Hometrust Bancshares, Inc. — Form 10-Q Summary
Reporting period: The filing covers the quarter and nine months ended March 31, 2022, HomeTrust’s fiscal third quarter. This differs from the “2021 Q3” period in the request metadata. Comparative income and cash-flow results are for the periods ended March 31, 2021; balance-sheet comparisons are primarily with June 30, 2021. Amounts below are in U.S. dollars.
Business context and key financial results
HomeTrust is a bank holding company headquartered in Asheville, North Carolina. Its business includes commercial and consumer lending, equipment and municipal finance, deposit-taking, and originating certain residential, SBA and HELOC loans for sale.
- Quarter: Net income was $8.0 million, up 2.0% year over year; diluted EPS was $0.51 versus $0.48. Net interest income rose 5.2% to $27.0 million. Noninterest income fell 16.2% to $8.9 million, while noninterest expense fell 15.4% to $25.8 million.
- Nine months: Net income was $29.6 million, up 28.4%; diluted EPS was $1.84 versus $1.40. Net interest income increased 5.9% to $81.9 million, and noninterest income increased 2.9% to $29.5 million. Noninterest expense decreased 6.3% to $77.7 million.
- Net interest margin: Fully taxable-equivalent margin was 3.39% for the quarter and 3.38% for the nine months, compared with 3.02% in each prior-year period. The filing attributes the improvement largely to sharply lower funding costs following repayment of higher-cost borrowings.
- Credit costs: The company recorded a $45,000 net benefit for credit losses in the quarter and a $4.0 million net benefit for the nine months. The nine-month benefit was smaller than the $6.2 million benefit in the prior-year period.
Financial condition, cash flow and capital
- Total assets were $3.54 billion at March 31, 2022, compared with $3.52 billion at June 30, 2021. Loans, net, were $2.67 billion, down from $2.70 billion; deposits were $3.06 billion, up 3.5%.
- Commercial loans excluding PPP grew, while total loans declined 1.2%, reflecting PPP forgiveness and lower retail consumer balances. Commercial loans were 75.3% of total loans at period end.
- Borrowings declined to $30.0 million from $115.0 million. Cash and cash equivalents were $52.1 million; commercial paper was $312.9 million. The bank reported available borrowing capacity of $255.7 million at the FHLB, $72.1 million at the Federal Reserve, and $125.0 million through other bank lines, with no outstanding balances on those lines.
- Operating cash flow was $38.2 million for the nine months, versus $1.7 million a year earlier. Cash increased $1.1 million to $52.1 million. Investing activities used $25.1 million and financing activities used $12.1 million.
- Stockholders’ equity was $395.1 million. Tangible book value was $23.12 per share and tangible equity to tangible assets was 10.51%. The bank reported regulatory capital ratios above minimum requirements and was categorized as well-capitalized.
- The allowance for credit losses on loans was $31.0 million, or 1.15% of loans, versus $35.5 million, or 1.30%, at June 30, 2021. Nonperforming assets were $5.8 million, or 0.16% of assets, down from $12.8 million, or 0.36%.
Material changes, outlook and risks
- Quarterly expense comparisons benefited from the prior-year quarter’s $3.7 million in borrowing prepayment penalties; nine-month comparisons were affected by the same prior-year charge. Lower salaries and benefits, partly associated with branch closures and lower mortgage-banking incentive pay, also reduced expenses.
- Available-for-sale securities fell to $106.3 million from $156.5 million at June 30, 2021. Their net unrealized loss was $1.8 million before tax, and accumulated other comprehensive income shifted from $1.5 million to a $1.4 million loss. Management said it did not intend, and was not more likely than not expected, to sell the securities; however, it noted future market changes could lead to a sale or credit-loss charge.
- Management said improving economic expectations contributed to the lower allowance estimate. COVID-related full-payment deferrals granted before 2022 had ended; $9.6 million of commercial loans remained on interest-only payments, down from $78.9 million at June 30, 2021.
- No numeric earnings or margin guidance is provided. Management described opportunities for growth in current and nearby markets, while emphasizing disciplined expansion. It also cited selective acquisitions as a possible avenue for growth.
- Risks identified include borrower credit deterioration, economic and real-estate conditions, interest-rate and funding changes, deposit retention, loan-sale market demand, regulatory actions, cybersecurity and third-party disruptions, and uncertainty related to COVID-19. The company reported $902.2 million in off-balance-sheet commitments, including construction-loan undisbursed amounts, loan commitments, unused lines and standby letters of credit. Management said pending litigation was not expected to have a material adverse effect.
Important facts for investors to verify
- Confirm the reporting period: the filing is for the quarter ended March 31, 2022, not 2021.
- Assess how much earnings improvement reflects lower funding costs and reduced expenses, including the prior-year prepayment-penalty comparison, versus recurring revenue growth.
- Track commercial-loan growth, portfolio mix and credit quality, particularly construction and development, commercial real estate and equipment finance exposures.
- Monitor securities valuation losses and their effects on equity, as well as liquidity and deposit trends, including the maturities of $389.4 million of certificates of deposit due within one year.
- Review the pace and cost of share repurchases: 1.10 million shares were repurchased during the nine months at an average price of $29.50; a further 806,000-share authorization was in place at March 31, 2022.