming assets decreased slightly by $300,000, or 2.1% to $14.3 million, or 0.41% of total assets, at March 31, 2019 compared to $14.6 million, or 0.44% of total assets at June 30, 2018. Nonperforming assets included $11.3 million in nonaccruing loans, including the remaining balance from the commercial lending relationship discussed above, and $3.0 million in REO at March 31, 2019, compared to $10.9 million and $3.7 million, in nonaccruing loans and REO, respectively, at June 30, 2018. Included in nonperforming loans are $3.6 million of loans restructured from their original terms of which $1.8 million were current at March 31, 2019, with respect to their modified payment terms. At March 31, 2019, $6.8 million, or 60.3% of nonaccruing loans were current on their required loan payments. Purchased impaired loans aggregating $1.9 million obtained through prior acquisitions are excluded from nonaccruing loans due to the accretion of discounts established in accordance with the acquisition method of accounting for business combinations. Nonperforming loans to total loans was 0.43% at both March 31, 2019 and June 30, 2018.

The ratio of classified assets to total assets remained consistent at 1.00% at March 31, 2019 and June 30, 2018. Classified assets increased to $34.5 million at March 31, 2019 compared to $33.1 million at June 30, 2018, due to the inclusion of the commercial lending relationship discussed above. While the previously mentioned significant provision for loan losses negatively affected our earnings, we believe our overall asset quality metrics continue to demonstrate our commitment to growing and maintaining a loan portfolio with a moderate risk profile.

About HomeTrust Bancshares, Inc.

HomeTrust Bancshares, Inc. is the holding company for HomeTrust Bank. As of March 31, 2019, the Company had assets of $3.5 billion. The Bank, founded in 1926, is a North Carolina state chartered, community-focused financial institution committed to providing value added relationship banking through 43 locations as well as online/mobile channels. Locations include: North Carolina (including the Asheville metropolitan area, the "Piedmont" region, Charlotte, and Raleigh/Cary), Upstate South Carolina (Greenville), East Tennessee (including Kingsport/Johnson City/Bristol, Knoxville, and Morristown) and Southwest Virginia (including the Roanoke Valley). The Bank is the 2nd largest community bank headquartered in North Carolina.

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements often include words such as "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events, many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially, from those currently expected or projected in these forward-looking statements. Factors that could cause our actual results to differ materially from those described in the forward-looking statements, include expected cost savings, synergies and other financial benefits from our acquisitions  might not be realized within the expected time frames or at all, and costs or difficulties relating to integration matters might be greater than expected; increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and other factors described in HomeTrust's latest annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other documents filed with or furnished to the Securities and Exchange Commission - which are available on our website at www.htb.com and on the SEC's website at www.sec.gov. Any of the forward-looking statements that we make in this press release or the documents we file with or furnish to the SEC are based upon management's beliefs and assumptions at the time they are made and may turn out to be wrong because of inaccurate assumptions we might make, because of the factors described above or because of other factors that we cannot foresee. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for fiscal 2019 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect our operating and stock performance.

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


Consolidated Balance Sheets (Unaudited)

(Dollars in thousands) March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
2018(2)
  March 31,
 2018
Assets                  
Cash $ 40,633     $ 44,425     $ 39,872     $ 45,222     $ 38,100  
Interest-bearing deposits 37,678     26,881     18,896     25,524     41,296  
Cash and cash equivalents 78,311     71,306     58,768     70,746     79,396  
Commercial paper 246,903     239,286     238,224     229,070     239,435  
Certificates of deposit in other financial institutions 56,209     51,936     58,384     66,937     84,218  
Securities available for sale, at fair value 139,112     149,752     148,704     154,993     160,971  
Other investments, at cost 51,122     44,858     43,996     41,931     41,405  
Loans held for sale 14,745     13,095     10,773     5,873     6,071  
Total loans, net of deferred loan fees 2,660,647     2,632,231     2,587,106     2,525,852     2,445,755  
Allowance for loan losses (24,416 )   (21,419 )   (20,932 )   (21,060 )   (21,472 )
Net loans 2,636,231     2,610,812     2,566,174     2,504,792     2,424,283  
Premises and equipment, net 67,983     66,610     62,681     62,537     62,725  
Accrued interest receivable 10,885     10,372     10,252     9,344     9,216  
Real estate owned ("REO") 3,003     2,955     3,286     3,684     5,053  
Deferred income taxes 28,832     28,533     30,942     32,565     34,311  
Bank owned life insurance ("BOLI") 89,663     89,156     88,581     88,028     87,532  
Goodwill 25,638     25,638     25,638     25,638     25,638  
Core deposit intangibles 2,948     3,436     3,963     4,528     5,131  
Other assets 6,152     5,354     3,593     3,503     5,478  
Total Assets $ 3,457,737     $ 3,413,099     $ 3,353,959     $ 3,304,169     $ 3,270,863  
Liabilities and Stockholders' Equity                  
Liabilities                  
Deposits $ 2,308,395     $ 2,258,069     $ 2,203,044     $ 2,196,253     $ 2,180,324  
Borrowings 680,000     688,000     675,000     635,000     625,000  
Capital lease obligations 1,888     1,897     1,905     1,914     1,920  
Other liabilities 60,224     54,163     59,815     61,760     62,066  
Total liabilities 3,050,507     3,002,129     2,939,764     2,894,927     2,869,310  
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) 183     185     190     191     190  
Additional paid in capital 196,824     203,660     214,803     217,480     216,712  
Retained earnings 217,490     215,289     208,365     200,575     193,368  
Unearned Employee Stock Ownership Plan ("ESOP") shares (7,009 )   (7,142 )   (7,274 )   (7,406 )   (7,538 )
Accumulated other comprehensive loss (258 )   (1,022 )   (1,889 )   (1,598 )   (1,179 )
Total stockholders' equity 407,230     410,970     414,195     409,242     401,553  
Total Liabilities and Stockholders' Equity $ 3,457,737     $ 3,413,099     $ 3,353,959     $ 3,304,169     $ 3,270,863  

_________________________________

(1) Shares of common stock issued and outstanding were 18,265,535 at March 31, 2019; 18,520,825 at December 31, 2018, 18,939,280 at September 30, 2018; 19,041,668 at June 30, 2018; and 19,034,868 at March 31, 2018.
(2) Derived from audited financial statements.


Consolidated Statement of Income (Unaudited)

  Three Months Ended   Nine Months Ended
  March 31,   December 31,   March 31,   March 31,   March 31,
(Dollars in thousands) 2019   2018   2018   2019   2018
Interest and Dividend Income                  
Loans $ 30,770     $ 30,544     $ 26,355     $ 90,042     $ 77,745  
Securities available for sale 850     876     916     2,582     2,791  
Commercial paper and interest-bearing deposits in other financial institutions 2,283     1,966     1,498     6,106     3,970  
Other investments 821     1,014     626     2,674     1,883  
Total interest and dividend income 34,724     34,400     29,395     101,404     86,389  
Interest Expense                  
Deposits 4,404     3,607     1,622     10,761     4,509  
Borrowings 3,741     3,692     2,414     10,691     6,460  
Total interest expense 8,145     7,299     4,036     21,452     10,969  
Net Interest Income 26,579     27,101     25,359     79,952     75,420  
Provision for Loan Losses 5,500             5,500      
Net Interest Income after Provision for Loan Losses 21,079     27,101     25,359     74,452     75,420  
Noninterest Income                  
Service charges and fees on deposit accounts 2,265     2,577     1,935     7,243     5,766  
Loan income and fees 134     295     330     757     910  
Gain on sale of loans held for sale 1,472     944     1,080     4,086     2,963  
BOLI income 518     520     536     1,574     1,616  
Gain from sale of premises and equipment                 164  
Other, net 997     749     648     2,424     1,831  
Total noninterest income 5,386     5,085     4,529     16,084     13,250  
Noninterest Expense                  
Salaries and employee benefits 13,463     12,857     11,927     39,005     36,252  
Net occupancy expense 2,478     2,551     2,389     7,376     7,211  
Marketing and advertising 400     402     334     1,219     1,106  
Telephone, postage, and supplies 698     743     748     2,210     2,181  
Deposit insurance premiums 320     335     413     959     1,246  
Computer services 1,980     1,895     1,600     5,724     4,740  
Loss on sale and impairment of REO 246     75     194     500     152  
REO expense 200     173     311     548     757  
Core deposit intangible amortization 488     526     642     1,580     2,042  
Other 2,705     2,301     2,496     7,598     7,230  
Total noninterest expense 22,978     21,858     21,054     66,719     62,917  
Income Before Income Taxes 3,487     10,328     8,834     23,817     25,753  
Income Tax Expense 185     2,287     2,707     4,684     24,725  
Net Income $ 3,302     $ 8,041     $ 6,127     $ 19,133     $ 1,028  
                                       


Per Share Data

    Three Months Ended   Nine Months Ended
    March 31,     December 31,     March 31,     March 31,     March 31,  
    2019     2018     2018     2019     2018  
                                         
Net income per common share:(1)                                        
Basic   $ 0.19     $ 0.45     $ 0.34     $ 1.07     $ 0.06  
Diluted   $ 0.18     $ 0.43     $ 0.32     $ 1.02     $ 0.06  
Adjusted net income per common share:(2)                    
Basic   $ 0.17     $ 0.45     $ 0.36     $ 1.06     $ 1.06  
Diluted   $ 0.16     $ 0.43     $ 0.34     $ 1.02     $ 1.02  
                     
Average shares outstanding:                    
Basic   17,506,018     17,797,553     18,052,000     17,811,962     17,997,997  
Diluted   18,197,429     18,497,334     18,761,586     18,528,161     18,688,486  
Book value per share at end of period   $ 22.29     $ 22.19     $ 21.10     $ 22.39     $ 21.10  
Tangible book value per share at end of period (2)   $ 20.77     $ 20.66     $ 19.54     $ 20.86     $ 19.54  
Total shares outstanding at end of period   18,265,535     18,520,825     19,034,868     18,265,535     19,034,868  

__________________________________________________

(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   Nine Months Ended
    March 31,   December 31,   March 31,   March 31,   March 31,
    2019   2018   2018   2019   2018
             
Performance ratios: (1)                          
Return on assets (ratio of net income to average total assets)   0.39 %   0.95 %   0.76 %   0.76 %   0.04 %
Return on assets - adjusted(2)   0.35     0.95     0.80     0.74     0.79  
Return on equity (ratio of net income to average equity)   3.24     7.83     6.16     6.21     0.34  
Return on equity - adjusted(2)   2.92     7.83     6.47     6.11     6.32  
Tax equivalent yield on earning assets(3)   4.42     4.45     4.00     4.36     3.93  
Rate paid on interest-bearing liabilities   1.23     1.13     0.65     1.11     0.60  
Tax equivalent average interest rate spread (3)   3.19     3.32     3.35     3.25     3.35  
Tax equivalent net interest margin(3) (4)   3.39     3.51     3.46     3.45     3.45  
Average interest-earning assets to average interest-bearing liabilities   119.70     120.48     120.71     120.81     120.60  
Operating expense to average total assets   2.69     2.59     2.60     2.64     2.60  
Efficiency ratio   71.88     67.91     70.44     69.47     70.96  
Efficiency ratio - adjusted (2)   71.19     67.32     69.50     68.84     70.16  

_____________________________

(1) Ratios are annualized where appropriate.
(2) See Non-GAAP reconciliation tables below for adjustments.
(3) For the three months ended March 31, 2019, December 31, 2018, and March 31, 2018, the weighted average rate for municipal leases is adjusted for a 24%, 24%, and 30% combined federal and state tax rate, respectively since the interest from these leases is tax exempt. For the nine months ended March 31, 2019 and 2018, the weighted average rate for municipal leases is adjusted for a 24% and 30% combined federal and state tax rate, respectively.
(4) Net interest income divided by average interest-earning assets.


  At or For the Three Months Ended
  March 31,   December 31,   September 30,   June 30,   March 31,
  2019   2018   2018   2018   2018
Asset quality ratios:                  
Nonperforming assets to total assets(1) 0.41 %   0.37 %   0.40 %   0.44 %   0.54 %
Nonperforming loans to total loans(1) 0.43     0.37     0.39     0.43     0.52  
Total classified assets to total assets 1.00     0.97     0.93     1.00     1.29  
Allowance for loan losses to nonperforming loans(1) 215.46     221.45     207.06     192.96     169.71  
Allowance for loan losses to total loans 0.92     0.81     0.81     0.83     0.88  
Allowance for loan losses to total gross loans excluding acquired loans(2) 0.99     0.89     0.88     0.91     0.97  
Net charge-offs (recoveries) to average loans (annualized) 0.38     (0.07 )   0.02     0.07     (0.06 )
Capital ratios:                            
Equity to total assets at end of period 11.78 %   12.04 %   12.35 %   12.39 %   12.28 %
Tangible equity to total tangible assets(2) 11.06     11.31     11.59     11.61     11.48  
Average equity to average assets 11.93     12.20     12.43     12.31     12.30  

__________________________________________

(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 March 31, 2019, there were $3.6 million of restructured loans included in nonaccruing loans and $6.8 million, or 60.3% 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 March 31,
  2019   2018
  Average   Interest   Yield/   Average   Interest   Yield/
  Balance   Earned/ Rate(2)   Balance   Earned/   Rate(2)
  Outstanding   Paid(2)     Outstanding   Paid(2)    
(Dollars in thousands)                                          
Assets:                      
Interest-earning assets:                      
Loans receivable(1) $ 2,650,155     $ 31,084     4.69 %   $ 2,431,723     $ 26,761     4.40 %
Deposits in other financial institutions 89,063     448     2.01 %   126,933     441     1.39 %
Investment securities 139,898     850     2.43 %   165,219     916     2.22 %
Other interest-earning assets(3) 295,215     2,655     3.60 %   254,424     1,682     2.65 %
Total interest-earning assets 3,174,331     35,037     4.42 %   2,978,299     29,800     4.00 %
Other assets 246,858             259,390          
Total assets 3,421,189             3,237,689          
Liabilities and equity:                      
Interest-bearing deposits:                      
Interest-bearing checking accounts 463,807     332     0.29 %   480,650     236     0.20 %
Money market accounts 701,692     1,408     0.80 %   657,214     633     0.39 %
Savings accounts 188,848     58     0.12 %   221,214     72     0.13 %
Certificate accounts 627,444     2,606     1.66 %   445,328     681     0.61 %
Total interest-bearing deposits 1,981,791     4,404     0.89 %   1,804,406     1,622     0.36 %
Borrowings 670,142     3,741     2.23 %   662,977     2,414     1.46 %
Total interest-bearing liabilities 2,651,933     8,145     1.23 %   2,467,383     4,036     0.65 %
Noninterest-bearing deposits 298,118             308,955          
Other liabilities 63,015             63,177          
Total liabilities 3,013,066             2,839,515          
Stockholders' equity 408,123             398,174          
Total liabilities and stockholders' equity $ 3,421,189             $ 3,237,689          
                       
Net earning assets $ 522,398             $ 510,916          
Average interest-earning assets to                      
average interest-bearing liabilities 119.70 %           120.71 %        
Tax-equivalent:                      
Net interest income     $ 26,892             $ 25,764      
Interest rate spread         3.19 %           3.35 %
Net interest margin(4)         3.39 %           3.46 %
Non-tax-equivalent:                      
Net interest income     $ 26,579             $ 25,358      
Interest rate spread         3.15 %           3.28 %
Net interest margin(4)         3.35 %           3.39 %

__________________

(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 $313 and $406 for the three months ended March 31, 2019 and 2018, respectively, calculated based on a combined federal and state tax rate of 24% and 30%, respectively.
(3) The average other interest-earning assets consists of FRB stock, FHLB stock, Small Business Investment Company ("SBIC") investments, and commercial paper.
(4) Net interest income divided by average interest-earning assets.


  For the Nine Months Ended March 31,
  2019   2018
  Average   Interest   Yield/   Average   Interest   Yield/
  Balance   Earned/   Rate(2)   Balance   Earned/   Rate(2)
  Outstanding   Paid(2)       Outstanding   Paid(2)    
(Dollars in thousands)                                          
Assets:                      
Interest-earning assets:                      
Loans receivable(1) $ 2,608,485     $ 90,920     4.65 %   $ 2,399,753     $ 78,914     4.38 %
Deposits in other financial institutions 88,092     1,258     1.90 %   145,761     1,494     1.37 %
Investment securities 148,645     2,582     2.32 %   176,726     2,791     2.11 %
Other interest-earning assets(3) 280,327     7,520     3.58 %   234,931     4,359     2.47 %
Total interest-earning assets 3,125,549     102,280     4.36 %   2,957,171     87,558     3.95 %
Other assets 245,360               271,231            
Total assets $ 3,370,909               $ 3,228,402            
Liabilities and equity:                          
Interest-bearing liabilities:                          
Interest-bearing checking accounts 463,035     903     0.26 %   471,618     688     0.19 %
Money market accounts 689,363     3,630     0.70 %   635,645     1,695     0.36 %
Savings accounts 197,929     189     0.13 %   227,413     225     0.13 %
Certificate accounts 573,647     6,039     1.40 %   447,950     1,901     0.57 %
Total interest-bearing deposits 1,923,974     10,761     0.75 %   1,782,626     4,509     0.36 %
Borrowings 663,157     10,691     2.15 %   669,371     6,460     1.29 %
Total interest-bearing liabilities 2,587,130     21,452     1.11 %   2,451,997     10,969     0.60 %
Noninterest-bearing deposits 310,304             309,162          
Other liabilities 62,830             65,380          
Total liabilities 2,960,264             2,826,539          
Stockholders' equity 410,645             401,863          
Total liabilities and stockholders' equity $ 3,370,909             $ 3,228,402          
                       
Net earning assets $ 538,419             $ 505,174          
Average interest-earning assets to                      
average interest-bearing liabilities 120.81 %           120.60 %        
Tax-equivalent:                      
Net interest income     $ 80,828             $ 76,589      
Interest rate spread         3.25 %           3.35 %
Net interest margin(4)         3.45 %           3.45 %
Non-tax-equivalent:                          
Net interest income     $ 79,952               $ 75,420        
Interest rate spread         3.22 %           3.30 %
Net interest margin(4)         3.41 %           3.40 %

__________________

(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 $876 and $1,169 for the nine months ended March 31, 2019 and 2018, respectively, calculated based on a combined federal and state tax rate of 24% and 30%, respectively.
(3) The average other interest-earning assets consists of FRB stock, FHLB stock, Small Business Investment Company ("SBIC") investments, and commercial paper.
(4) Net interest income divided by average interest-earning assets.


Loans

(Dollars in thousands) March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
Retail consumer loans:                                      
One-to-four family $ 658,723     $ 661,374     $ 656,011     $ 664,289     $ 670,036  
HELOCs - originated 133,203     135,430     135,512     137,564     143,049  
HELOCs - purchased 128,832     138,571     150,733     166,276     165,680  
Construction and land/lots 76,153     74,507     75,433     65,601     68,121  
Indirect auto finance 162,127     170,516     173,305     173,095     160,664  
Consumer 19,374     13,520     13,139     12,379     11,317  
Total retail consumer loans 1,178,412     1,193,918     1,204,133     1,219,204     1,218,867  
Commercial loans:                  
Commercial real estate 892,383     904,357     879,184     857,315     810,332  
Construction and development 214,511     198,738     198,809     192,102     184,179  
Commercial and industrial 263,646     224,582     193,739     148,823     132,337  
Municipal leases 112,067     111,135     111,951     109,172     101,108  
Total commercial loans 1,482,607     1,438,812     1,383,683     1,307,412     1,227,956  
Total loans 2,661,019     2,632,730     2,587,816     2,526,616     2,446,823  
Deferred loan fees, net (372 )   (499 )   (710 )   (764 )   (1,068 )
Total loans, net of deferred loan fees 2,660,647     2,632,231     2,587,106     2,525,852     2,445,755  
Allowance for loan losses (24,416 )   (21,419 )   (20,932 )   (21,060 )   (21,472 )
Loans, net $ 2,636,231     $ 2,610,812     $ 2,566,174     $ 2,504,792     $ 2,424,283  
                                       

Deposits

(Dollars in thousands) March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
Core deposits:                                      
Noninterest-bearing accounts $ 301,083     $ 300,031     $ 313,110     $ 317,822     $ 303,875  
NOW accounts 477,637     474,080     462,694     471,364     496,934  
Money market accounts 692,102     703,445     687,148     677,665     659,791  
Savings accounts 192,754     192,954     203,372     213,250     220,497  
Total core deposits 1,663,576     1,670,510     1,666,324     1,680,101     1,681,097  
Certificates of deposit 644,819     587,559     536,720     516,152     499,227  
Total $ 2,308,395     $ 2,258,069     $ 2,203,044     $ 2,196,253     $ 2,180,324  
                                       


Non-GAAP Reconciliations

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

Set forth below is a reconciliation to GAAP of our efficiency ratio:

    Three Months Ended   Nine Months Ended
(Dollars in thousands)   March 31,   December 30,   March 31,   March 31,   March 31,
    2019   2018   2018   2019   2018
Noninterest expense   $ 22,978     $ 21,858     $ 21,054     $ 66,719     $ 62,917  
                     
Net interest income   $ 26,579     $ 27,101     $ 25,359     $ 79,952     $ 75,420  
Plus noninterest income   5,386     5,085     4,529     16,084     13,250  
Plus tax equivalent adjustment   313     282     406     876     1,169  
Less gain on sale of premises and equipment                   164  
Net interest income plus noninterest income – as adjusted   $ 32,278     $ 32,468     $ 30,294     $ 96,912     $ 89,675  
Efficiency ratio   71.19 %   67.32 %   69.50 %   68.84 %   70.16 %
Efficiency ratio (without adjustments)   71.88 %   67.91 %   70.44 %   69.47 %   70.96 %

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)   March 31,   December 31,   September 30,   June 30,   March 31,
    2019   2018   2018   2018   2018
Total stockholders' equity   $ 407,230     $ 410,970     $ 414,195     $ 409,242     $ 401,553  
Less: goodwill, core deposit intangibles, net of taxes   27,908     28,284     28,690     29,125     29,589  
Tangible book value (1)   $ 379,322     $ 382,686     $ 385,505     $ 380,117     $ 371,964  
Common shares outstanding   18,265,535     18,520,825     18,939,280     19,041,668     19,034,868  
Tangible book value per share   $ 20.77     $ 20.66     $ 20.35     $ 19.96     $ 19.54  
Book value per share   $ 22.29     $ 22.19     $ 21.87     $ 21.49     $ 21.10  

(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
    March 31,   December 31,   September 30,   June 30,   March 31,
    2019   2018   2018   2018   2018
     
    (Dollars in thousands)
Tangible equity(1)   $ 379,322     $ 382,686     $ 385,505     $ 380,117     $ 371,964  
Total assets   3,457,737     3,413,099     3,353,959     3,304,169     3,270,863  
Less: goodwill, core deposit intangibles, net of taxes   27,908     28,284     28,690     29,125     29,589  
Total tangible assets(2)   $ 3,429,829     $ 3,384,815     $ 3,325,269     $ 3,275,044     $ 3,241,274  
Tangible equity to tangible assets   11.06 %   11.31 %   11.59 %   11.61 %   11.48 %

(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 income and earnings per share (EPS) as adjusted to exclude state tax expense rate change, federal tax law rate change, and gain from sale of premises and equipment:

    Three Months Ended   Nine Months Ended
(Dollars in thousands, except per share data)   March 31,   December 31,   March 31,   March 31,   March 31,
    2019   2018   2018   2019   2018
State tax expense adjustment (1)   $     $     $     $     $ 133  
Change in federal tax law adjustment (2)   (325 )       318     (325 )   18,011  
Gain from sale of premises and equipment                   (164 )
Total adjustments   (325 )       318     (325 )   17,980  
Tax effect                   49  
Total adjustments, net of tax   (325 )       318     (325 )   18,029  
                     
Net income (GAAP)   3,302     8,041     6,127     19,133     1,028  
                     
Net income (non-GAAP)   $ 2,977     $ 8,041     $ 6,445     $ 18,808     $ 19,057  
                     
Per Share Data                    
Average shares outstanding - basic   17,506,018     17,797,553     18,052,000     17,811,962     17,997,997  
Average shares outstanding - diluted   18,197,429     18,497,334     18,761,586     18,528,161     18,688,486  
                     
Basic EPS                    
EPS (GAAP)   $ 0.19     $ 0.45     $ 0.34     $ 1.07     $ 0.06  
Non-GAAP adjustment   (0.02 )       0.02     (0.01 )   1.00  
EPS (non-GAAP)   $ 0.17     $ 0.45     $ 0.36     $ 1.06     $ 1.06  
                     
Diluted EPS                    
EPS (GAAP)   $ 0.18     $ 0.43     $ 0.32     $ 1.02     $ 0.06  
Non-GAAP adjustment   (0.02 )       0.02         0.96  
EPS (non-GAAP)   $ 0.16     $ 0.43     $ 0.34     $ 1.02     $ 1.02  
                     
Average Balances                    
Average assets   $ 3,421,189     $ 3,369,726     $ 3,237,689     $ 3,370,909     $ 3,228,402  
Average equity   408,123     410,943     398,174     410,645     401,863  
                     
ROA                    
ROA (GAAP)   0.39 %   0.95 %   0.76 %   0.76 %   0.04 %
Non-GAAP adjustment   (0.04 )%   %   0.04 %   (0.02 )%   0.75 %
ROA (non-GAAP)   0.35 %   0.95 %   0.80 %   0.74 %   0.79 %
                                         
ROE                                        
ROE (GAAP)   3.24 %   7.83 %   6.16 %   6.21 %   0.34 %
Non-GAAP adjustment   (0.32 )%   %   0.31 %   (0.10 )%   5.98 %
ROE (non-GAAP)   2.92 %   7.83 %   6.47 %   6.11 %   6.32 %
                                         

(1) State tax adjustment is a result of various revaluations of state deferred tax assets.
(2) Revaluation and related adjustments of net deferred tax assets due to the Tax Cuts and Jobs Act.

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)   March 31,   December 31,   September 30,   June 30,   March 31,
    2019   2018   2018   2018   2018
Total gross loans receivable (GAAP)   $ 2,661,019     $ 2,632,730     $ 2,587,816     $ 2,526,616     $ 2,446,823  
Less: acquired loans   223,101     236,389     253,695     271,801     288,847  
Adjusted loans (non-GAAP)   $ 2,437,918     $ 2,396,341     $ 2,334,121     $ 2,254,815     $ 2,157,976  
                     
Allowance for loan losses (GAAP)   $ 24,416     $ 21,419     $ 20,932     $ 21,060     $ 21,472  
Less: allowance for loan losses on acquired loans   201     199     295     483     459  
Adjusted allowance for loan losses   $ 24,215     $ 21,220     $ 20,637     $ 20,577     $ 21,013  
Adjusted allowance for loan losses / Adjusted loans (non-GAAP)   0.99 %   0.89 %   0.88 %   0.91 %   0.97 %


 

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