HomeTrust Bancshares, Inc. — Form 10-Q Summary
Reporting period: The filing covers the quarter and nine months ended March 31, 2021 (the company’s fiscal 2021 third quarter), not 2020 Q3 as indicated in the request metadata. Dollar amounts below are in millions unless otherwise noted.
Business context
HomeTrust Bancshares is a bank holding company whose principal activities are gathering deposits and making commercial, consumer, mortgage, and equipment-finance loans. It operates through HomeTrust Bank across markets in North Carolina, South Carolina, Tennessee, and Virginia.
Financial results and condition
| Metric | Quarter ended March 31, 2021 | Nine months ended March 31, 2021 |
|---|---|---|
| Net interest income | $25.7; up 1.5% year over year | $77.3; down 2.6% |
| Net interest margin, tax-equivalent | 3.02%, versus 3.16% | 3.02%, versus 3.25% |
| Noninterest income | $10.7; up 67.5% | $28.7; up 24.0% |
| Noninterest expense | $30.5; up 22.5% | $82.9; up 14.4% |
| Provision for credit losses | $4.1 benefit, versus $5.4 expense | $6.2 benefit, versus $5.8 expense |
| Net income | $7.9, versus $1.2; diluted EPS $0.48, versus $0.07 | $23.1, versus $19.2; diluted EPS $1.40, versus $1.08 |
Quarterly earnings growth reflected the credit-loss provision benefit and higher gains on loan sales; a $3.7 million borrowing prepayment penalty partly offset the improvement. Lower market rates reduced interest income, while lower deposit and borrowing costs reduced interest expense.
- Balance sheet at March 31, 2021: Assets $3,648.6; deposits $2,908.5; borrowings $275.0; stockholders’ equity $406.5. Total assets declined $74.2 from June 30, 2020.
- Loans and credit quality: Gross loans were $2,690.2, down $78.8 from June 2020; net loans were $2,654.1. The allowance for credit losses (ACL) was $36.1, or 1.34% of loans (1.38% excluding PPP loans). Nonperforming assets were $13.4, or 0.37% of assets, versus $16.3, or 0.44%, at June 2020.
- Cash flow, nine months: Operating activities provided $1.7; investing activities provided $134.9; financing activities used $94.1. Cash and cash equivalents increased $42.5 to $164.1.
- Funding and liquidity: Deposits rose $122.7 as core deposits increased $358.4 and certificates of deposit declined $235.7. Borrowings fell $200.0. Available borrowing capacity was $232.3 at the FHLB, $96.8 at the Federal Reserve, and $100.0 across three unaffiliated banks; none of the latter lines was drawn.
- Capital: The Bank was categorized as well capitalized. Its CET1 risk-based ratio was 11.16%, total risk-based capital ratio 11.87%, and leverage ratio 9.91%.
Material changes and notable items
- The company adopted CECL on July 1, 2020. Adoption increased the loan ACL by $14.8, added a $2.3 reserve for unfunded commitments, and reduced retained earnings by $13.4. This accounting change limits direct comparability of credit reserves with prior periods.
- Loan balances fell partly due to large commercial payoffs, PPP loan forgiveness, and continued payoffs of purchased HELOCs. Commercial loans increased 1.3%, while retail consumer loans declined 11.3% from June 2020.
- Loan-sale gains increased, supported by higher residential mortgage, SBA, and home-equity loan sales. For the nine-month period, residential mortgage loans originated for sale totaled $297.2.
- The company repurchased 566,455 shares for approximately $11.7 during the nine months and declared $3.7 in dividends.
Outlook, risks, and contingencies
- Management said the pandemic and the 2020 reduction in federal funds rates were expected to weigh on net interest income and margin through fiscal 2021 and possibly longer. No specific earnings or margin guidance was provided.
- Management sees opportunities for organic growth as local and global conditions normalize, while emphasizing disciplined expansion and selective acquisitions.
- COVID-19 principal-and-interest deferrals declined to $5.8 (0.2% of loans) at March 31, 2021 from $551.3 (20.6%) at June 2020. Separately, $76.8 of commercial loans were on temporary interest-only payments. Management said most earlier deferrals had ended, but further deterioration in economic conditions could increase credit losses and the ACL.
- Key risks include pandemic-related economic effects, borrower and real-estate credit quality, interest-rate and funding changes, loan demand and secondary-market conditions, regulatory review, and operational or technology disruptions. Management reported no material change in previously disclosed risk factors.
- Loan commitments, undisbursed construction loans, unused credit lines, and letters of credit totaled $929.4. These are potential funding exposures and do not necessarily represent amounts expected to be drawn. Management stated that pending litigation was not expected to have a material adverse effect.
Most important facts for investors to verify
- Whether the $4.1 quarterly and $6.2 nine-month credit-loss benefits, including assumptions in the CECL forecast, are sustainable.
- How net interest margin and funding costs respond to persistently low or changing rates.
- Whether loan deferrals and interest-only arrangements convert to regular payment performance, and whether criticized or nonperforming loans increase.
- How much PPP forgiveness, mortgage and SBA loan sales, and related fees contributed to earnings, and whether those sources persist.
- The company’s ability to meet potential commitment draws while maintaining liquidity, capital, and planned shareholder returns.