HomeTrust Bancshares, Inc. Announces Fourth Quarter and Fiscal Year 2022 Financial Results and Quarterly Dividend

Jul 27th, 2022 12:00 EST

ASHEVILLE, N.C., July 27, 2022 (GLOBE NEWSWIRE) -- HomeTrust Bancshares, Inc. (NASDAQ: HTBI) ("Company"), the holding company of HomeTrust Bank ("Bank"), today announced preliminary net income for the fourth quarter and fiscal year 2022 and approval of its quarterly cash dividend.

For the quarter ended June 30, 2022 compared to the corresponding quarter in the previous year:

  • net income was $6.0 million compared to a net loss of $7.4 million;
  • diluted earnings per share ("EPS") was $0.39 compared to a loss per share of ($0.46);
  • annualized return on assets ("ROA") was 0.68% compared to (0.81)%;
  • annualized return on equity ("ROE") was 6.19% compared to (7.30)%;
  • net interest income was $28.9 million compared to $26.0 million;
  • provision for credit losses was $3.4 million compared to a net benefit of $955,000;
  • noninterest income was $9.7 million compared to $11.2 million;
  • no prepayment penalties on borrowings compared to $19.0 million;
  • 387,196 shares of Company common stock were repurchased during the quarter at an average price of $28.49 per share;
  • net loan growth was $69.8 million, or 10.3% annualized, compared to $43.1 million, or 6.4% annualized; and
  • quarterly cash dividends continued at $0.09 per share totaling $1.4 million.

For the fiscal year ended June 30, 2022 compared to the previous year:

  • net income was $35.7 million compared to $15.7 million;
  • diluted EPS was $2.23 compared to $0.94;
  • ROA was 1.01% compared to 0.42%;
  • ROE was 9.00% compared to 3.88%;
  • net interest income was $110.8 million compared to $103.3 million;
  • provision for credit losses was a net benefit of $592,000 compared to a net benefit of $7.1 million;
  • noninterest income was $39.2 million compared to $39.8 million;
  • no prepayment penalties on borrowings compared to $22.7 million;
  • 1,482,959 shares of Company common stock were repurchased during the year at an average price of $29.23 per share; and
  • net loan growth was $36.0 million, or 5.3%, compared to a decrease of $35.9 million, or 5.2%.

The Company also announced today that its Board of Directors declared a quarterly cash dividend of $0.09 per common share payable on September 1, 2022 to shareholders of record as of the close of business on August 18, 2022.

“In the fourth quarter we saw a continuation of many of the trends highlighted last quarter,” said Dana Stonestreet, Chairman and Chief Executive Officer. “We continue to be focused on opportunities for diversified loan growth, increasing loans by $69.8 million or 10.3% annualized this quarter. Once again, the upward movement in interest rates resulted in a decline in the volume of residential mortgage sales; however, we have already begun to benefit from an increase in yield on our loan and investment portfolios as our net interest margin increased by 14 basis points over the prior quarter. Our asset sensitivity and further expected rate increases by the Federal Reserve should continue to drive increases in our net interest margin.

“Beyond our organic growth, we recently partnered with a fintech which contributed to growth in the commercial and industrial loan segment, supplementing the Company’s existing partnership with a fintech specializing in HELOCs. These relationships present a unique opportunity for HomeTrust to expand the Company’s origination sources and enhance our management team’s understanding of the credit modeling approaches being deployed outside of traditional banking. We plan to continue to prudently grow these portfolios in future quarters and explore relationships with other fintechs as mutually beneficial opportunities arise.

“Lastly, as disclosed earlier this week, we were excited to announce the signing of a definitive merger agreement where HomeTrust will acquire Quantum Capital Corporation, the holding company of Quantum National Bank, a high-performing $660 million asset bank operating in the Atlanta metro area. This transaction presents a unique opportunity for HomeTrust to expand our franchise and meaningfully enhance our profitability.”

WEBSITE: WWW.HTB.COM

Comparison of Results of Operations for the Three Months Ended June 30, 2022 and June 30, 2021

Net Income (Loss).  Net income totaled $6.0 million, or $0.39 per diluted share, for the three months ended June 30, 2022 compared to a net loss of $7.4 million, or ($0.46) per diluted share, for the three months ended June 30, 2021, an increase of $13.4 million, or 181.3%. The results for the three months ended June 30, 2022 compared to the quarter ended June 30, 2021 were positively impacted by no prepayment penalties on borrowings and $1.9 million of gains on the sale of securities available for sale, partially offset by an increase in the provision for credit losses of $4.4 million and $1.8 million in officer transition agreement expense. Details of the changes in the various components of net income (loss) are further discussed below.

Net Interest Income.  The following table presents the distribution of average assets, liabilities and equity, as well as interest income on average interest-earning assets and interest expense paid on average interest-bearing liabilities. All average balances are daily average balances. Nonaccruing loans have been included in the table as loans carrying a zero yield.

 Three Months Ended June 30,
  2022   2021 
(Dollars in thousands)AverageBalanceOutstanding InterestEarned/Paid(2) Yield/Rate(2) AverageBalanceOutstanding InterestEarned/Paid(2) Yield/Rate(2)
Assets:           
Interest-earning assets:           
Loans receivable(1)$2,807,969  $28,457 4.06% $2,796,063  $27,559 3.95%
Commercial paper 295,485   852 1.16   245,234   217 0.35 
Debt securities available for sale 118,075   483 1.64   157,455   496 1.26 
Other interest-earning assets(3) 92,026   628 2.74   210,480   859 1.64 
Total interest-earning assets 3,313,555   30,420 3.68   3,409,232   29,131 3.43 
Other assets 255,596       260,365     
Total assets 3,569,151       3,669,597     
Liabilities and equity:           
Interest-bearing liabilities:           
Interest-bearing checking accounts$664,966  $340 0.20% $657,748  $411 0.25%
Money market accounts 979,816   350 0.14   948,739   363 0.15 
Savings accounts 235,848   42 0.07   225,385   41 0.07 
Certificate accounts 485,978   500 0.41   489,155   959 0.79 
Total interest-bearing deposits 2,366,608   1,232 0.21   2,321,027   1,774 0.31 
Borrowings 26,761   35 0.52   251,538   1,034 1.65 
Total interest-bearing liabilities 2,393,369   1,267 0.21   2,572,565   2,808 0.44 
Noninterest-bearing deposits 738,734       633,841     
Other liabilities 46,928       57,258     
Total liabilities 3,179,031       3,263,664     
Stockholders' equity 390,120       405,933     
Total liabilities and stockholders' equity 3,569,151       3,669,597     
Net earning assets$920,186      $836,667     
Average interest-earning assets to average interest-bearing liabilities 138.45%      132.52%    
Tax-equivalent:           
Net interest income  $29,153     $26,323  
Interest rate spread    3.47%     2.99%
Net interest margin(4)    3.53%     3.10%
Non-tax-equivalent:           
Net interest income  $28,859     $25,998  
Interest rate spread    3.43%     2.95%
Net interest margin(4)    3.49%     3.06%

__________________________________________(1) The average loans receivable 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 $294 and $325 for the three months ended June 30, 2022 and 2021, respectively, calculated based on a combined federal and state tax rate of 24%.(3) The average other interest-earning assets consist of FRB stock, FHLB stock, SBIC investments, and deposits in other banks.(4) Net interest income divided by average interest-earning assets.

Total interest and dividend income for the three months ended June 30, 2022 increased $1.3 million, or 4.6%, compared to the three months ended June 30, 2021, which was driven by a $929,000, or 3.4%, increase in interest income on loans, a $635,000, or 292.6%, increase in interest income on commercial paper, partially offset by a $231,000, or 26.9%, decrease in interest income on other interest-earning assets. The overall increase in average yield on interest-earning assets was the result of rising interest rates, while the rate paid on interest-bearing liabilities has not increased as rapidly. Specific to the commercial paper and debt securities available for sale, the Company has intentionally maintained relatively short-term duration portfolios which has allowed and will continue to allow the Company to take advantage of rising rates when reinvesting the proceeds of maturing instruments.

Total interest expense for the three months ended June 30, 2022 decreased $1.5 million, or 54.9%, compared to the three months ended June 30, 2021. The decrease was driven by a $1.0 million, or 96.6%, decrease in interest expense on borrowings and a $542,000, or 30.6%, decrease in interest expense on deposits compared to the same period last year. The overall average cost of funds decreased 23 basis points compared to the same period last year primarily due to the prepayment of long-term borrowings in the prior year and reduced market rates.

The following table shows the effects that changes in average balances (volume) and average interest rates (rate) had on the interest earned on interest-earning assets and interest paid on interest-bearing liabilities:

(Dollars in thousands)Increase/(Decrease)Due to TotalIncrease/(Decrease)
 Volume Rate 
Interest-earning assets:     
Loans receivable$117  $781  $898 
Commercial paper 44   591   635 
Debt securities available for sale (124)  111   (13)
Other interest-earning assets (483)  252   (231)
Total interest-earning assets (446)  1,735   1,289 
Interest-bearing liabilities:     
Interest-bearing checking accounts 5   (76)  (71)
Money market accounts 11   (24)  (13)
Savings accounts 2   (1)  1 
Certificate accounts (6)  (453)  (459)
Borrowings (924)  (75)  (999)
Total interest-bearing liabilities (912)  (629)  (1,541)
Net increase in tax equivalent interest income    $2,830 

Provision for Credit Losses.  The provision for credit losses is the amount of expense that, based on our judgment, is required to maintain the allowance for credit losses ("ACL") at an appropriate level under the current expected credit losses ("CECL") model.

The following table presents a breakdown of the components of the provision (benefit) for credit losses:

 Three Months Ended June 30,  
  2022   2021  $ Change % Change
Provision (benefit) for credit losses:       
Loans$2,942  $(900) $3,842  (427)%
Off-balance-sheet credit exposure 566   25   541  2,164
Commercial paper (95)  (80)  (15) 19
Total provision (benefit) for credit losses$3,413  $(955) $4,368  (457)%

For the quarter ended June 30, 2022, the "loans" portion of the provision for credit losses was primarily the result of the following, offset by net recoveries of $714,000 during the quarter:

  • $1.2 million provision specific to fintech portfolios which have a riskier credit profile than loans originated in-house. The elevated credit risk is offset by the higher yields earned on the portfolios.
  • $0.8 million provision driven by a projected worsening of the economic forecast, specifically the national unemployment rate.
  • $0.8 million provision driven by loan growth, changes in the loan mix, and qualitative adjustments.
  • $0.8 million provision to fully reserve a single individually evaluated commercial loan relationship where the borrower's financial performance deteriorated during the quarter.

For the quarter ended June 30, 2021, the "loans" portion of the provision for credit losses was driven by a slight improvement in the economic forecast, as more clarity was gained regarding the impact of COVID-19 upon the loan portfolio.

For both periods presented, the provision for credit losses for off-balance-sheet credit exposure was the result of loan growth and changes in the loan mix and qualitative adjustments.Noninterest Income.  Noninterest income for the three months ended June 30, 2022 decreased $1.4 million, or 12.9%, when compared to the quarter ended June 30, 2021. Changes in selected components of noninterest income are discussed below:

 Three Months Ended June 30, 
  2022  2021 $ Change % Change
Noninterest income:       
Service charges and fees on deposit accounts$2,361 $2,376 $(15) (1)%
Loan income and fees 649  529  120  23 
Gain on sale of loans held for sale 1,949  5,423  (3,474) (64)
BOLI income 500  605  (105) (17)
Operating lease income 1,472  1,494  (22) (1)
Gain on sale of debt securities available for sale 1,895    1,895  100 
Other 890  733  157  21 
Total noninterest income$9,716 $11,160 $(1,444) (13)%
  • Gain on sale of loans held for sale: The decrease in the gain on sale of loans held for sale was primarily driven by a decrease in volume of residential mortgage loans and U.S. Small Business Administration ("SBA") commercial loans sold during the period as a result of rising interest rates. During the quarter ended June 30, 2022, $38.3 million of residential mortgage loans originated for sale were sold with gains of $835,000 compared to $105.6 million sold with gains of $2.8 million for the quarter ended June 30, 2021. There were $11.2 million of sales of the guaranteed portion of SBA commercial loans with gains of $904,000 in the current quarter compared to $21.4 million sold and gains of $2.4 million for the same period in the prior year. Lastly, the Company sold $22.8 million of home equity lines of credit ("HELOC") during the quarter for a gain of $210,000 compared to $13.6 million sold and gains of $164,000 in the same period last year.
  • Gain on sale of debt securities available for sale: The increase in the gain was driven by the sale of seven trust preferred securities during the quarter ended June 30, 2022 which had previously been written down to zero through purchase accounting adjustments from a merger in a prior period. No other securities were sold during either period presented.

Noninterest Expense.  Noninterest expense for the three months ended June 30, 2022 decreased $20.8 million, or 43.1%, when compared to the quarter ended June 30, 2021. Changes in selected components of noninterest expense are discussed below:

 Three Months Ended June 30,  
  2022  2021 $ Change % Change
Noninterest expense:       
Salaries and employee benefits$14,709 $16,265 $(1,556) (10)%
Occupancy expense, net 2,491  2,511  (20) (1)
Computer services 2,613  2,499  114  5 
Telephone, postage and supplies 621  777  (156) (20)
Marketing and advertising 473  655  (182) (28)
Deposit insurance premiums 432  438  (6) (1)
REO related expense, net 110  120  (10) (8)
Core deposit intangible amortization 42  130  (88) (68)
Branch closure and restructuring expenses   1,513  (1,513) (100)
Officer transition agreement expense 1,795    1,795  100 
Prepayment penalties on borrowings   19,034  (19,034) (100)
Other 4,173  4,291  (118) (3)
Total noninterest expense$27,459 $48,233 $(20,774) (43)%
  • Salaries and employee benefits: The decrease in salaries and employee benefits is primarily the result of branch closures and lower mortgage banking incentive pay as a result of the reduction of the volume of originations.
  • Branch closure and restructuring expenses: In June 2021, the Company announced plans to close nine branches as part of its efforts to further improve profitability (occurred in September 2021), incurring $1.5 million in expenses associated with the decision. No such expenses were incurred in the current quarter.
  • Officer transition agreement expense: In May 2022, the Company entered into an amended and restated employment and transition agreement with the Company's Chairman and CEO, Dana Stonestreet. As part of this agreement, the full amount of the estimated separation payment was accrued in the current quarter. No such expenses were incurred in the corresponding period in 2021.
  • Prepayment penalties on borrowings: In June 2021, the Company prepaid its remaining $275 million in long-term debt, incurring a prepayment penalty of $19.0 million. No such expenses were incurred in the current quarter.

Income Taxes.  The amount of income tax expense is influenced by the amount of pre-tax income, the amount of tax-exempt income, changes in the statutory rate and the effect of changes in valuation allowances maintained against deferred tax benefits. Income tax expense for the three months ended June 30, 2022 increased $4.4 million as a result of taxable income in the current quarter versus a pre-tax loss in the corresponding period in the prior year. The effective tax rate for the quarter ended June 30, 2022 was 21.8%.

Comparison of Results of Operations for the Years Ended June 30, 2022 and June 30, 2021

Net Income.  Net income totaled $35.7 million, or $2.23 per diluted share, for the year ended June 30, 2022 compared to $15.7 million, or $0.94 per diluted share, for the year ended June 30, 2021, an increase of $20.0 million, or 127.5%. The results for the year ended June 30, 2022 compared to the year ended June 30, 2021 were positively impacted by higher net interest income and no prepayment penalties on borrowings, partially offset by a lower benefit for credit losses. Details of the changes in the various components of net income are further discussed below.

Net Interest Income.  The following table presents the distribution of average assets, liabilities and equity, as well as interest income on average interest-earning assets and interest expense paid on average interest-bearing liabilities. All average balances are daily average balances. Nonaccruing loans have been included in the table as loans carrying a zero yield.

 Year Ended June 30,
  2022   2021 
(Dollars in thousands)AverageBalanceOutstanding InterestEarned/Paid(2) Yield/Rate(2) AverageBalanceOutstanding InterestEarned/Paid(2) Yield/Rate(2)
Assets:           
Interest-earning assets:           
Loans receivable(1)$2,809,673  $110,834 3.94% $2,819,180  $113,065 4.01%
Commercial paper 232,676   1,721 0.74   217,457   1,206 0.55 
Debt securities available for sale 122,558   1,802 1.47   137,863   2,024 1.47 
Other interest-earning assets(3) 114,458   2,988 2.61   266,783   3,705 1.39 
Total interest-earning assets 3,279,365   117,345 3.58   3,441,283   120,000 3.49 
Other assets 258,550       257,111     
Total assets 3,537,915       3,698,394     
Liabilities and equity:           
Interest-bearing liabilities:           
Interest-bearing checking accounts$646,370  $1,378 0.21% $609,754  $1,552 0.25%
Money market accounts 996,876   1,406 0.14   882,252   1,699 0.19 
Savings accounts 227,452   163 0.07   211,192   155 0.07 
Certificate accounts 457,186   2,313 0.51   568,284   5,964 1.05 
Total interest-bearing deposits 2,327,884   5,260 0.23   2,271,482   9,370 0.41 
Borrowings 43,376   80 0.18   416,822   6,041 1.45 
Total interest-bearing liabilities 2,371,260   5,340 0.23   2,688,304   15,411 0.57 
Noninterest-bearing deposits 724,588       550,265     
Other liabilities 45,834       56,315     
Total liabilities 3,141,682       3,294,884     
Stockholders' equity 396,233       403,510     
Total liabilities and stockholders' equity 3,537,915       3,698,394     
Net earning assets$908,105      $752,979     
Average interest-earning assets to average interest-bearing liabilities 138.30%      128.01%    
Tax-equivalent:           
Net interest income  $112,005     $104,589  
Interest rate spread    3.35%     2.92%
Net interest margin(4)    3.42%     3.04%
Non-tax-equivalent:           
Net interest income  $110,774     $103,322  
Interest rate spread    3.32%     2.88%
Net interest margin(4)    3.38%     3.00%

__________________________________________(1) The average loans receivable 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 $1,231 and $1,267 for the years ended June 30, 2022 and 2021, respectively, calculated based on a combined federal and state tax rate of 24%.(3) The average other interest-earning assets consist of FRB stock, FHLB stock, SBIC investments, and deposits in other banks.(4) Net interest income divided by average interest-earning assets.

Total interest and dividend income for the year ended June 30, 2022 decreased $2.6 million, or 2.2%, compared to the year ended June 30, 2021, which was driven by a $2.2 million, or 2.0%, decrease in interest income on loans, a $515,000, or 42.7%, increase in interest income on commercial paper, a $222,000, or 11.0%, decrease in interest income on debt securities available for sale, and a $718,000, or 19.4%, decrease in interest income on other interest-earning assets.

Total interest expense for the year ended June 30, 2022 decreased $10.1 million, or 65.3%, compared to the year ended June 30, 2021. The decrease was driven by a $6.0 million, or 98.7%, decrease in interest expense on borrowings and a $4.1 million, or 43.9%, decrease in interest expense on deposits compared to the same period last year. The overall average cost of funds decreased 34 basis points compared to the same period last year primarily due to the prepayment of long-term borrowings in the prior year and reduced market rates.

The following table shows the effects that changes in average balances (volume) and average interest rates (rate) had on the interest earned on interest-earning assets and interest paid on interest-bearing liabilities:

(Dollars in thousands)Increase/(Decrease)Due to TotalIncrease/(Decrease)
 Volume Rate 
Interest-earning assets:     
Loans receivable$(381) $(1,850) $(2,231)
Commercial paper 84   431   515 
Debt securities available for sale (225)  3   (222)
Other interest-earning assets (2,115)  1,398   (717)
Total interest-earning assets (2,637)  (18)  (2,655)
Interest-bearing liabilities:     
Interest-bearing checking accounts 93   (267)  (174)
Money market accounts 221   (514)  (293)
Savings accounts 12   (4)  8 
Certificate accounts (1,166)  (2,485)  (3,651)
Borrowings (5,412)  (549)  (5,961)
Total interest-bearing liabilities (6,252)  (3,819)  (10,071)
Net increase in tax equivalent interest income    $7,416 

Provision for Credit Losses.  The following table presents a breakdown of the components of the provision (benefit) for credit losses:

 Year Ended June 30,  
  2022   2021  $ Change % Change
Provision (benefit) for credit losses:       
Loans$(1,473) $(7,270) $5,797  (80)%
Off-balance-sheet credit exposure 981   35   946  2,703 
Commercial paper (100)  100   (200) (200)
Total provision (benefit) for credit losses$(592) $(7,135) $6,543  (92)%

The Company adopted CECL on July 1, 2020 when there was significant uncertainty regarding the impact of COVID-19 upon the economy and the Bank's loan portfolio more specifically. Since that time, more clarity has been gained regarding COVID-19's impact, and the economic forecast, specifically the national unemployment rate, improved significantly, driving the changes in the "loans" specific portion of the provision for credit losses for both periods.

For both periods presented, the provision for credit losses for off-balance-sheet credit exposure was the result of growth in unfunded commitments and changes in the commitments mix and qualitative adjustments.

See further discussion in the “Asset Quality” section below.

Noninterest Income.  Noninterest income for the year ended June 30, 2022 decreased $625,000, or 1.6%, year-over-year. Changes in selected components of noninterest income are discussed below:

 Year Ended June 30, 
  2022  2021 $ Change % Change
Noninterest income:       
Service charges and fees on deposit accounts$9,462 $9,083 $379  4%
Loan income and fees 3,185  2,208  977  44 
Gain on sale of loans held for sale 12,876  17,352  (4,476) (26)
BOLI income 2,000  2,156  (156) (7)
Operating lease income 6,392  5,601  791  14 
Gain on sale of debt securities available for sale 1,895    1,895  100 
Other 3,386  3,421  (35) (1)
Total noninterest income$39,196 $39,821 $(625) (2)%
  • Loan income and fees: The increase in loan income and fees was primarily due to approximately $1.3 million in SBA servicing income, the result of bringing the servicing of these loans in-house effective July 1, 2021.
  • Gain on sale of loans held for sale: The decrease in the gain on sale of loans held for sale was primarily driven by decreases in volume of residential mortgage loans and SBA commercial loans sold during the period as a result of rising interest rates. During the year ended June 30, 2022, $263.0 million of residential mortgage loans originated for sale were sold with gains of $6.4 million compared to $406.5 million sold with gains of $10.5 million in the prior year. There were $54.7 million of sales of the guaranteed portion of SBA commercial loans with recorded gains of $5.4 million in the current year compared to $66.1 million sold with gains of $6.1 million in the prior year. The Company sold $120.0 million of HELOCs during the current year for a gain of $791,000 compared to $110.8 million sold and gains of $724,000 in the prior year. Lastly, $11.5 million of indirect auto finance loans were sold out of the held for investment portfolio during the current year for a gain of $205,000. No such sales occurred in the prior year.
  • Operating lease income: The increase in operating lease income year-over-year is a result of increases in equipment lease originations and higher outstanding balances in the current year.
  • Gain on sale of debt securities available for sale: See explanation in the "Comparison — for the Three Months Ended June 30, 2022" section above.

Noninterest Expense.  Noninterest expense for the year ended June 30, 2022 decreased $26.0 million, or 19.8%, year-over-year. Changes in selected components of noninterest expense are discussed below:

 Year Ended June 30, 
  2022  2021 $ Change % Change
Noninterest expense:       
Salaries and employee benefits$59,591 $62,956 $(3,365) (5)%
Occupancy expense, net 9,692  9,521  171  2 
Computer services 9,761  9,607  154  2 
Telephone, postage and supplies 2,754  3,122  (368) (12)
Marketing and advertising 2,583  1,626  957  59 
Deposit insurance premiums 1,712  1,799  (87) (5)
REO related expense, net 588  582  6  1 
Core deposit intangible amortization 250  735  (485) (66)
Branch closure and restructuring expenses   1,513  (1,513) (100)
Officer transition agreement expense 1,795    1,795  100 
Prepayment penalties on borrowings   22,690  (22,690) (100)
Other 16,458  17,031  (573) (3)
Total noninterest expense$105,184 $131,182 $(25,998) (20)%
  • Salaries and employee benefits: See explanation in the "Comparison — for the Three Months Ended June 30, 2022" section above.
  • Marketing and advertising: The increase in marketing and advertising is primarily the result of less media advertising in the prior period during the pandemic.
  • Branch closure and restructuring expenses: See explanation in the "Comparison — for the Three Months Ended June 30, 2022" section above.
  • Officer transition agreement expense: See explanation in the "Comparison — for the Three Months Ended June 30, 2022" section above.
  • Prepayment penalties on borrowings: See explanation in the "Comparison — for the Three Months Ended June 30, 2022" section above.

Income Taxes.  Income tax expense for the year ended June 30, 2022 increased $6.3 million, or 184.3%, to $9.7 million from $3.4 million in the prior year as a result of higher taxable income. The effective tax rate for 2022 and 2021 was 21.4% and 17.9%, respectively. The higher effective tax rate in the current year compared to the prior year was driven by a comparable amount of tax-exempt income in each period, compared to a higher pre-tax income in 2022.

Balance Sheet Review

Total assets and liabilities increased by $24.5 million and $32.2 million to $3.5 billion and $3.2 billion, respectively, at June 30, 2022 as compared to June 30, 2021. Deposits increased by $144.2 million, or 4.9%, which were used to pay off all borrowings during the period. The combined decreases in debt securities available for sale, certificates of deposit in other banks, and loans held for sale of $60.3 million was invested in interest-bearing deposits which increased $55.5 million, or 193.6%, during the period.

Stockholders' equity decreased $7.7 million, or 1.9%, to $388.8 million at June 30, 2022 as compared to June 30, 2021. Activity within stockholders' equity included $35.7 million in net income, $8.2 million in stock-based compensation and stock option exercises, offset by stock repurchases of $43.3 million and $5.5 million in cash dividends declared. As of June 30, 2022, the Bank was considered "well capitalized" in accordance with its regulatory capital guidelines and exceeded all regulatory capital requirements.

Asset Quality

The ACL on loans was $34.7 million, or 1.25% of total loans, at June 30, 2022 compared to $35.5 million, or 1.30% of total loans, as of June 30, 2021. The drivers of this year-over-year change are discussed in the "Comparison — for the Year Ended June 30, 2022" section above.

Net loan recoveries totaled $694,000 for the year ended June 30, 2022 compared to net charge-offs of $143,000 for the year ended June 30, 2021. Net recoveries as a percentage of average loans were (0.02)% for the year ended June 30, 2022 compared to net charge-offs of 0.01% for the prior year.

Nonperforming assets decreased by $6.5 million, or 50.6%, to $6.3 million, or 0.18%, of total assets at June 30, 2022 compared to $12.8 million, or 0.36%, of total assets at June 30, 2021. The significant decrease from June 30, 2021 was primarily a result of the payoff of two commercial real estate loan relationships totaling $5.1 million during the period. Nonperforming assets included $6.1 million in nonaccruing loans and $200,000 of real estate owned ("REO") at June 30, 2022, compared to $12.6 million and $188,000 in nonaccruing loans and REO, respectively, at June 30, 2021. Nonperforming loans to total loans was 0.22% at June 30, 2022 and 0.46% at June 30, 2021.

The ratio of classified assets to total assets decreased to 0.61% at June 30, 2022 from 0.76% at June 30, 2021. Classified assets decreased $5.1 million, or 19.2%, to $21.5 million at June 30, 2022 compared to $26.7 million at June 30, 2021, primarily due to the payoff of the two commercial real estate loan relationships discussed above.

About HomeTrust Bancshares, Inc.

HomeTrust Bancshares, Inc. is the holding company for the Bank. As of June 30, 2022, 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 with over 30 locations as well as online/mobile channels. Locations include: North Carolina (including the Asheville metropolitan area, the "Piedmont" region, Charlotte, and Raleigh/Cary), Upstate South Carolina (Greenville), East Tennessee (including Kingsport/Johnson City, Knoxville, and Morristown) and Southwest Virginia (including the Roanoke Valley).

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 the Company's control. Actual results may differ, possibly materially, from those currently expected or projected in these forward-looking statements. Factors that could cause the Company's actual results to differ materially from those described in the forward-looking statements include: the effect of the COVID-19 pandemic, including on the Company's credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID-19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate customers, including economic activity, employment levels and labor shortages, and market liquidity, both nationally and in our market areas; expected revenues, cost savings, synergies and other benefits from our merger and acquisition activities, including the proposed acquisition of Quantum Capital Corp. might not be realized to the extent anticipated, within the anticipated time frames, or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; 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 the effects of inflation, a potential recession, and other factors described in the Company's latest annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other documents filed with or furnished to the Securities and Exchange Commission - which are available on our website at www.htb.com and on the SEC's website at www.sec.gov. Any of the forward-looking statements that the Company makes in this press release or the documents they 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 they might make, because of the factors described above or because of other factors that they cannot foresee. The Company does 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.

Consolidated Balance Sheets (Unaudited)

(Dollars in thousands)June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 (1)
Assets         
Cash$20,910  $19,783  $20,586  $22,431  $22,312 
Interest-bearing deposits 84,209   32,267   14,240   20,142   28,678 
Cash and cash equivalents 105,119   52,050   34,826   42,573   50,990 
Commercial paper, net 194,427   312,918   254,157   196,652   189,596 
Certificates of deposit in other banks 23,551   28,125   34,002   35,495   40,122 
Debt securities available for sale, at fair value 126,978   106,315   121,851   124,576   156,459 
FHLB and FRB stock 9,326   10,451   10,368   10,360   13,539 
SBIC investments, at cost 12,758   12,589   11,749   10,531   10,171 
Loans held for sale 79,307   85,263   102,070   105,161   93,539 
Total loans, net of deferred loan fees and costs 2,769,295   2,699,538   2,696,072   2,719,642   2,733,267 
Allowance for credit losses – loans (34,690)  (31,034)  (30,933)  (34,406)  (35,468)
Loans, net 2,734,605   2,668,504   2,665,139   2,685,236   2,697,799 
Premises and equipment, net 69,094   69,629   69,461   68,568   70,909 
Accrued interest receivable 8,573   7,980   8,200   8,429   7,933 
Deferred income taxes, net 11,487   12,494   12,019   15,722   16,901 
Bank owned life insurance ("BOLI") 95,281   94,740   94,209   93,679   93,108 
Goodwill 25,638   25,638   25,638   25,638   25,638 
Core deposit intangibles, net 93   135   185   250   343 
Other assets 52,967   54,954   58,945   58,490   57,676 
Total assets$3,549,204  $3,541,785  $3,502,819  $3,481,360  $3,524,723 
Liabilities and stockholders' equity         
Liabilities         
Deposits$3,099,761  $3,059,157  $2,998,691  $2,987,284  $2,955,541 
Borrowings    30,000   48,000   40,000   115,000 
Other liabilities 60,598   57,497   54,382   57,565   57,663 
Total liabilities 3,160,359   3,146,654   3,101,073   3,084,849   3,128,204 
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) 156   160   163   163   167 
Additional paid in capital 126,106   136,181   147,552   151,425   160,582 
Retained earnings 270,276   265,609   258,986   249,331   240,075 
Unearned Employee Stock Ownership Plan ("ESOP") shares (5,290)  (5,422)  (5,555)  (5,687)  (5,819)
Accumulated other comprehensive income (loss) (2,403)  (1,397)  600   1,279   1,514 
Total stockholders' equity 388,845   395,131   401,746   396,511   396,519 
Total liabilities and stockholders' equity$3,549,204  $3,541,785  $3,502,819  $3,481,360  $3,524,723 

__________________________________________(1) Derived from audited financial statements.(2) Shares of common stock issued and outstanding were 15,591,466 at June 30, 2022; 15,978,262 at March 31, 2022; 16,303,461 at December 31, 2021; 16,307,658 at September 30, 2021; and 16,636,483 at June 30, 2021.

Consolidated Statements of Income (Loss) (Unaudited)

 Three Months Ended Year Ended
(Dollars in thousands)June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021 (1)
Interest and dividend income         
Loans$28,163  26,616  $27,234  $109,603  $111,798 
Commercial paper 852  411   217   1,721   1,206 
Debt securities available for sale 483  384   496   1,802   2,024 
Other investments and interest-bearing deposits 628  784   859   2,988   3,705 
Total interest and dividend income 30,126  28,195   28,806   116,114   118,733 
Interest expense         
Deposits 1,232  1,151   1,774   5,260   9,370 
Borrowings 35  4   1,034   80   6,041 
Total interest expense 1,267  1,155   2,808   5,340   15,411 
Net interest income 28,859  27,040   25,998   110,774   103,322 
Provision (benefit) for credit losses  3,413  (45)  (955)  (592)  (7,135)
Net interest income after provision (benefit) for credit losses 25,446  27,085   26,953   111,366   110,457 
Noninterest income         
Service charges and fees on deposit accounts 2,361  2,216   2,376   9,462   9,083 
Loan income and fees 649  752   529   3,185   2,208 
Gain on sale of loans held for sale 1,949  2,969   5,423   12,876   17,352 
BOLI income 500  492   605   2,000   2,156 
Operating lease income 1,472  1,661   1,494   6,392   5,601 
Gain on sale of securities available for sale 1,895        1,895    
Other 890  857   733   3,386   3,421 
Total noninterest income 9,716  8,947   11,160   39,196   39,821 
Noninterest expense         
Salaries and employee benefits 14,709  14,730   16,265   59,591   62,956 
Occupancy expense, net 2,491  2,483   2,511   9,692   9,521 
Computer services 2,613  2,455   2,499   9,761   9,607 
Telephone, postage and supplies 621  686   777   2,754   3,122 
Marketing and advertising 473  573   655   2,583   1,626 
Deposit insurance premiums 432  412   438   1,712   1,799 
REO related expense, net 110  220   120   588   582 
Core deposit intangible amortization 42  50   130   250   735 
Branch closure and restructuring expenses      1,513      1,513 
Officer transition agreement expense 1,795        1,795    
Prepayment penalties on borrowings      19,034      22,690 
Other 4,173  4,190   4,291   16,458   17,031 
Total noninterest expense 27,459  25,799   48,233   105,184   131,182 
Income (loss) before income taxes 7,703  10,233   (10,120)  45,378   19,096 
Income tax expense (benefit) 1,678  2,210   (2,712)  9,725   3,421 
Net income (loss)$6,025 $8,023  $(7,408) $35,653  $15,675 

__________________________________________(1) Derived from audited financial statements.

Per Share Data

  Three Months Ended  Year Ended
  June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30,2021
Net income (loss) per common share:(1)          
Basic $0.40 $0.51 $(0.46) $2.27 $0.96
Diluted $0.39 $0.51 $(0.46) $2.23 $0.94
Average shares outstanding:          
Basic  15,064,694  15,523,813  15,894,342   15,516,173  16,078,066
Diluted  15,245,673  15,793,012  15,894,342   15,810,409  16,495,115
Book value per share at end of period $24.94 $24.73 $23.83  $24.94 $23.83
Tangible book value per share at end of period (2) $23.29 $23.12 $22.28  $23.29 $22.28
Cash dividends declared per common share $0.09 $0.09 $0.08  $0.35 $0.31
Total shares outstanding at end of period  15,591,466  15,978,262  16,636,483   15,591,466  16,636,483

__________________________________________(1) Basic and diluted net income (loss) per common share have been prepared in accordance with the two-class method. (2) See Non-GAAP reconciliations below for adjustments.

Selected Financial Ratios and Other Data

  Three Months Ended Year Ended
  June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021
Performance ratios:(1)      
Return on assets (ratio of net income (loss) to average total assets) 0.68% 0.92% (0.81)        % 1.01% 0.42%
Return on equity (ratio of net income (loss) to average equity) 6.19  8.15  (7.30) 9.00  3.88 
Tax equivalent yield on earning assets(2) 3.68  3.54  3.43  3.58  3.49 
Rate paid on interest-bearing liabilities 0.21  0.20  0.44  0.23  0.57 
Tax equivalent average interest rate spread(2) 3.47  3.34  2.99  3.35  2.92 
Tax equivalent net interest margin(2) (3) 3.53  3.39  3.10  3.42  3.04 
Average interest-earning assets to average interest-bearing liabilities 138.45  137.72  132.52  138.30  128.01 
Noninterest expense to average total assets 3.09  2.97  5.26  2.97  3.55 
Efficiency ratio 71.18  71.69  129.81  71.18  91.64 
Efficiency ratio – adjusted(4) 69.41  71.06  73.86  69.25  74.08 

__________________________________________(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 since the interest from these leases is tax exempt.(3) Net interest income divided by average interest-earning assets.(4) See Non-GAAP reconciliations below for adjustments.   

  At or For the Three Months Ended
  June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021
Asset quality ratios:          
Nonperforming assets to total assets(1) 0.18% 0.16% 0.18% 0.19% 0.36%
Nonperforming loans to total loans(1) 0.22  0.22  0.23  0.25  0.46 
Total classified assets to total assets 0.61  0.61  0.65  0.65  0.64 
Allowance for credit losses to nonperforming loans(1) 566.83  534.06  500.70  510.63  281.38 
Allowance for credit losses to total loans 1.25  1.15  1.15  1.27  1.30 
Net charge-offs (recoveries) to average loans (annualized) (0.10) (0.11) 0.15  (0.04) (0.04)
Capital ratios:          
Equity to total assets at end of period 10.96% 11.16% 11.47% 11.39% 11.25%
Tangible equity to total tangible assets(2) 10.31  10.51  10.81  10.73  10.59 
Average equity to average assets 10.93  11.32  11.28  11.27  11.06 

__________________________________________(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 June 30, 2022, there were $2.8 million of restructured loans included in nonaccruing loans and $3.8 million, or 62.5%, of nonaccruing loans were current on their loan payments as of that date.(2) See Non-GAAP reconciliations below for adjustments.  

Loans

(Dollars in thousands)June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021
Commercial real estate loans:         
Construction and land development 291,202   251,668   226,439   187,900   179,427 
Commercial real estate - owner occupied 335,658   332,078   323,434   329,252   324,350 
Commercial real estate - non-owner occupied 662,159   688,071   709,825   715,324   727,361 
Multifamily 81,086   82,035   80,071   88,188   90,565 
Total commercial real estate loans 1,370,105   1,353,852   1,339,769   1,320,664   1,321,703 
Commercial loans:         
Commercial and industrial 192,652   167,342   162,396   153,612   141,341 
Equipment finance 394,541   378,629   367,008   341,995   317,920 
Municipal leases 129,766   130,260   131,078   142,100   140,421 
PPP loans 661   2,756   19,044   28,762   46,650 
Total commercial loans 717,620   678,987   679,526   666,469   646,332 
Residential real estate loans:         
Construction and land development 81,847   72,735   69,253   69,835   66,027 
One-to-four family 354,203   347,945   356,850   384,901   406,549 
HELOCs 160,137   155,356   158,984   163,734   169,201 
Total residential real estate loans 596,187   576,036   585,087   618,470   641,777 
Consumer loans 85,383   90,663   91,690   114,039   123,455 
Total loans, net of deferred loan fees and costs 2,769,295   2,699,538   2,696,072   2,719,642   2,733,267 
Allowance for credit losses - loans (34,690)  (31,034)  (30,933)  (34,406)  (35,468)
Loans, net$2,734,605  $2,668,504  $2,665,139  $2,685,236  $2,697,799 

Deposits

(Dollars in thousands)June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021
Core deposits:         
Noninterest-bearing accounts$745,746 $704,344 $677,159 $711,764 $636,414
NOW accounts 654,981  652,577  644,343  621,675  644,958
Money market accounts 969,661  1,026,595  1,010,901  987,650  975,001
Savings accounts 238,197  232,831  224,474  220,614  226,391
Total core deposits 2,608,585  2,616,347  2,556,877  2,541,703  2,482,764
Certificates of deposit 491,176  442,810  441,814  445,581  472,777
Total$3,099,761 $3,059,157 $2,998,691 $2,987,284 $2,955,541

Non-GAAP Reconciliations

In addition to results presented in accordance with generally accepted accounting principles utilized in the United States ("GAAP"), this earnings release contains certain non-GAAP financial measures, which include: the efficiency ratio, tangible book value, tangible book value per share and the tangible equity to tangible assets ratio. The Company believes these non-GAAP financial measures and ratios as presented are useful for both investors and management to understand the effects of certain items and provide an alternative view of its performance over time and in comparison to its competitors. These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for total stockholders' equity or operating results determined in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

Set forth below is a reconciliation to GAAP of the Company's efficiency ratio:

  Three Months Ended Year Ended
  June 30, March 31, June 30, June 30, June 30,
(Dollars in thousands)  2022   2022   2021   2022   2021 
Noninterest expense $27,459  $25,799  $48,233  $105,184  $131,182 
Less: branch closure and restructuring expenses        1,513      1,513 
Less: officer transition agreement expense  1,795         1,795    
Less: prepayment penalties on borrowings        19,034      22,690 
Noninterest expense – adjusted $25,664  $25,799  $27,686  $103,389  $106,979 
           
Net interest income $28,859  $27,040  $25,998  $110,774  $103,322 
Plus: tax equivalent adjustment  294   320   325   1,231   1,267 
Plus: noninterest income  9,716   8,947   11,160   39,196   39,821 
Less: gain on sale of securities available for sale  1,895         1,895    
Net interest income plus noninterest income – adjusted $36,974  $36,307  $37,483  $149,306  $144,410 
Efficiency ratio  71.18%  71.69%  129.81%  70.14%  91.64%
Efficiency ratio – adjusted  69.41%  71.06%  73.86%  69.25%  74.08%

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) June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021
Total stockholders' equity $388,845 $395,131 $401,746 $396,511 $396,519
Less: goodwill, core deposit intangibles, net of taxes  25,710  25,742  25,780  25,830  25,902
Tangible book value $363,135 $369,389 $375,966 $370,681 $370,617
Common shares outstanding  15,591,466  15,978,262  16,303,461  16,307,658  16,636,483
Book value per share at end of period $24.94 $24.73 $24.64 $24.31 $23.83
Tangible book value per share at end of period $23.29 $23.12 $23.06 $22.73 $22.28

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

  As of
  June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021
(Dollars in thousands)  
Tangible equity(1) $363,135  $369,389  $375,966  $370,681  $370,617 
Total assets  3,549,204   3,541,785   3,502,819   3,481,360   3,524,723 
Less: goodwill and core deposit intangibles, net of taxes  25,710   25,742   25,780   25,830   25,902 
Total tangible assets $3,523,494  $3,516,043  $3,477,039  $3,455,530  $3,498,821 
Tangible equity to tangible assets  10.31%  10.51%  10.81%  10.73%  10.59%

__________________________________________

(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.

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