Business context and reporting period
HomeTrust Bancshares, Inc. is a bank holding company operating HomeTrust Bank, with lending, deposit-taking, equipment finance and investment activities across parts of North Carolina, South Carolina, Tennessee and Virginia. The filing covers the three months ended September 30, 2020 (the first quarter of fiscal 2021), not calendar 2020 Q1 as suggested by the request metadata. Unless noted otherwise, financial amounts below are in millions of dollars.
Key financial results and position
- Earnings: Net income was $5.8 million, down 34.7% from $8.8 million a year earlier. Diluted EPS was $0.35 versus $0.49.
- Revenue and margins: Net interest income fell 5.8% to $25.5 million. Net interest margin was 2.96% GAAP and 3.00% on a tax-equivalent basis, compared with 3.28% and 3.32%, respectively. Noninterest income rose 12.8% to $8.6 million, including $3.3 million in gains on loan sales. Noninterest expense increased 10.5% to $26.0 million.
- Credit costs: The company recorded a $0.95 million provision for credit losses, compared with none a year earlier. Net charge-offs were $0.70 million versus $0.12 million.
- Assets and loans: Total assets were $3.67 billion at September 30, down from $3.72 billion at June 30. Loans held for investment were approximately $2.77 billion, broadly unchanged from June; loans held for sale rose 61.9% to $125.0 million.
- Credit allowance: The allowance for credit losses was $43.1 million, or 1.56% of loans; excluding Paycheck Protection Program loans, the ratio was 1.61%. Nonperforming assets were $14.5 million, or 0.40% of assets, versus $16.3 million, or 0.44%, at June 30.
- Funding and liquidity: Deposits declined 1.6% to $2.74 billion, principally reflecting planned brokered-deposit runoff. Core deposits increased 2.5% to $2.10 billion; certificates of deposit fell 12.7% to $645.2 million. Borrowings remained $475.0 million. Cash and cash equivalents were $171.1 million, and commercial paper was $204.9 million.
- Cash flow: Operating activities used $55.8 million, investing activities provided $150.2 million, and financing activities used $44.9 million. Cash and cash equivalents increased $49.5 million during the quarter.
- Capital: Stockholders’ equity was $400.4 million. The company and bank exceeded regulatory capital requirements and were described as well capitalized; the bank’s CET1 ratio was 11.39% and total risk-based capital ratio was 12.27%.
Material changes versus comparable periods
- Compared with the prior-year quarter, lower asset yields reduced interest income by $5.8 million, partly offset by a $4.2 million reduction in interest expense. Tax-equivalent net interest margin contracted 32 basis points.
- Loan-sale gains and equipment-finance operating lease income supported higher noninterest income. Salary and benefit costs, other expenses and deposit insurance premiums contributed to higher operating expenses.
- On July 1, 2020, HomeTrust adopted CECL. The adoption increased the loan allowance by $14.8 million, established a $2.3 million reserve for unfunded commitments and reduced retained earnings by $13.4 million, partly offset by deferred tax benefits. The adoption accounts for much of the increase in the allowance from June 30; the current-quarter provision was $0.95 million.
- COVID-19 payment deferrals fell to $91.2 million, or 3.3% of the loan portfolio, from $551.3 million, or 20.6%, at June 30. Lodging-related deferrals were $60.8 million, or 2.2% of the portfolio.
Outlook, commentary and risks
Management provided no specific numerical earnings or loan-growth guidance. It expects lower interest rates and the effects of COVID-19 to adversely affect net interest income and net interest margin in fiscal 2021 and possibly longer. Management said most payment deferrals had ended and borrowers had resumed regular payments, while continuing to monitor affected credits and reassess extensions of relief. It described the allowance as adequate but cautioned that economic deterioration, borrower stress, changing assumptions or regulatory review could require additional reserves.
Liquidity sources include deposits, loan and security cash flows, commercial paper and available borrowing lines. At quarter-end, the bank reported $110.6 million of available FHLB capacity, a $108.5 million Federal Reserve line and $100.0 million in lines with unaffiliated banks, with no balances outstanding on those non-FHLB lines. Risks highlighted include the pandemic and economic outlook, credit and real-estate conditions, interest-rate and funding changes, loan-sale market conditions, regulatory actions, and operational or technology disruptions. Management reported no pending litigation it believed would materially adversely affect the company and no material change to previously disclosed risk factors.
Important facts for investors to verify
- Review CECL assumptions and the allowance’s sensitivity to economic forecasts, loan mix, COVID-19 borrower performance and regulator assessments.
- Track remaining deferrals—particularly lodging exposure—and subsequent delinquencies, nonaccrual loans, charge-offs and reserve needs.
- Assess whether lower net interest margin and elevated expenses persist, and how much earnings depend on loan-sale gains and equipment-finance income.
- Monitor deposit trends, brokered-funding runoff, callable FHLB advances, available borrowing capacity and cash needs from loan commitments.
- Confirm regulatory capital and liquidity remain adequate as conditions evolve; the filing does not provide numerical forward earnings guidance.