Business context and reporting period
HomeTrust Bancshares, Inc. is a bank holding company headquartered in Asheville, North Carolina. Its principal activities are deposit gathering, commercial and consumer lending, equipment and municipal finance, and originating certain loans for sale. This Form 10-Q reports the fiscal second quarter and six months ended December 31, 2021; the comparable income-statement periods are the three and six months ended December 31, 2020. Unless otherwise stated, financial figures below are in millions of dollars.
Financial performance and condition
| Metric | Three months | Six months |
|---|---|---|
| Net income | $11.1, versus $9.5 | $21.6, versus $15.2 |
| Diluted EPS | $0.68, versus $0.57 | $1.33, versus $0.92 |
| Net interest income | $27.2, versus $26.1 | $54.9, versus $51.6 |
| Net interest margin, fully taxable-equivalent | 3.33%, versus 3.07% | 3.37%, versus 3.02% |
| Net provision benefit for credit losses | $2.5, versus $3.0 | $4.0, versus $2.1 |
| Noninterest income | $10.2, versus $9.3 | $20.5, versus $18.0 |
| Noninterest expense | $25.9, versus $26.4 | $51.9, versus $52.4 |
At December 31, 2021, total assets were $3.503 billion, down $21.9 million from June 30, 2021. Net loans were $2.665 billion, deposits $2.999 billion, borrowings $48.0 million, and stockholders’ equity $401.7 million. Deposits rose $43.2 million during the six months, including $74.1 million growth in core deposits, while borrowings declined $67.0 million. Cash and cash equivalents were $34.8 million; commercial paper was $254.2 million.
Six-month operating cash flow was $17.4 million, compared with cash used of $31.5 million in the prior-year period. Investing activities provided $7.5 million, compared with $185.6 million, and financing activities used $41.0 million, compared with $49.3 million. The company attributed the decline in cash and cash equivalents to using excess liquidity to repay borrowings.
The allowance for credit losses on loans was $30.9 million, or 1.15% of loans, versus $35.5 million, or 1.30%, at June 30, 2021. Nonperforming assets were $6.2 million, or 0.18% of assets, versus $12.8 million, or 0.36%. The Bank exceeded regulatory capital requirements and was categorized as well-capitalized; its CET1 ratio was 10.81% and total risk-based capital ratio was 11.45% at December 31, 2021.
Material changes versus comparable periods
- Year-to-date net income increased 42.0%, supported by lower funding costs, higher noninterest income, and a larger net benefit for credit losses. Net interest income grew despite lower interest and dividend income, as interest expense fell 67.5%.
- Quarterly net interest income increased 4.0%; the fully taxable-equivalent net interest margin rose to 3.33%. Management attributed the improvement principally to repaying higher-cost long-term borrowings and reducing funding costs.
- Commercial loans grew $51.3 million from June 30, including increases in construction and development and equipment finance. Total loans nevertheless fell $37.2 million, chiefly due to reductions in one-to-four-family and indirect auto loans and lower PPP balances.
- Noninterest income increased, including gains on loan sales, operating lease income, and loan fees. Noninterest expense declined modestly; branch closures and lower incentive pay were partly offset by higher marketing expense.
- During the six months, the company repurchased 675,832 shares for $19.4 million. Nine branches were closed during the quarter ended September 30, 2021.
Outlook, commentary, risks and contingencies
The filing provides no numerical earnings or revenue guidance. Management said it expected net interest income and net interest margin to remain adversely affected through fiscal 2022 and possibly longer by the pandemic’s effects and the lower-rate environment, while also describing opportunities for growth as local and global economies normalize. It planned to focus expansion primarily on existing markets and to consider selective branch, loan, or whole-bank acquisitions.
COVID-19-related full principal-and-interest deferrals were $652,000 at December 31, 2021; commercial loan interest-only deferrals were $15.6 million, down from $78.9 million at June 30, 2021. Management cautioned that pandemic and economic uncertainty could affect credit quality, loan concentrations, and the allowance estimate. Other disclosed risks include interest-rate and funding changes, loan demand and real-estate values, regulatory actions, competition, technology and third-party disruptions, and litigation.
Available borrowing capacity included $285.1 million at the FHLB, $59.4 million at the Federal Reserve, and $100.0 million with unaffiliated banks; outstanding balances included $30.0 million of FHLB advances and $18.0 million of Federal Reserve borrowings. Off-balance-sheet commitments totaled $829.2 million, including $539.8 million of unused lines of credit. Management reported no pending litigation it believed would materially adversely affect financial condition or results. Disclosure controls were assessed as effective; the filing reported no material change in previously disclosed risk factors.
Available-for-sale securities had $602,000 of gross unrealized losses at December 31, 2021. Management said the securities were performing as scheduled, it did not intend to sell them, and it did not expect forced sales; future conditions could change that assessment. The company also noted that the six-month results are not necessarily indicative of full-year results.
Investor facts to verify
- Whether the credit-loss benefit and lower funding costs are sustainable, and how earnings respond to changing rates and deposit pricing.
- Credit quality and concentrations in commercial real estate, construction and development, and equipment finance; monitor deferrals, delinquency trends, charge-offs, and allowance assumptions.
- Loan growth and mix, including consumer-loan runoff, PPP paydowns, and the performance and sale economics of loans held for sale.
- Liquidity and funding resilience, including deposit retention, maturing certificates of deposit, borrowing availability, and potential draws against the $829.2 million of commitments.
- Effects of branch closures, share repurchases, and any future acquisitions on expenses, capital, and per-share results.