HomeTrust Bancshares, Inc. — Form 10-Q summary
Reporting period: The filing covers the quarter and six months ended December 31, 2019, which is fiscal Q2 2020. This differs from the request metadata’s “2019 Q2.” Figures are unaudited and generally in millions of dollars unless stated otherwise.
Financial performance
- Quarter: Net income was $9.2 million, up 14.3% from $8.0 million; diluted EPS was $0.52 versus $0.43. Net interest income was $27.0 million, down 0.2%. Noninterest income rose 78.4% to $9.1 million, while noninterest expense rose 10.0% to $24.0 million.
- Six months: Net income was $18.0 million, up 13.7%; diluted EPS was $1.01 versus $0.84. Net interest income increased 1.4% to $54.1 million. Noninterest income increased 56.4% to $16.7 million, and noninterest expense increased 8.8% to $47.6 million.
- Net interest margin: Tax-equivalent margin declined to 3.27% from 3.51% for the quarter and to 3.30% from 3.48% for the six-month period. Higher deposit costs offset growth in earning assets.
- Credit costs: The company recorded a $0.4 million loan-loss provision in both the quarter and six-month period, versus none in the comparable 2018 periods. The allowance was $22.0 million, or 0.86% of total loans, at December 31.
- Balance sheet: Total assets were $3.47 billion, broadly unchanged from June 30, 2019. Deposits increased 9.9% to $2.56 billion; borrowings declined 36.0% to $435 million. Stockholders’ equity was $417.0 million. Tangible book value was $22.08 per share, and tangible equity to tangible assets was 11.33%.
- Liquidity and cash flow: Cash and cash equivalents were $88.9 million. For six months, operating cash flow was negative $7.0 million, investing cash flow was positive $50.8 million, and financing cash flow was negative $26.0 million; cash increased $17.9 million. Available borrowing capacity included $77.9 million at the FHLB, $119.7 million at the FRB, and $70.0 million in lines with three banks; no other lines were drawn.
- Capital: The Bank was categorized as well-capitalized. Its CET1 risk-based capital ratio was 11.59%, and total risk-based capital was 12.30% at December 31.
Material changes and drivers
- The company marketed $256.8 million of one-to-four-family loans for sale; $154.9 million was sold during the quarter, producing a reported $958,000 after-tax gain. Management said sales were intended to shift loan mix, reduce the loan-to-deposit ratio, and improve margin over time. Loans held for sale rose to $118.1 million, including about $85.6 million of residential loans still being marketed.
- Gross loans declined 5.6% from June 30, partly due to loans transferred to held-for-sale or sold; management reported $114.4 million of organic loan growth, an 8.8% annualized rate. Commercial loans rose 8.6%, including 40.4% growth in equipment finance; retail consumer loans fell 24.5%.
- Deposit growth and loan-sale proceeds funded a $245.0 million reduction in borrowings and increased liquid investments. Core deposits increased $153.2 million, with certificates of deposit up $77.4 million.
- Quarterly earnings benefited from loan-sale gains. The filing also cites higher residential mortgage and SBA loan-sale gains and equipment-finance fees and lease income. These revenue sources and the loan-sale gain may not recur at the same level.
Outlook, risks, and contingencies
- Management expects to pursue organic growth in its existing markets and says it will remain disciplined about expansion. It identifies opportunities from strengthening local economies and loan demand but gives no specific earnings or growth guidance.
- Nonperforming assets increased to $15.7 million, or 0.45% of assets, from $13.3 million at June 30. Management attributed the increase mainly to a large commercial real estate relationship moved to nonaccrual. Nonaccruing loans were $14.3 million; nonperforming loans were 0.56% of total loans.
- Management considers the allowance adequate, but notes estimates may prove incorrect and regulators may require additional reserves. The company expects adoption of the current expected credit loss standard to increase the allowance; the amount was not yet known.
- Key disclosed risks include credit deterioration, real estate and economic conditions, interest-rate and funding-cost changes, deposit competition, loan demand and secondary-market conditions, regulatory actions, operating costs, technology and third-party disruptions, and valuation-estimate uncertainty.
- Outstanding commitments included $164.8 million of undisbursed construction loans, $75.7 million of loan commitments, $383.7 million of unused credit lines, and $8.0 million of standby letters of credit. Management reported no pending litigation expected to have a material adverse effect.
Important facts for investors to verify
- Confirm the reporting-period designation: the filing is for the quarter ended December 31, 2019 (fiscal Q2 2020), not calendar Q2 2019.
- Track whether loan-sale gains and mortgage/SBA sales remain material contributors to earnings, and whether the planned loan-mix changes improve net interest margin.
- Monitor the large commercial real estate relationship, nonaccrual balances, delinquencies, allowance coverage, and the effect of expected-credit-loss adoption.
- Assess deposit growth, interest costs, brokered deposits, upcoming certificate maturities, and whether liquidity and capital remain adequate as commitments are funded.
- Review the filing’s detailed tables for loan-sale amounts and gains, which are presented across several categories and periods.