|
| | | | | | | | | | | | | | | | | | | | | | | |
| Pass | | Special Mention | | Substandard | | Doubtful | | Loss | | Total |
December 31, 2017 | | | | | | | | | | | |
Retail consumer loans: | | | | | | | | | | | |
One-to-four family | $ | 2,827 |
| | $ | 1,193 |
| | $ | 3,427 |
| | $ | — |
| | $ | 1 |
| | $ | 7,448 |
|
HELOCs - originated | 256 |
| | — |
| | — |
| | — |
| | — |
| | 256 |
|
Construction and land/lots | 469 |
| | — |
| | 42 |
| | — |
| | — |
| | 511 |
|
Consumer | 3 |
| | — |
| | — |
| | — |
| | — |
| | 3 |
|
Commercial loans: | |
| | |
| | |
| | |
| | |
| | |
|
Commercial real estate | 6,627 |
| | 1,579 |
| | 4,520 |
| | — |
| | — |
| | 12,726 |
|
Construction and development | 326 |
| | — |
| | 2,106 |
| | — |
| | — |
| | 2,432 |
|
Commercial and industrial | 2,267 |
| | 23 |
| | 130 |
| | — |
| | — |
| | 2,420 |
|
Total loans | $ | 12,775 |
| | $ | 2,795 |
| | $ | 10,225 |
| | $ | — |
| | $ | 1 |
| | $ | 25,796 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Pass | | Special Mention | | Substandard | | Doubtful | | Loss | | Total |
June 30, 2017 | | | | | | | | | | | |
Retail consumer loans: | | | | | | | | | | | |
One-to-four family | $ | 3,115 |
| | $ | 1,129 |
| | $ | 3,615 |
| | $ | 210 |
| | $ | — |
| | $ | 8,069 |
|
HELOCs - originated | 258 |
| | — |
| | 30 |
| | — |
| | — |
| | 288 |
|
Construction and land/lots | 487 |
| | — |
| | 41 |
| | — |
| | — |
| | 528 |
|
Consumer | 4 |
| | 14 |
| | — |
| | — |
| | — |
| | 18 |
|
Commercial loans: | |
| | |
| | |
| | |
| | |
| | |
|
Commercial real estate | 8,909 |
| | 2,299 |
| | 6,175 |
| | — |
| | — |
| | 17,383 |
|
Construction and development | 338 |
| | — |
| | 2,291 |
| | — |
| | — |
| | 2,629 |
|
Commercial and industrial | 2,460 |
| | 44 |
| | 122 |
| | — |
| | — |
| | 2,626 |
|
Total loans | $ | 15,571 |
| | $ | 3,486 |
| | $ | 12,274 |
| | $ | 210 |
| | $ | — |
| | $ | 31,541 |
|
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
The Company's totalfollowing table presents the credit risk profile by risk grade for retail consumer loans by segment, class, and delinquency status at the dates indicated follows:origination year: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Term Loans By Origination Fiscal Year | | | | |
September 30, | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Revolving | | Total |
One-to-four family | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | $ | 9,624 | | | $ | 69,855 | | | $ | 56,443 | | | $ | 37,245 | | | $ | 35,835 | | | $ | 163,570 | | | $ | 4,367 | | | $ | 376,939 | |
Special mention | — | | | — | | | — | | | — | | | — | | | 1,091 | | | — | | | 1,091 | |
Substandard | — | | | 243 | | | 972 | | | — | | | 215 | | | 4,939 | | | — | | | 6,369 | |
Doubtful | — | | | — | | | — | | | — | | | — | | | 188 | | | — | | | 188 | |
Loss | — | | | — | | | — | | | — | | | — | | | 314 | | | — | | | 314 | |
Total one-to-four family | $ | 9,624 | | | $ | 70,098 | | | $ | 57,415 | | | $ | 37,245 | | | $ | 36,050 | | | $ | 170,102 | | | $ | 4,367 | | | $ | 384,901 | |
| | | | | | | | | | | | | | | |
HELOCs - originated | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | $ | 297 | | | $ | 1,578 | | | $ | 365 | | | $ | 1,366 | | | $ | 242 | | | $ | 9,309 | | | $ | 115,486 | | | $ | 128,643 | |
Special mention | — | | | — | | | — | | | — | | | — | | | 11 | | | — | | | 11 | |
Substandard | — | | | — | | | — | | | 159 | | | — | | | 926 | | | 52 | | | 1,137 | |
Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total HELOCs - originated | $ | 297 | | | $ | 1,578 | | | $ | 365 | | | $ | 1,525 | | | $ | 242 | | | $ | 10,246 | | | $ | 115,538 | | | $ | 129,791 | |
| | | | | | | | | | | | | | | |
HELOCs - purchased | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 33,490 | | | $ | 33,490 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | — | | | — | | | — | | | — | | 0 | — | | | — | | | 453 | | | 453 | |
Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total HELOCs - purchased | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 33,943 | | | $ | 33,943 | |
| | | | | | | | | | | | | | | |
Construction and land/lots | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | $ | 431 | | | $ | 8,096 | | | $ | 8,454 | | | $ | 747 | | | $ | — | | | $ | 2,781 | | | $ | 48,920 | | | $ | 69,429 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | — | | | — | | | — | | | — | | | — | | | 406 | | | — | | | 406 | |
Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total construction and land/lots | $ | 431 | | | $ | 8,096 | | | $ | 8,454 | | | $ | 747 | | | $ | — | | | $ | 3,187 | | | $ | 48,920 | | | $ | 69,835 | |
| | | | | | | | | | | | | | | |
Indirect auto finance | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | $ | 8,103 | | | $ | 37,082 | | | $ | 23,730 | | | $ | 13,635 | | | $ | 15,561 | | | $ | 7,222 | | | $ | — | | | $ | 105,333 | |
Special mention | — | | 0 | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | — | | | 12 | | | 353 | | | 120 | | | 208 | | | 157 | | | — | | | 850 | |
Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Loss | — | | | 1 | | | — | | | — | | | — | | | — | | | — | | | 1 | |
Total indirect auto finance | $ | 8,103 | | | $ | 37,095 | | | $ | 24,083 | | | $ | 13,755 | | | $ | 15,769 | | | $ | 7,379 | | | $ | — | | | $ | 106,184 | |
| | | | | | | | | | | | | | | |
Total consumer loans | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | $ | 303 | | | $ | 1,170 | | | $ | 861 | | | $ | 4,828 | | | $ | 201 | | | $ | 153 | | | $ | 271 | | | $ | 7,787 | |
Special mention | — | | | — | | | — | | | — | | | 14 | | | — | | | — | | | 14 | |
Substandard | — | | | — | | | 3 | | | 17 | | | 3 | | | 14 | | | 16 | | | 53 | |
Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Loss | — | | | — | | | — | | | 1 | | | — | | | — | | | — | | | 1 | |
Total consumer loans | $ | 303 | | | $ | 1,170 | | | $ | 864 | | | $ | 4,846 | | | $ | 218 | | | $ | 167 | | | $ | 287 | | | $ | 7,855 | |
| | | | | | | | | | | | | | | |
Total retail consumer loans | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | $ | 18,758 | | | $ | 117,781 | | | $ | 89,853 | | | $ | 57,821 | | | $ | 51,839 | | | $ | 183,035 | | | $ | 202,534 | | | $ | 721,621 | |
Special mention | — | | | — | | | — | | | — | | | 14 | | | 1,102 | | | — | | | 1,116 | |
Substandard | — | | | 255 | | | 1,328 | | | 296 | | | 426 | | | 6,442 | | | 521 | | | 9,268 | |
Doubtful | — | | | — | | | — | | | — | | | — | | | 188 | | | — | | | 188 | |
Loss | — | | | 1 | | | — | | | 1 | | | — | | | 314 | | | — | | | 316 | |
Total retail consumer loans | $ | 18,758 | | | $ | 118,037 | | | $ | 91,181 | | | $ | 58,118 | | | $ | 52,279 | | | $ | 191,081 | | | $ | 203,055 | | | $ | 732,509 | |
|
| | | | | | | | | | | | | | | | | | | |
| Past Due | | | | Total |
| 30-89 Days | | 90 Days+ | | Total | | Current | | Loans |
December 31, 2017 | | | | | | | | | |
Retail consumer loans: | | | | | | | | | |
One-to-four family | $ | 4,730 |
| | $ | 3,601 |
| | $ | 8,331 |
| | $ | 677,898 |
| | $ | 686,229 |
|
HELOCs - originated | 531 |
| | 740 |
| | 1,271 |
| | 148,813 |
| | 150,084 |
|
HELOCs - purchased | — |
| | — |
| | — |
| | 162,181 |
| | 162,181 |
|
Construction and land/lots | 164 |
| | 133 |
| | 297 |
| | 60,508 |
| | 60,805 |
|
Indirect auto finance | 441 |
| | 67 |
| | 508 |
| | 149,534 |
| | 150,042 |
|
Consumer | 7 |
| | 4 |
| | 11 |
| | 9,688 |
| | 9,699 |
|
Commercial loans: | | | | | | | | | |
Commercial real estate | 341 |
| | 2,854 |
| | 3,195 |
| | 783,186 |
| | 786,381 |
|
Construction and development | 831 |
| | 2,062 |
| | 2,893 |
| | 183,028 |
| | 185,921 |
|
Commercial and industrial | 267 |
| | 538 |
| | 805 |
| | 126,904 |
| | 127,709 |
|
Municipal leases | — |
| | — |
| | — |
| | 100,205 |
| | 100,205 |
|
Total loans | $ | 7,312 |
| | $ | 9,999 |
| | $ | 17,311 |
| | $ | 2,401,945 |
| | $ | 2,419,256 |
|
The table above includes PCI loans of $797 30-89 days past due and $2,023 90 days or more past due as of December 31, 2017.
|
| | | | | | | | | | | | | | | | | | | |
| Past Due | | | | Total |
| 30-89 Days | | 90 Days+ | | Total | | Current | | Loans |
June 30, 2017 | | | | | | | | | |
Retail consumer loans: | | | | | | | | | |
One-to-four family | $ | 3,496 |
| | $ | 3,990 |
| | $ | 7,486 |
| | $ | 676,603 |
| | $ | 684,089 |
|
HELOCs - originated | 1,037 |
| | 274 |
| | 1,311 |
| | 155,757 |
| | 157,068 |
|
HELOCs - purchased | — |
| | — |
| | — |
| | 162,407 |
| | 162,407 |
|
Construction and land/lots | 132 |
| | 129 |
| | 261 |
| | 49,875 |
| | 50,136 |
|
Indirect auto finance | 96 |
| | — |
| | 96 |
| | 140,783 |
| | 140,879 |
|
Consumer | 5 |
| | 14 |
| | 19 |
| | 7,881 |
| | 7,900 |
|
Commercial loans: | |
| | |
| | |
| | |
| | |
|
Commercial real estate | 809 |
| | 3,100 |
| | 3,909 |
| | 726,499 |
| | 730,408 |
|
Construction and development | 385 |
| | 887 |
| | 1,272 |
| | 196,694 |
| | 197,966 |
|
Commercial and industrial | 37 |
| | 831 |
| | 868 |
| | 119,519 |
| | 120,387 |
|
Municipal leases | — |
| | — |
| | — |
| | 101,175 |
| | 101,175 |
|
Total loans | $ | 5,997 |
| | $ | 9,225 |
| | $ | 15,222 |
| | $ | 2,337,193 |
| | $ | 2,352,415 |
|
The table above includes PCI loans of $854 30-89 days past due and $4,211 90 days or more past due as of June 30, 2017.
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
The following table presents the credit risk profile by risk grade for commercial loans by origination year:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Term Loans By Origination Fiscal Year | | | | |
June 30, | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Revolving | | Total |
Commercial real estate | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | $ | 227,850 | | | $ | 177,691 | | | $ | 142,407 | | | $ | 158,147 | | | $ | 158,525 | | | $ | 220,834 | | | $ | 25,860 | | | $ | 1,111,314 | |
Special mention | — | | | — | | | — | | | 16,951 | | | 1,256 | | | 3,092 | | | — | | | 21,299 | |
Substandard | — | | | — | | | — | | | 630 | | | 4,993 | | | 3,642 | | | 398 | | | 9,663 | |
Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total commercial real estate | $ | 227,850 | | | $ | 177,691 | | | $ | 142,407 | | | $ | 175,728 | | | $ | 164,774 | | | $ | 227,568 | | | $ | 26,258 | | | $ | 1,142,276 | |
| | | | | | | | | | | | | | | |
Construction and development | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | 18,262 | | | 6,523 | | | 10,349 | | | 6,008 | | | 2,693 | | | 7,153 | | | 123,843 | | | $ | 174,831 | |
Special mention | — | | | — | | | — | | | — | | | — | | | 286 | | | 3,827 | | | 4,113 | |
Substandard | — | | | — | | | — | | | — | | | — | | | 482 | | | — | | | 482 | |
Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Loss | — | | | — | | | — | | | — | | | — | | | 1 | | | — | | | 1 | |
Total construction and development | $ | 18,262 | | | $ | 6,523 | | | $ | 10,349 | | | $ | 6,008 | | | $ | 2,693 | | | $ | 7,922 | | | $ | 127,670 | | | $ | 179,427 | |
| | | | | | | | | | | | | | | |
Commercial and industrial | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | 29,606 | | | 14,010 | | | 18,826 | | | 10,759 | | | 15,346 | | | 10,589 | | | 36,165 | | | $ | 135,301 | |
Special mention | — | | | 21 | | | 438 | | | 110 | | | 32 | | | 125 | | | 37 | | | 763 | |
Substandard | 31 | | | 33 | | | 300 | | | — | | | — | | | 83 | | | 4,829 | | | 5,276 | |
Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Loss | — | | | — | | | — | | | — | | | — | | | 1 | | | — | | | 1 | |
Total commercial and industrial | $ | 29,637 | | | $ | 14,064 | | | $ | 19,564 | | | $ | 10,869 | | | $ | 15,378 | | | $ | 10,798 | | | $ | 41,031 | | | $ | 141,341 | |
| | | | | | | | | | | | | | | |
Equipment finance | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | 154,685 | | | 104,681 | | | 53,178 | | | 4,773 | | | — | | | — | | | — | | | $ | 317,317 | |
Special mention | — | | | — | | | 0 | | — | | | — | | | — | | | — | | | — | |
Substandard | — | | | — | | | 323 | | | — | | | — | | | — | | | — | | | 323 | |
Doubtful | — | | | — | | | 280 | | | — | | | — | | | — | | | — | | | 280 | |
Loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total equipment finance | $ | 154,685 | | | $ | 104,681 | | | $ | 53,781 | | | $ | 4,773 | | | $ | — | | | $ | — | | | $ | — | | | $ | 317,920 | |
| | | | | | | | | | | | | | | |
Municipal leases | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | 23,358 | | | 19,240 | | | 14,005 | | | 17,979 | | | 9,738 | | | 47,144 | | | 8,700 | | | $ | 140,164 | |
Special mention | — | | | — | | | — | | | — | | | — | | | 257 | | | — | | | 257 | |
Substandard | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Loss | 0 | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total municipal leases | $ | 23,358 | | | $ | 19,240 | | | $ | 14,005 | | | $ | 17,979 | | | $ | 9,738 | | | $ | 47,401 | | | $ | 8,700 | | | $ | 140,421 | |
| | | | | | | | | | | | | | | |
PPP loans | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | 29,667 | | | 16,983 | | | — | | | — | | | — | | | — | | | — | | | $ | 46,650 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total PPP loans | $ | 29,667 | | | $ | 16,983 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 46,650 | |
| | | | | | | | | | | | | | | |
Total commercial loans | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | $ | 483,428 | | | $ | 339,128 | | | $ | 238,765 | | | $ | 197,666 | | | $ | 186,302 | | | $ | 285,720 | | | $ | 194,568 | | | $ | 1,925,577 | |
Special mention | — | | | 21 | | | 438 | | | 17,061 | | | 1,288 | | | 3,760 | | | 3,864 | | | 26,432 | |
Substandard | 31 | | | 33 | | | 623 | | | 630 | | | 4,993 | | | 4,207 | | | 5,227 | | | 15,744 | |
Doubtful | — | | | — | | | 280 | | | — | | | — | | | — | | | — | | | 280 | |
Loss | — | | | — | | | — | | | — | | | — | | | 2 | | | — | | | 2 | |
Total commercial loans | $ | 483,459 | | | $ | 339,182 | | | $ | 240,106 | | | $ | 215,357 | | | $ | 192,583 | | | $ | 293,689 | | | $ | 203,659 | | | $ | 1,968,035 | |
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
The following table presents the credit risk profile by risk grade for retail consumer loans by origination year: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Term Loans By Origination Fiscal Year | | | | |
June 30, | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Revolving | | Total |
One-to-four family | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | $ | 72,723 | | | $ | 52,987 | | | $ | 46,958 | | | $ | 40,461 | | | $ | 37,361 | | | $ | 143,531 | | | $ | 4,345 | | | $ | 398,366 | |
Special mention | — | | | — | | | — | | | — | | | 27 | | | 1,084 | | | — | | | 1,111 | |
Substandard | 246 | | | 981 | | | — | | | 216 | | | 86 | | | 5,037 | | | — | | | 6,566 | |
Doubtful | — | | | — | | | — | | | — | | | — | | | 191 | | | — | | | 191 | |
Loss | — | | | — | | | — | | | — | | | — | | | 315 | | | — | | | 315 | |
Total one-to-four family | $ | 72,969 | | | $ | 53,968 | | | $ | 46,958 | | | $ | 40,677 | | | $ | 37,474 | | | $ | 150,158 | | | $ | 4,345 | | | $ | 406,549 | |
| | | | | | | | | | | | | | | |
HELOCs - originated | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | 2,767 | | | 465 | | | 1,294 | | | 217 | | | 716 | | | 9,469 | | | 114,048 | | | $ | 128,976 | |
Special mention | — | | | — | | | — | | | — | | | — | | | 12 | | | — | | | 12 | |
Substandard | — | | | — | | | 159 | | | — | | | 38 | | | 935 | | | 105 | | | 1,237 | |
Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total HELOCs - originated | $ | 2,767 | | | $ | 465 | | | $ | 1,453 | | | $ | 217 | | | $ | 754 | | | $ | 10,416 | | | $ | 114,153 | | | $ | 130,225 | |
| | | | | | | | | | | | | | | |
HELOCs - purchased | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | — | | | — | | | — | | | — | | | — | | | — | | | 38,523 | | | $ | 38,523 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | — | | | — | | | — | | | — | | | — | | | — | | | 453 | | | 453 | |
Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total HELOCs - purchased | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 38,976 | | | $ | 38,976 | |
| | | | | | | | | | | | | | | |
Construction and land/lots | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | 4,244 | | | 12,133 | | | 2,357 | | | 956 | | | — | | | 3,558 | | | 42,267 | | | $ | 65,515 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | — | | | — | | | — | | | 96 | | | — | | | 416 | | | — | | | 512 | |
Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total construction and land/lots | $ | 4,244 | | | $ | 12,133 | | | $ | 2,357 | | | $ | 1,052 | | | $ | — | | | $ | 3,974 | | | $ | 42,267 | | | $ | 66,027 | |
| | | | | | | | | | | | | | | |
Indirect auto finance | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | 42,128 | | | 27,134 | | | 16,224 | | | 18,853 | | | 7,561 | | | 2,061 | | | — | | | $ | 113,961 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | 29 | | | 415 | | | 195 | | | 273 | | | 143 | | | 75 | | | — | | | 1,130 | |
Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Loss | 2 | | | — | | | — | | | — | | | — | | | — | | | — | | | 2 | |
Total indirect auto finance | $ | 42,159 | | | $ | 27,549 | | | $ | 16,419 | | | $ | 19,126 | | | $ | 7,704 | | | $ | 2,136 | | | $ | — | | | $ | 115,093 | |
| | | | | | | | | | | | | | | |
Consumer loans | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | 1,344 | | | 1,019 | | | 5,204 | | | 252 | | | 90 | | | 91 | | | 288 | | | $ | 8,288 | |
Special mention | — | | | — | | | — | | | 14 | | | — | | | — | | | — | | | 14 | |
Substandard | — | | | 3 | | | 19 | | | 11 | | | 4 | | | 10 | | | 11 | | | 58 | |
Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Loss | — | | | 1 | | | 1 | | | — | | | — | | | — | | | — | | | 2 | |
Total consumer loans | $ | 1,344 | | | $ | 1,023 | | | $ | 5,224 | | | $ | 277 | | | $ | 94 | | | $ | 101 | | | $ | 299 | | | $ | 8,362 | |
| | | | | | | | | | | | | | | |
Total retail consumer loans | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | |
Pass | $ | 123,206 | | | $ | 93,738 | | | $ | 72,037 | | | $ | 60,739 | | | $ | 45,728 | | | $ | 158,710 | | | $ | 199,471 | | | $ | 753,629 | |
Special mention | — | | | — | | | — | | | 14 | | | 27 | | | 1,096 | | | — | | | 1,137 | |
Substandard | 275 | | | 1,399 | | | 373 | | | 596 | | | 271 | | | 6,473 | | | 569 | | | 9,956 | |
Doubtful | — | | | — | | | — | | | — | | | — | | | 191 | | | — | | | 191 | |
Loss | 2 | | | 1 | | | 1 | | | — | | | — | | | 315 | | | — | | | 319 | |
Total retail consumer loans | $ | 123,483 | | | $ | 95,138 | | | $ | 72,411 | | | $ | 61,349 | | | $ | 46,026 | | | $ | 166,785 | | | $ | 200,040 | | | $ | 765,232 | |
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
The following tables present aging analysis of past due loans (includes nonaccrual loans) by segment and class for the periods indicated below: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| Past Due | | | | Total | | |
| 30-89 Days | | 90 Days+ | | Total | | Current | | Loans | | |
September 30, 2021 | | | | | | | | | | | |
Commercial loans: | | | | | | | | | | | |
Commercial real estate | $ | — | | | $ | 114 | | | $ | 114 | | | $ | 1,132,650 | | | $ | 1,132,764 | | | |
Construction and development | 216 | | | 37 | | | 253 | | | 187,647 | | | 187,900 | | | |
Commercial and industrial | 67 | | | 562 | | | 629 | | | 152,983 | | | 153,612 | | | |
Equipment finance | 52 | | | 256 | | | 308 | | | 341,687 | | | 341,995 | | | |
Municipal finance | 405 | | | — | | | 405 | | | 141,695 | | | 142,100 | | | |
PPP loans | — | | | — | | | — | | | 28,762 | | | 28,762 | | | |
Retail consumer loans: | | | | | | | | | | | |
One-to-four family | 1,159 | | | 1,227 | | | 2,386 | | | 382,515 | | | 384,901 | | | |
HELOCs - originated | 65 | | | 317 | | | 382 | | | 129,409 | | | 129,791 | | | |
HELOCs - purchased | 200 | | | — | | | 200 | | | 33,743 | | | 33,943 | | | |
Construction and land/lots | 126 | | | 22 | | | 148 | | | 69,687 | | | 69,835 | | | |
Indirect auto finance | 170 | | | 139 | | | 309 | | | 105,875 | | | 106,184 | | | |
Consumer | 425 | | | 43 | | | 468 | | | 7,387 | | | 7,855 | | | |
Total loans | $ | 2,885 | | | $ | 2,717 | | | $ | 5,602 | | | $ | 2,714,040 | | | $ | 2,719,642 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Past Due | | | | Total |
| 30-89 Days | | 90 Days+ | | Total | | Current | | Loans |
June 30, 2021 | | | | | | | | | |
Commercial loans: | | | | | | | | | |
Commercial real estate | $ | 396 | | | $ | 1,680 | | | $ | 2,076 | | | $ | 1,140,200 | | | $ | 1,142,276 | |
Construction and development | — | | | 37 | | | 37 | | | 179,390 | | | 179,427 | |
Commercial and industrial | 634 | | | 19 | | | 653 | | | 140,688 | | | 141,341 | |
Equipment finance | — | | | 347 | | | 347 | | | 317,573 | | | 317,920 | |
Municipal finance | — | | | — | | | — | | | 140,421 | | | 140,421 | |
PPP loans | — | | | — | | | — | | | 46,650 | | | 46,650 | |
Retail consumer loans: | | | | | | | | | |
One-to-four family | 1,112 | | | 1,124 | | | 2,236 | | | 404,313 | | | 406,549 | |
HELOCs - originated | 290 | | | 186 | | | 476 | | | 129,749 | | | 130,225 | |
HELOCs - purchased | 198 | | | 79 | | | 277 | | | 38,699 | | | 38,976 | |
Construction and land/lots | 6 | | | 35 | | | 41 | | | 65,986 | | | 66,027 | |
Indirect auto finance | 299 | | | 259 | | | 558 | | | 114,535 | | | 115,093 | |
Consumer | 378 | | | 36 | | | 414 | | | 7,948 | | | 8,362 | |
Total loans | $ | 3,313 | | | $ | 3,802 | | | $ | 7,115 | | | $ | 2,726,152 | | | $ | 2,733,267 | |
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
The Company'sfollowing table presents recorded investment in loans on nonaccrual status, by segment and class, that are not accruingincluding restructured loans. It also includes interest or are 90 days or more past due and still accruing interest atincome recognized on nonaccrual loans for the dates indicated follow:three months ended September 30, 2021.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2021 | | June 30, 2021 | | | | 90 Days + & still accruing as of September 30, 2021 | | Nonaccrual with no allowance as of September 30, 2021 | | Interest income recognized | | |
Commercial loans: | | | | | | | | | | | | | | |
Commercial real estate | | $ | 1,576 | | | $ | 7,015 | | | | | $ | — | | | $ | — | | | $ | 12 | | | |
Construction and development | | 388 | | | 482 | | | | | — | | | — | | | 2 | | | |
Commercial and industrial | | 1,488 | | | 49 | | | | | — | | | 418 | | | 12 | | | |
Equipment finance | | 334 | | | 630 | | | | | — | | | 255 | | | — | | | |
| | | | | | | | | | | | | | |
Retail consumer loans: | | | | | | | | | | | | | | |
One-to-four family | | 1,710 | | | 2,625 | | | | | — | | | — | | | 11 | | | |
HELOCs - originated | | 445 | | | 476 | | | | | — | | | — | | | 2 | | | |
HELOCs - purchased | | 453 | | | 453 | | | | | — | | | — | | | 8 | | | |
Construction and land/lots | | 22 | | | 22 | | | | | — | | | — | | | — | | | |
Indirect auto finance | | 274 | | | 438 | | | | | — | | | — | | | 2 | | | |
Consumer | | 48 | | | 416 | | | | | — | | | — | | | — | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Total loans | | $ | 6,738 | | | $ | 12,606 | | | | | $ | — | | | $ | 673 | | | $ | 49 | | | |
|
| | | | | | | | | | | | | | | |
| December 31, 2017 | | June 30, 2017 |
| Nonaccruing | | 90 Days + & still accruing | | Nonaccruing | | 90 Days + & still accruing |
Retail consumer loans: | | | | | | | |
One-to-four family | $ | 6,281 |
| | $ | — |
| | $ | 6,453 |
| | $ | — |
|
HELOCs - originated | 1,275 |
| | — |
| | 1,291 |
| | — |
|
HELOCs - purchased | 190 |
| | — |
| | 192 |
| | — |
|
Construction and land/lots | 315 |
| | — |
| | 245 |
| | — |
|
Indirect auto finance | 285 |
| | — |
| | 1 |
| | — |
|
Consumer | 21 |
| | — |
| | 29 |
| | — |
|
Commercial loans: | |
| | |
| | |
| | |
|
Commercial real estate | 2,808 |
| | — |
| | 2,756 |
| | — |
|
Construction and development | 2,569 |
| | — |
| | 1,766 |
| | — |
|
Commercial and industrial | 525 |
| | — |
| | 827 |
| | — |
|
Municipal leases | 98 |
| | — |
| | 106 |
| | — |
|
Total loans | $ | 14,367 |
| | $ | — |
| | $ | 13,666 |
| | $ | — |
|
PCI loans totaling $4,596 at December 31, 2017 and $6,664 at The decrease in the nonaccrual balance in the above schedule, compared to June 30, 2017 are excluded from nonaccruing loans2021, is mainly due to the accretionpayoff of discounts established in accordance with the acquisition method of accounting for business combinations.2 commercial real estate loan relationships totaling $5.1 million.
Troubled debt restructurings ("TDRs")TDRs are loans which have renegotiated loan terms to assist borrowers who are unable to meet the original terms of their loans. Such modifications to loan terms may include a lower interest rate, a reduction in principal, or a longer term to maturity. Additionally, all TDRs are considered impaired. The Company had no commitments to lend additional funds on these TDR loans at December 31, 2017.
The Company'sCompany’s loans that were performing under the payment terms of TDRs that were excluded from nonaccruing loans above at the dates
indicated follow:follows:
| | | | | | | | | | | | | | |
| | September 30, 2021 | | June 30, 2021 | | |
Performing TDRs | | $ | 11,341 | | | $ | 11,088 | | | |
|
| | | | | | | |
| December 31, 2017 | | June 30, 2017 |
Performing TDRs included in impaired loans | $ | 25,181 |
| | $ | 27,043 |
|
AnThe following table presents a breakdown of the provision (benefit) for credit losses included in our Consolidated Statements of Income:
| | | | | | | | | | | | | | | | |
| | | | Three Months Ended |
| | September 30, |
| | | | | | 2021 | | 2020 |
Provision (benefit) for credit losses: | | | | | | | | |
Loans | | | | | | $ | (1,335) | | | $ | 950 | |
Off-balance-sheet credit exposure | | | | | | (125) | | | — | |
| | | | | | | | |
Total provision (benefit) for credit losses | | | | | | $ | (1,460) | | | $ | 950 | |
The following tables present analysis of the
allowance for loan lossesACL on loans by segment for the periods
shown is as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, 2017 | | Three Months Ended December 31, 2016 |
| PCI | | Retail Consumer | | Commercial | | Total | | PCI | | Retail Consumer | | Commercial | | Total |
Balance at beginning of period | $ | 1,197 |
| | $ | 8,310 |
| | $ | 12,490 |
| | $ | 21,997 |
| | $ | 356 |
| | $ | 10,446 |
| | $ | 10,149 |
| | $ | 20,951 |
|
Provision for (recovery of) loan losses | (286 | ) | | 162 |
| | 124 |
| | — |
| | (20 | ) | | (609 | ) | | 629 |
| | — |
|
Charge-offs | (345 | ) | | (378 | ) | | (349 | ) | | (1,072 | ) | | — |
| | (155 | ) | | (67 | ) | | (222 | ) |
Recoveries | — |
| | 97 |
| | 68 |
| | 165 |
| | — |
| | 131 |
| | 126 |
| | 257 |
|
Balance at end of period | $ | 566 |
| | $ | 8,191 |
| | $ | 12,333 |
| | $ | 21,090 |
| | $ | 336 |
| | $ | 9,813 |
| | $ | 10,837 |
| | $ | 20,986 |
|
indicated below: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended December 31, 2017 | | Six Months Ended December 31, 2016 |
| PCI | | Retail Consumer | | Commercial | | Total | | PCI | | Retail Consumer | | Commercial | | Total |
Balance at beginning of period | $ | 727 |
| | $ | 8,585 |
| | $ | 11,839 |
| | $ | 21,151 |
| | $ | 361 |
| | $ | 11,549 |
| | $ | 9,382 |
| | $ | 21,292 |
|
Provision for (recovery of) loan losses | 184 |
| | (250 | ) | | 66 |
| | — |
| | (25 | ) | | (1,505 | ) | | 1,530 |
| | — |
|
Charge-offs | (345 | ) | | (528 | ) | | (363 | ) | | (1,236 | ) | | — |
| | (574 | ) | | (675 | ) | | (1,249 | ) |
Recoveries | — |
| | 384 |
| | 791 |
| | 1,175 |
| | — |
| | 343 |
| | 600 |
| | 943 |
|
Balance at end of period | $ | 566 |
| | $ | 8,191 |
| | $ | 12,333 |
| | $ | 21,090 |
| | $ | 336 |
| | $ | 9,813 |
| | $ | 10,837 |
| | $ | 20,986 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Three Months Ended |
| | | | | | | September 30, 2021 |
| | | | | | | | | | | Commercial | | Retail Consumer | | Total |
Balance at beginning of period | | | | | | | | | | | $ | 24,746 | | | $ | 10,722 | | | $ | 35,468 | |
| | | | | | | | | | | | | | | |
Benefit for credit losses | | | | | | | | | | | (623) | | | (712) | | | (1,335) | |
Charge-offs | | | | | | | | | | | (619) | | | (90) | | | (709) | |
Recoveries | | | | | | | | | | | 700 | | | 282 | | | 982 | |
Net recoveries | | | | | | | | | | | 81 | | | 192 | | | 273 | |
Balance at end of period | | | | | | | | | | | $ | 24,204 | | | $ | 10,202 | | | $ | 34,406 | |
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | |
| | | September 30, 2020 | | |
| | | Commercial | | Retail Consumer | | Total | | | | | | | | |
Balance at beginning of period | | | $ | 21,116 | | | $ | 6,956 | | | $ | 28,072 | | | | | | | | | |
Impact of adoption ASU 2016-13 | | | 4,073 | | | 10,736 | | | 14,809 | | | | | | | | | |
Provision for credit losses | | | 292 | | | 658 | | | 950 | | | | | | | | | |
Charge-offs | | | (1,095) | | | (682) | | | (1,777) | | | | | | | | | |
Recoveries | | | 813 | | | 265 | | | 1,078 | | | | | | | | | |
Net charge-offs | | | (282) | | | (417) | | | (699) | | | | | | | | | |
Balance at end of period | | | $ | 25,199 | | | $ | 17,933 | | | 43,132 | | | | | | | | | |
The Company'sfollowing tables present ending balances of loans and the related allowance,ACL, by segment and class atfor the datesperiods indicated follows:below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for Credit Losses | | | | Total Loans Receivable |
| Loans Individually Evaluated | | Loans Collectively Evaluated | | Total | | | | Loans Individually Evaluated | | Loans Collectively Evaluated | | Total |
September 30, 2021 | | | | | | | | | | | | | |
Commercial loans: | | | | | | | | | | | | | |
Commercial real estate | $ | 9 | | | $ | 12,209 | | | $ | 12,218 | | | | | $ | 299 | | | $ | 1,132,465 | | | $ | 1,132,764 | |
Construction and development | — | | | 1,776 | | | 1,776 | | | | | — | | | 187,900 | | | 187,900 | |
Commercial and industrial | 525 | | | 2,682 | | | 3,207 | | | | | 2,048 | | | 151,564 | | | 153,612 | |
Equipment finance | — | | | 6,714 | | | 6,714 | | | | | 255 | | | 341,740 | | | 341,995 | |
Municipal finance | — | | | 289 | | | 289 | | | | | — | | | 142,100 | | | 142,100 | |
PPP loans | — | | | — | | | — | | | | | — | | | 28,762 | | | 28,762 | |
Retail consumer loans: | | | | | | | | | | | | | |
One-to-four family | 3 | | | 5,018 | | | 5,021 | | | | | 1,969 | | | 382,932 | | | 384,901 | |
HELOCs - originated | — | | | 1,430 | | | 1,430 | | | | | — | | | 129,791 | | | 129,791 | |
HELOCs - purchased | — | | | 374 | | | 374 | | | | | — | | | 33,943 | | | 33,943 | |
Construction and land/lots | — | | | 776 | | | 776 | | | | | — | | | 69,835 | | | 69,835 | |
Indirect auto finance | — | | | 2,444 | | | 2,444 | | | | | — | | | 106,184 | | | 106,184 | |
Consumer | — | | | 157 | | | 157 | | | | | — | | | 7,855 | | | 7,855 | |
Total | $ | 537 | | | $ | 33,869 | | | $ | 34,406 | | | | | $ | 4,571 | | | $ | 2,715,071 | | | $ | 2,719,642 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for Loan Losses | | Total Loans Receivable |
| PCI | | Loans individually evaluated for impairment | | Loans collectively evaluated | | Total | | PCI | | Loans individually evaluated for impairment | | Loans collectively evaluated | | Total |
December 31, 2017 | | | | | | | | | | | | | | | |
Retail consumer loans: | | | | | | | | | | | | | | | |
One-to-four family | $ | 135 |
| | $ | 391 |
| | $ | 3,587 |
| | $ | 4,113 |
| | $ | 7,448 |
| | $ | 9,302 |
| | $ | 669,479 |
| | $ | 686,229 |
|
HELOCs - originated | — |
| | 21 |
| | 1,311 |
| | 1,332 |
| | 256 |
| | 462 |
| | 149,366 |
| | 150,084 |
|
HELOCs - purchased | — |
| | — |
| | 791 |
| | 791 |
| | — |
| | — |
| | 162,181 |
| | 162,181 |
|
Construction and land/lots | — |
| | 22 |
| | 1,063 |
| | 1,085 |
| | 511 |
| | 611 |
| | 59,683 |
| | 60,805 |
|
Indirect auto finance | — |
| | — |
| | 940 |
| | 940 |
| | — |
| | — |
| | 150,042 |
| | 150,042 |
|
Consumer | — |
| | 9 |
| | 56 |
| | 65 |
| | 3 |
| | 9 |
| | 9,687 |
| | 9,699 |
|
Commercial loans: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Commercial real estate | 248 |
| | 190 |
| | 7,463 |
| | 7,901 |
| | 12,726 |
| | 5,806 |
| | 767,849 |
| | 786,381 |
|
Construction and development | 168 |
| | 51 |
| | 2,876 |
| | 3,095 |
| | 2,432 |
| | 2,583 |
| | 180,906 |
| | 185,921 |
|
Commercial and industrial | 15 |
| | 91 |
| | 1,197 |
| | 1,303 |
| | 2,420 |
| | 1,060 |
| | 124,229 |
| | 127,709 |
|
Municipal leases | — |
| | — |
| | 465 |
| | 465 |
| | — |
| | — |
| | 100,205 |
| | 100,205 |
|
Total | $ | 566 |
| | $ | 775 |
| | $ | 19,749 |
| | $ | 21,090 |
| | $ | 25,796 |
| | $ | 19,833 |
| | $ | 2,373,627 |
| | $ | 2,419,256 |
|
June 30, 2017 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Retail consumer loans: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
One-to-four family | $ | 28 |
| | $ | 863 |
| | $ | 3,585 |
| | $ | 4,476 |
| | $ | 8,069 |
| | $ | 10,305 |
| | $ | 665,715 |
| | $ | 684,089 |
|
HELOCs - originated | — |
| | 44 |
| | 1,340 |
| | 1,384 |
| | 288 |
| | 12 |
| | 156,768 |
| | 157,068 |
|
HELOCs - purchased | — |
| | — |
| | 838 |
| | 838 |
| | — |
| | — |
| | 162,407 |
| | 162,407 |
|
Construction and land/lots | — |
| | 88 |
| | 889 |
| | 977 |
| | 528 |
| | 634 |
| | 48,974 |
| | 50,136 |
|
Indirect auto finance | — |
| | 1 |
| | 880 |
| | 881 |
| | — |
| | 1 |
| | 140,878 |
| | 140,879 |
|
Consumer | — |
| | 8 |
| | 49 |
| | 57 |
| | 18 |
| | 8 |
| | 7,874 |
| | 7,900 |
|
Commercial loans: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Commercial real estate | 512 |
| | 239 |
| | 6,600 |
| | 7,351 |
| | 17,383 |
| | 6,284 |
| | 706,741 |
| | 730,408 |
|
Construction and development | 171 |
| | 13 |
| | 2,982 |
| | 3,166 |
| | 2,629 |
| | 2,184 |
| | 193,153 |
| | 197,966 |
|
Commercial and industrial | 16 |
| | 287 |
| | 1,221 |
| | 1,524 |
| | 2,626 |
| | 1,514 |
| | 116,247 |
| | 120,387 |
|
Municipal leases | — |
| | — |
| | 497 |
| | 497 |
| | — |
| | — |
| | 101,175 |
| | 101,175 |
|
Total | $ | 727 |
| | $ | 1,543 |
| | $ | 18,881 |
| | $ | 21,151 |
| | $ | 31,541 |
| | $ | 20,942 |
| | $ | 2,299,932 |
| | $ | 2,352,415 |
|
Loans acquired from acquisitions are initially excluded from the allowance for loan losses in accordance with the acquisition method of accounting for business combinations. The Company records these loans at fair value, which includes a credit discount, therefore, no allowance for loan losses are established for these acquired loans at acquisition. A provision for loan losses is recorded for any further deterioration in these acquired loans subsequent to the acquisition.
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Allowance for Loan Losses | | | | Total Loans Receivable |
| | | Loans Individually Evaluated | | Loans Collectively Evaluated | | Total | | | | Loans Individually Evaluated | | Loans Collectively Evaluated | | Total |
June 30, 2021 | | | | | | | | | | | | | | | |
Commercial loans: | | | | | | | | | | | | | | | |
Commercial real estate | | | $ | 456 | | | $ | 12,826 | | | $ | 13,282 | | | | | $ | 5,729 | | | $ | 1,136,547 | | | $ | 1,142,276 | |
Construction and development | | | — | | | 1,801 | | | 1,801 | | | | | 80 | | | 179,347 | | | 179,427 | |
Commercial and industrial | | | 9 | | | 2,583 | | | 2,592 | | | | | 760 | | | 140,581 | | | 141,341 | |
Equipment finance | | | — | | | 6,537 | | | 6,537 | | | | | 275 | | | 317,645 | | | 317,920 | |
Municipal finance | | | — | | | 534 | | | 534 | | | | | — | | | 140,421 | | | 140,421 | |
PPP loans | | | — | | | — | | | — | | | | | — | | | 46,650 | | | 46,650 | |
Retail consumer loans: | | | | | | | | | | | | | | | |
One-to-four family | | | 2 | | | 5,407 | | | 5,409 | | | | | 1,977 | | | 404,572 | | | 406,549 | |
HELOCs - originated | | | — | | | 1,512 | | | 1,512 | | | | | — | | | 130,225 | | | 130,225 | |
HELOCs - purchased | | | — | | | 452 | | | 452 | | | | | — | | | 38,976 | | | 38,976 | |
Construction and land/lots | | | — | | | 812 | | | 812 | | | | | — | | | 66,027 | | | 66,027 | |
Indirect auto finance | | | — | | | 2,367 | | | 2,367 | | | | | — | | | 115,093 | | | 115,093 | |
Consumer | | | — | | | 170 | | | 170 | | | | | — | | | 8,362 | | | 8,362 | |
Total | | | $ | 467 | | | $ | 35,001 | | | $ | 35,468 | | | | | $ | 8,821 | | | $ | 2,724,446 | | | $ | 2,733,267 | |
In estimating ECL, ASC 326 prescribes that if foreclosure is probable, a CDA is required to be measured at the fair value of collateral, but as a practical expedient, if foreclosure is not probable, fair value measurement is optional. For those CDA loans measured at the fair value of collateral, a credit loss expense is recorded for loan amounts in excess of fair value. The Company's impairedfollowing tables provide a breakdown between loans identified as CDAs and the related allowance,non-CDAs, by segment and class, atand securing collateral, as well as collateral coverage for those loans for the datesperiods indicated follows:below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Type of Collateral and Extent to Which Collateral Secures Financial Assets | | | | |
September 30, 2021 | Residential Property | | Investment Property | | Commercial Property | | Business Assets | | | | Financial Assets Not Considered Collateral Dependent | | Total |
| | | | | | | | | | | | | |
Commercial loans: | | | | | | | | | | | | | |
Commercial real estate | $ | — | | | $ | — | | | $ | 299 | | | $ | — | | | | | $ | 1,132,465 | | | $ | 1,132,764 | |
Construction and development | — | | | — | | | — | | | — | | | | | 187,900 | | | 187,900 | |
Commercial and industrial | — | | | — | | | — | | | 494 | | | | | 153,118 | | | 153,612 | |
Equipment finance | — | | | — | | | — | | | — | | | | | 341,995 | | | 341,995 | |
Municipal finance | — | | | — | | | — | | | — | | | | | 142,100 | | | 142,100 | |
PPP loans | — | | | — | | | — | | | — | | | | | 28,762 | | | 28,762 | |
Retail consumer loans: | | | | | | | | | | | | | |
One-to-four family | 799 | | | — | | | — | | | — | | | | | 384,102 | | | 384,901 | |
HELOCs - originated | — | | | — | | | — | | | — | | | | | 129,791 | | | 129,791 | |
HELOCs - purchased | — | | | — | | | — | | | — | | | | | 33,943 | | | 33,943 | |
Construction and land/lots | — | | | — | | | — | | | — | | | | | 69,835 | | | 69,835 | |
Indirect auto finance | — | | | — | | | — | | | — | | | | | 106,184 | | | 106,184 | |
Consumer | — | | | — | | | — | | | — | | | | | 7,855 | | | 7,855 | |
Total | $ | 799 | | | $ | — | | | $ | 299 | | | $ | 494 | | | | | $ | 2,718,050 | | | $ | 2,719,642 | |
Total Collateral Value | $ | 1,160 | | | $ | — | | | $ | 288 | | | $ | — | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| Total Impaired Loans |
| Unpaid Principal Balance | | Recorded Investment With a Recorded Allowance | | Recorded Investment With No Recorded Allowance | | Total | | Related Recorded Allowance |
December 31, 2017 | | | | | | | | | |
Retail consumer loans: | | | | | | | | | |
One-to-four family | $ | 27,510 |
| | $ | 18,013 |
| | $ | 6,147 |
| | $ | 24,160 |
| | $ | 935 |
|
HELOCs - originated | 3,826 |
| | 2,046 |
| | 554 |
| | 2,600 |
| | 63 |
|
HELOCs - purchased | 190 |
| | 190 |
| | — |
| | 190 |
| | 1 |
|
Construction and land/lots | 2,538 |
| | 1,277 |
| | 332 |
| | 1,609 |
| | 60 |
|
Indirect auto finance | 354 |
| | 257 |
| | 28 |
| | 285 |
| | 1 |
|
Consumer | 512 |
| | 2 |
| | 29 |
| | 31 |
| | 9 |
|
Commercial loans: | |
| | |
| | |
| | |
| | |
|
Commercial real estate | 7,483 |
| | 4,737 |
| | 2,390 |
| | 7,127 |
| | 204 |
|
Construction and development | 4,433 |
| | 1,272 |
| | 2,006 |
| | 3,278 |
| | 62 |
|
Commercial and industrial | 6,280 |
| | 1,339 |
| | 50 |
| | 1,389 |
| | 93 |
|
Municipal leases | 98 |
| | 98 |
| | — |
| | 98 |
| | — |
|
Total impaired loans | $ | 53,224 |
| | $ | 29,231 |
| | $ | 11,536 |
| | $ | 40,767 |
| | $ | 1,428 |
|
June 30, 2017 | |
| | |
| | |
| | |
| | |
|
Retail consumer loans: | |
| | |
| | |
| | |
| | |
|
One-to-four family | $ | 28,469 |
| | $ | 17,353 |
| | $ | 7,773 |
| | $ | 25,126 |
| | $ | 881 |
|
HELOCs - originated | 4,070 |
| | 2,270 |
| | 532 |
| | 2,802 |
| | 49 |
|
HELOCs - purchased | 192 |
| | — |
| | 192 |
| | 192 |
| | — |
|
Construction and land/lots | 2,817 |
| | 1,310 |
| | 468 |
| | 1,778 |
| | 88 |
|
Indirect auto finance | 22 |
| | — |
| | 1 |
| | 1 |
| | 1 |
|
Consumer | 552 |
| | 15 |
| | 27 |
| | 42 |
| | 8 |
|
Commercial loans: | |
| | |
| | |
| | |
| | |
|
Commercial real estate | 8,307 |
| | 4,721 |
| | 3,186 |
| | 7,907 |
| | 253 |
|
Construction and development | 3,768 |
| | 1,024 |
| | 1,617 |
| | 2,641 |
| | 16 |
|
Commercial and industrial | 7,757 |
| | 845 |
| | 1,231 |
| | 2,076 |
| | 288 |
|
Municipal leases | 400 |
| | 106 |
| | 294 |
| | 400 |
| | — |
|
Total impaired loans | $ | 56,354 |
| | $ | 27,644 |
| | $ | 15,321 |
| | $ | 42,965 |
| | $ | 1,584 |
|
Impaired loans above excludes $4,596 at December 31, 2017 and $6,677 at June 30, 2017 in PCI loans due to the accretion of discounts established in accordance with the acquisition method of accounting for business combinations. The June 30, 2017 balance in the preceding sentence was previously disclosed as $13,425. Based on further review, this amount was determined to be an error and was corrected during the quarter ended September 30, 2017. The error had no effect on the Company’s audited financial statements or other disclosures.
The table above includes $20,934 and $22,023, of impaired loans that were not individually evaluated at December 31, 2017 and June 30, 2017, respectively, because these loans did not meet the Company's threshold for individual impairment evaluation. The recorded allowance above includes $653 and $41 related to these loans that were not individually evaluated at December 31, 2017 and June 30, 2017, respectively.
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Type of Collateral and Extent to Which Collateral Secures Financial Assets | | | | |
June 30, 2021 | Residential Property | | Investment Property | | Commercial Property | | Business Assets | | | | Financial Assets Not Considered Collateral Dependent | | Total |
| | | | | | | | | | | | | |
Commercial loans: | | | | | | | | | | | | | |
Commercial real estate | $ | — | | | $ | 3,421 | | | $ | 2,308 | | | $ | — | | | | | $ | 1,136,547 | | | $ | 1,142,276 | |
Construction and development | — | | | 80 | | | — | | | — | | | | | 179,347 | | | 179,427 | |
Commercial and industrial | — | | | — | | | — | | | 25 | | | | | 141,316 | | | 141,341 | |
Equipment finance | — | | | — | | | — | | | — | | | | | 317,920 | | | 317,920 | |
Municipal finance | — | | | — | | | — | | | — | | | | | 140,421 | | | 140,421 | |
PPP loans | — | | | — | | | — | | | — | | | | | 46,650 | | | 46,650 | |
Retail consumer loans: | | | | | | | | | | | | | |
One-to-four family | 807 | | | — | | | — | | | — | | | | | 405,742 | | | 406,549 | |
HELOCs - originated | — | | | — | | | — | | | — | | | | | 130,225 | | | 130,225 | |
HELOCs - purchased | — | | | — | | | — | | | — | | | | | 38,976 | | | 38,976 | |
Construction and land/lots | — | | | — | | | — | | | — | | | | | 66,027 | | | 66,027 | |
Indirect auto finance | — | | | — | | | — | | | — | | | | | 115,093 | | | 115,093 | |
Consumer | — | | | — | | | — | | | — | | | | | 8,362 | | | 8,362 | |
Total | $ | 807 | | | $ | 3,501 | | | $ | 2,308 | | | $ | 25 | | | | | $ | 2,726,626 | | | $ | 2,733,267 | |
Total Collateral Value | $ | 1,160 | | | $ | 3,602 | | | $ | 2,723 | | | $ | 26 | | | | | | | |
The Company's average recorded investment in impaired loans and interest income recognizedfollowing table presents a breakdown of the types of concessions made on impaired loansTDRs by loan class for the three and six months ended December 31, 2017 and 2016 was as follows: |
| | | | | | | | | | | | | | | |
| Three Months Ended |
| December 31, 2017 | | December 31, 2016 |
| Average Recorded Investment | | Interest Income Recognized | | Average Recorded Investment | | Interest Income Recognized |
Retail consumer loans: | | | | | | | |
One-to-four family | $ | 24,519 |
| | $ | 287 |
| | $ | 26,673 |
| | $ | 283 |
|
HELOCs - originated | 2,750 |
| | 31 |
| | 2,544 |
| | 33 |
|
HELOC - purchased | 191 |
| | 3 |
| | — |
| | — |
|
Construction and land/lots | 1,588 |
| | 27 |
| | 1,594 |
| | 38 |
|
Indirect auto finance | 232 |
| | 3 |
| | 134 |
| | 1 |
|
Consumer | 33 |
| | 4 |
| | 32 |
| | 5 |
|
Commercial loans: | |
| | |
| | |
| | |
|
Commercial real estate | 7,184 |
| | 77 |
| | 7,673 |
| | 63 |
|
Construction and development | 2,973 |
| | 31 |
| | 2,530 |
| | 31 |
|
Commercial and industrial | 1,723 |
| | 23 |
| | 3,372 |
| | 22 |
|
Municipal leases | 102 |
| | 6 |
| | 408 |
| | — |
|
Total loans | $ | 41,295 |
| | $ | 492 |
| | $ | 44,960 |
| | $ | 476 |
|
period indicated below: |
| | | | | | | | | | | | | | | |
| Six Months Ended |
| December 31, 2017 | | December 31, 2016 |
| Average Recorded Investment | | Interest Income Recognized | | Average Recorded Investment | | Interest Income Recognized |
Retail consumer loans: | | | | | | | |
One-to-four family | $ | 24,721 |
| | $ | 585 |
| | $ | 26,356 |
| | $ | 585 |
|
HELOCs - originated | 2,767 |
| | 61 |
| | 2,755 |
| | 65 |
|
HELOCs - purchased | 191 |
| | 7 |
| | — |
| | — |
|
Construction and land/lots | 1,651 |
| | 56 |
| | 1,548 |
| | 75 |
|
Indirect auto finance | 155 |
| | 9 |
| | 96 |
| | 3 |
|
Consumer | 36 |
| | 8 |
| | 29 |
| | 10 |
|
Commercial loans: | |
| | |
| | |
| | |
|
Commercial real estate | 7,425 |
| | 152 |
| | 7,326 |
| | 130 |
|
Construction and development | 2,862 |
| | 52 |
| | 2,530 |
| | 49 |
|
Commercial and industrial | 1,841 |
| | 42 |
| | 3,624 |
| | 58 |
|
Municipal leases | 201 |
| | 6 |
| | 412 |
| | 12 |
|
Total loans | $ | 41,850 |
| | $ | 978 |
| | $ | 44,676 |
| | $ | 987 |
|
A summary of changes in the accretable yield for PCI loans for the three and six months ended December 31, 2017 and 2016 was as follows:
|
| | | | | | | |
| Three Months Ended |
| December 31, 2017 | | December 31, 2016 |
Accretable yield, beginning of period | $ | 6,698 |
| | $ | 8,339 |
|
Reclass from nonaccretable yield (1) | 77 |
| | 185 |
|
Other changes, net (2) | 80 |
| | (282 | ) |
Interest income | (634 | ) | | (723 | ) |
Accretable yield, end of period | $ | 6,221 |
| | $ | 7,519 |
|
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
|
| | | | | | | |
| Six Months Ended |
| December 31, 2017 | | December 31, 2016 |
Accretable yield, beginning of period | $ | 7,080 |
| | $ | 9,532 |
|
Reclass from nonaccretable yield (1) | 278 |
| | 1,072 |
|
Other changes, net (2) | 107 |
| | (741 | ) |
Interest income | (1,244 | ) | | (2,344 | ) |
Accretable yield, end of period | $ | 6,221 |
| | $ | 7,519 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
(1) | Represents changes attributable to expected losses assumptions. |
| | | | | | | | | |
(2) | Represents changes in cash flows expected to be collected due to the impact of modifications, changes in prepayment assumptions, and changes in interest rates. | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2021 | | 2020 |
| Number of Loans | | Pre Modification Outstanding Recorded Investment | | Post Modification Outstanding Recorded Investment | | Number of Loans | | Pre Modification Outstanding Recorded Investment | | Post Modification Outstanding Recorded Investment |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
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| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Other TDRs: | | | | | | | | | | | |
Commercial: | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Commercial and industrial | — | | | — | | | — | | | 1 | | | 4,407 | | | 3,800 | |
Retail consumer: | | | | | | | | | | | |
| | | | | | | | | | | |
HELOCs - originated | 1 | | | 18 | | | 18 | | | — | | | — | | | — | |
| | | | | | | | | | | |
Indirect auto finance | 5 | | | 84 | | | 83 | | | 6 | | | 105 | | | 78 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total | 6 | | | $ | 102 | | | $ | 101 | | | 7 | | | $ | 4,512 | | | $ | 3,878 | |
HOMETRUST BANCSHARES, INC. AND SUBSIDIARYThe following table presents loans that were modified as TDRs within the previous 12 months and for which there was a payment default during the periods indicated below:
Notes to Consolidated Financial Statements | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, 2021 | | Three Months Ended September 30, 2020 | | |
| | | | | Number of Loans | | Recorded Investment | | Number of Loans | | Recorded Investment | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Other TDRs: | | | | | | | | | | | | | |
Retail consumer: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Indirect auto finance | | | | | 2 | | | 44 | | | 1 | | | 11 | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Total | | | | | 2 | | | $ | 44 | | | — | | | $ | 11 | | | |
| | | | | | | | | | | | | |
(Dollars in thousands, except per share data)
Other TDRs include TDRs that have a below market interest rate and extended payment terms. The Company does not typically forgive principal when restructuring troubled debt.
For the three and six months ended December 31, 2017 and 2016, the following table presents a breakdown of the types of concessions made on TDRs by loan class:
|
| | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, 2017 | | Three Months Ended December 31, 2016 |
| Number of Loans | | Pre Modification Outstanding Recorded Investment | | Post Modification Outstanding Recorded Investment | | Number of Loans | | Pre Modification Outstanding Recorded Investment | | Post Modification Outstanding Recorded Investment |
Extended payment terms: | |
| | |
| | |
| | |
| | |
| | |
|
Retail consumer: | |
| | |
| | |
| | |
| | |
| | |
|
One-to-four family | 3 |
| | $ | 398 |
| | $ | 395 |
| | 1 |
| | $ | 20 |
| | $ | 20 |
|
HELOCs - originated | 1 |
| | 64 |
| | 59 |
| | — |
| | — |
| | — |
|
Construction and land/lots | 1 |
| | 36 |
| | 36 |
| | 1 |
| | 280 |
| | 280 |
|
Total | 5 |
| | $ | 498 |
| | $ | 490 |
| | 2 |
| | $ | 300 |
| | $ | 300 |
|
Other TDRs: | |
| | |
| | |
| | |
| | |
| | |
|
Retail consumer: | |
| | |
| | |
| | |
| | |
| | |
|
One-to-four family | 6 |
| | $ | 177 |
| | $ | 176 |
| | 5 |
| | $ | 168 |
| | $ | 171 |
|
Construction and land/lots | — |
| | — |
| | — |
| | 2 |
| | 254 |
| | 251 |
|
Indirect auto finance | 1 |
| | 19 |
| | 6 |
| | — |
| | — |
| | — |
|
Commercial: | | | | | | | | | | | |
Commercial & Industrial | — |
| | — |
| | — |
| | 1 |
| | 24 |
| | 24 |
|
Total | 7 |
| | $ | 196 |
| | $ | 182 |
| | 8 |
| | $ | 446 |
| | $ | 446 |
|
Total | 12 |
| | $ | 694 |
| | $ | 672 |
| | 10 |
| | $ | 746 |
| | $ | 746 |
|
|
| | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended December 31, 2017 | | Six Months Ended December 31, 2016 |
| Number of Loans | | Pre Modification Outstanding Recorded Investment | | Post Modification Outstanding Recorded Investment | | Number of Loans | | Pre Modification Outstanding Recorded Investment | | Post Modification Outstanding Recorded Investment |
Extended payment terms: | |
| | |
| | |
| | |
| | |
| | |
|
Retail consumer: | |
| | |
| | |
| | |
| | |
| | |
|
One-to-four family | 3 |
| | $ | 398 |
| | $ | 395 |
| | 3 |
| | $ | 139 |
| | $ | 137 |
|
HELOCs - originated | 1 |
| | 64 |
| | 59 |
| | — |
| | — |
| | — |
|
Construction and land/lots | 1 |
| | 36 |
| | 36 |
| | 1 |
| | 280 |
| | 280 |
|
Total | 5 |
| | $ | 498 |
| | $ | 490 |
| | 4 |
| | $ | 419 |
| | $ | 417 |
|
Other TDRs: | |
| | |
| | |
| | |
| | |
| | |
|
Retail consumer: | |
| | |
| | |
| | |
| | |
| | |
|
One-to-four family | 15 |
| | $ | 1,493 |
| | $ | 1,481 |
| | 8 |
| | $ | 273 |
| | $ | 275 |
|
HELOCs - originated | — |
| | — |
| | — |
| | 1 |
| | 3 |
| | 3 |
|
Construction and land/lots | — |
| | — |
| | — |
| | 2 |
| | 254 |
| | 251 |
|
Indirect auto finance | 1 |
| | 19 |
| | 6 |
| | — |
| | — |
| | — |
|
Commercial: | | | | | | | | | | | |
Commercial and industrial | — |
| | — |
| | — |
| | 1 |
| | 24 |
| | 24 |
|
Total | 16 |
| | $ | 1,512 |
| | $ | 1,487 |
| | 12 |
| | $ | 554 |
| | $ | 553 |
|
Total | 21 |
| | $ | 2,010 |
| | $ | 1,977 |
| | 16 |
| | $ | 973 |
| | $ | 970 |
|
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
The following table presents loans that were modified as TDRs withinIn determining the previous 12 months and for which there was a payment default during the three and six months ended December 31, 2017 and 2016:
|
| | | | | | | | | | | | | |
| Three Months Ended December 31, 2017 | | Three Months Ended December 31, 2016 |
| Number of Loans | | Recorded Investment | | Number of Loans | | Recorded Investment |
Extended payment terms: | | | | | | | |
Retail consumer: | | | | | | | |
One-to-four family | 1 |
| | $ | 37 |
| | — |
| | $ | — |
|
Total | 1 |
| | $ | 37 |
| | — |
| | $ | — |
|
Other TDRs: | |
| | |
| | |
| | |
|
Retail consumer: | |
| | |
| | |
| | |
|
One-to-four family | 3 |
| | $ | 493 |
| | — |
| | $ | — |
|
Indirect auto finance | 1 |
| | 6 |
| | — |
| | — |
|
Commercial: | | | | | | | |
Commercial and industrial | — |
| | — |
| | 4 |
| | 1,277 |
|
Total | 4 |
| | $ | 499 |
| | 4 |
| | $ | 1,277 |
|
Total | 5 |
| | $ | 536 |
| | 4 |
| | $ | 1,277 |
|
|
| | | | | | | | | | | | | |
| Six Months Ended December 31, 2017 | | Six Months Ended December 31, 2016 |
| Number of Loans | | Recorded Investment | | Number of Loans | | Recorded Investment |
Extended payment terms: |
|
| |
|
| |
|
| |
|
|
Retail consumer: | | | | | | | |
One-to-four family | 1 |
| | $ | 37 |
| | — |
| | $ | — |
|
Total | 1 |
| | $ | 37 |
| | — |
| | $ | — |
|
Other TDRs: | |
| | |
| | |
| | |
|
Retail consumer: | |
| | |
| | |
| | |
|
One-to-four family | 3 |
| | $ | 493 |
| | — |
| | $ | — |
|
Indirect auto finance | 1 |
| | 6 |
| | — |
| | — |
|
Commercial: | | | | | | | |
Commercial real estate | — |
| | — |
| | — |
| | — |
|
Commercial and industrial | — |
| | — |
| | 4 |
| | 1,277 |
|
Total | 4 |
| | $ | 499 |
| | 4 |
| | $ | 1,277 |
|
Total | 5 |
| | $ | 536 |
| | 4 |
| | $ | 1,277 |
|
In the determination of the allowance for loan losses,ACL, management considers TDRs for all loan classes, and the subsequent nonperformance in accordance with their modified terms, by measuring impairmenta reserve on a loan-by-loan basis based on either the value of the loan's expected future cash flows discounted at the loan's original effective interest rate or on the collateral value, net of the estimated costs of disposal, if the loan is collateral dependent.
Off-Balance-Sheet Credit Exposure
The Company maintains a separate reserve for credit losses on off-balance-sheet credit exposures, including unfunded loan commitments, which is included in other liabilities on the consolidated balance sheet. The reserve for credit losses on off-balance-sheet credit exposures is adjusted as a provision for credit losses in the consolidated statement of income. The estimate includes consideration of the likelihood that funding will occur and an estimate of ECLs on commitments expected to be funded over its estimated life, utilizing the same models and approaches for the Company's other loan portfolio segments described above, as these unfunded commitments share similar risk characteristics as its loan portfolio segments. The Company has identified the unfunded portion of certain lines of credit as unconditionally cancellable credit exposures, meaning the Company can cancel the unfunded commitment at any time. No credit loss estimate is reported for off-balance-sheet credit exposures that are unconditionally cancellable by the Company or for undrawn amounts under such arrangements that may be drawn prior to the cancellation of the arrangement. At September 30, 2021, the liability for credit losses on off-balance-sheet credit exposures included in other liabilities was $2,198.
Modifications in Response to COVID-19
Beginning in March 2020, the Company began offering short-term loan modifications to assist borrowers during the COVID-19 pandemic. The CARES Act along with a joint agency statement issued by banking agencies and confirmed by FASB staff that short-term modifications made in response to COVID-19 are not considered TDRs.
The Bank is offering payment and financial relief programs for borrowers impacted by COVID-19. These programs include loan payment deferrals for up to 90 days (which can be renewed for another 90 days under certain circumstances) waived late fees, and suspension of foreclosure proceedings and repossessions. Since March 2020, the Company has received numerous requests from borrowers for some type of payment relief; however, the majority of these payment deferrals have ended and borrowers are again making regular loan payments.
As of September 30, 2021, the Company had $1,003 in loans with full principal and interest payment deferrals related to COVID-19 compared to $107 at June 30, 2021. Substantially all loans placed on full payment deferral during the pandemic have come out of deferral and borrowers are either making regular loan payments or interest-only payments through the end of calendar year 2021. As of September 30, 2021, the Company had $67,810 in commercial loan deferrals on interest-only payments compared to $78,850 at June 30, 2021.
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
The activity within REO for the periods shown is as follows: |
| | | | | | | | | | | | | | | |
| Three Months Ended December 31, | | Six Months Ended December 31, |
| 2017 | | 2016 | | 2017 | | 2016 |
Balance at beginning of period | $ | 5,941 |
| | $ | 5,715 |
| | $ | 6,318 |
| | $ | 5,956 |
|
Transfers from loans | 339 |
| | 1,025 |
| | 591 |
| | 1,330 |
|
Sales, net of gain or loss | (1,111 | ) | | (1,005 | ) | | (1,758 | ) | | (1,551 | ) |
Writedowns | (351 | ) | | (87 | ) | | (351 | ) | | (87 | ) |
Capital improvements | — |
| | — |
| | 18 |
| | — |
|
Balance at end of period | $ | 4,818 |
| | $ | 5,648 |
| | $ | 4,818 |
| | $ | 5,648 |
|
At December 31, 2017 and June 30, 2017, the Bank had $1,081 and $1,015 respectively, of foreclosed residential real estate property in REO. The recorded investment in consumer mortgage loans collateralized by residential real estate in the process of foreclosure totaled $2,268 and $2,230 at December 31, 2017 and June 30, 2017, respectively.
7. Income Taxes
Income tax expense consists of:
|
| | | | | | | | | | | | | | | |
| Three Months Ended December 31, | | Six Months Ended December 31, |
| 2017 | | 2016 | | 2017 | | 2016 |
Current: | | | | | | | |
Federal | $ | 92 |
| | $ | 40 |
| | $ | 230 |
| | $ | 191 |
|
State | (3 | ) | | 22 |
| | 8 |
| | 29 |
|
Total current expense | 89 |
| | 62 |
| | 238 |
| | 220 |
|
Deferred: | | | | | | | |
Federal | 1,611 |
| | 751 |
| | 3,681 |
| | 2,356 |
|
State | 115 |
| | 80 |
| | 406 |
| | 741 |
|
Adjustment due to the Tax Cuts and Jobs Act | 17,693 |
| | — |
| | 17,693 |
| | — |
|
Total deferred expense | 19,419 |
| | 831 |
| | 21,780 |
| | 3,097 |
|
Total income tax expense | $ | 19,508 |
| | $ | 893 |
| | $ | 22,018 |
| | $ | 3,317 |
|
Income tax expense differed from the amounts computed by applying the U.S. federal income tax rate of 28% and 34% for the periods ended December 31, 2017 and 2016, respectively, to pretax income from continuing operations before income taxes as a result of the following:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, | | Six Months Ended December 31, |
| 2017 | | 2016 | | 2017 | | 2016 |
| $ | | Rate | | $ | | Rate | | $ | | Rate | | $ | | Rate |
Tax at federal income tax rate | $ | 2,432 |
| | 28 | % | | $ | 1,318 |
| | 34 | % | | $ | 4,653 |
| | 28 | % | | $ | 3,442 |
| | 34 | % |
Increase (decrease) resulting from: | | | | | | | | | | | | | | | |
Tax exempt income | (264 | ) | | (3 | )% | | (340 | ) | | (9 | )% | | (541 | ) | | (3 | )% | | (712 | ) | | (7 | )% |
Nondeductible merger expenses | 1 |
| | — | % | | 1 |
| | — | % | | 1 |
| | — | % | | 28 |
| | — | % |
Change in valuation allowance for deferred tax assets, allocated to income tax expense | (49 | ) | | (1 | )% | | (65 | ) | | (2 | )% | | (184 | ) | | (1 | )% | | (264 | ) | | (3 | )% |
State tax, net of federal benefit | 81 |
| | 1 | % | | 67 |
| | 2 | % | | 204 |
| | 1 | % | | 185 |
| | 2 | % |
Change in deferred tax assets due to North Carolina corporate tax rate decrease | — |
| | — | % | | — |
| | — | % | | 133 |
| | 1 | % | | 490 |
| | 5 | % |
Change in deferred tax assets due to the Tax Cuts and Jobs Act | 17,693 |
| | 200 | % | | — |
| | — | % | | 17,693 |
| | 105 | % | | — |
| | — | % |
Adjustment for prior quarter expense due to accrual at higher rate | (418 | ) | | (5 | )% | | — |
| | — | % | | — |
| | — | % | | — |
| | — | % |
Other | 32 |
| | — | % | | (88 | ) | | (2 | )% | | 59 |
| | — | % | | 148 |
| | 1 | % |
Total | $ | 19,508 |
| | 220 | % | | $ | 893 |
| | 23 | % | | $ | 22,018 |
| | 131 | % | | $ | 3,317 |
| | 32 | % |
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
7. Net Income per Share
The sources and tax effects of temporary differences that give rise to significant portions of the deferred tax assets (liabilities) at December 31, 2017 and June 30, 2017 are presented below:
|
| | | | | | | |
| December 31, 2017 | | June 30, 2017 |
Deferred tax assets: | | | |
Alternative minimum tax credit | $ | 4,637 |
| | $ | 4,418 |
|
Allowance for loan losses | 4,646 |
| | 7,452 |
|
Deferred compensation and post-retirement benefits | 9,672 |
| | 16,055 |
|
Accrued vacation and sick leave | 18 |
| | 29 |
|
Impairments on real estate owned | 877 |
| | 1,337 |
|
Other than temporary impairment on investments | 2,262 |
| | 3,617 |
|
Net operating loss carryforward | 11,109 |
| | 21,443 |
|
Discount from business combination | 3,056 |
| | 3,645 |
|
Unrealized loss on securities held for sale | 98 |
| | — |
|
Stock compensation plans | 2,154 |
| | 2,884 |
|
Other | 1,904 |
| | 2,687 |
|
Total gross deferred tax assets | 40,433 |
| | 63,567 |
|
Less valuation allowance | (54 | ) | | (238 | ) |
Deferred tax assets | 40,379 |
| | 63,329 |
|
Deferred tax (liabilities): | |
| | |
|
Depreciable basis of fixed assets | (589 | ) | | (670 | ) |
Deferred loan fees | (406 | ) | | (493 | ) |
FHLB stock, book basis in excess of tax | (89 | ) | | (143 | ) |
Unrealized gain on securities available for sale | — |
| | (152 | ) |
Other | (2,769 | ) | | (4,484 | ) |
Total gross deferred tax liabilities | (3,853 | ) | | (5,942 | ) |
Net deferred tax assets | $ | 36,526 |
| | $ | 57,387 |
|
We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion of the deferred tax asset will not be realized. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets.
The decrease in net deferred tax assets was driven by the enactment of the Tax Cuts and Jobs Act (the "Tax Act"), which among other things reduced the federal corporate tax rate to 21% effective January 1, 2018 requiring the Company to revalue net deferred tax assets. The resulting estimated $17.7 million deferred tax revaluation was reflected as an increase to the Company's income tax expense. In addition, our June 30 fiscal year end required the use of a blended rate as prescribed by the Internal Revenue Code. The blended federal rate of 27.5% was retroactively effective July 1, 2017 and will be used for the entire fiscal year ending June 30, 2018. As a result of this blended rate, income tax expense for the quarter ended December 31, 2017 includes approximately $418,000 in tax benefit from adjusting the federal income tax rate to 27.5% from 34% for the first quarter of the fiscal year. The estimated $17.7 million deferred tax revaluation includes provisional amounts where a reasonable estimate was made to comply with the Tax Act, which can be adjusted throughout the measurement period or up to one year. These provisional amounts include estimates related to the timing of potential reversals of various deferred tax assets and liabilities during fiscal year 2018 using the blended tax rate as described above. The Company will continue to update the provisional amounts as additional information becomes available and expects all adjustments to be finalized by the end of fiscal 2018.
The Company had federal net operating loss ("NOL") carry forwards of $52,655 and $62,041 as of December 31, 2017 and June 30, 2017, respectively, with a recorded tax benefit of $11,109 and $21,443 included in deferred tax assets. The majority of these NOLs will expire for federal tax purposes from 2024 through 2036.
The Company also adjusted its net deferred tax asset as a result of additional reductions in the North Carolina corporate income tax rates that were enacted July 23, 2013, and effective January 1, 2014 through 2017. The lower corporate income tax rate resulted in a reduction in the deferred tax assets as of December 31, 2017 and June 30, 2017 and an increase in income tax expense for the six months ended December 31, 2017 and 2016.
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
The valuation allowance for deferred tax assets as of December 31, 2017 and June 30, 2017 was $54 and $238, respectively. The net decrease in the total valuation allowance relates to North Carolina state income taxes due to limitations on state net operating loss carry forwards.
Retained earnings at December 31, 2017 and June 30, 2017 include $19,570 representing pre-1988 tax bad debt reserve base year amounts for which no deferred tax liability has been provided since these reserves are not expected to reverse and may never reverse. Circumstances that would require an accrual of a portion or all of this unrecorded tax liability are a failure to meet the definition of a bank, dividend payments in excess of current year or accumulated earnings and profits, or other distributions in dissolution or liquidation of the Bank. The Company is no longer subject to examination for federal and state purposes for tax years prior to 2013.
| |
8. | Net Income (Loss) per Share |
The following is a reconciliation of the numerator and denominator of basic and diluted net income (loss) per share of common stock:
|
| | | | | | | | | | | | | | | |
| Three Months Ended December 31, | | Six Months Ended December 31, |
| 2017 | | 2016 | | 2017 | | 2016 |
Numerator: | | | | | | | |
Net income (loss) | $ | (10,666 | ) | | $ | 2,983 |
| | $ | (5,099 | ) | | $ | 6,807 |
|
Allocation of earnings to participating securities | — |
| | (44 | ) | | — |
| | (100 | ) |
Numerator for basic EPS - Net income (loss) available to common stockholders | $ | (10,666 | ) | | $ | 2,939 |
| | $ | (5,099 | ) | | $ | 6,707 |
|
Effect of dilutive securities: | | | | | | | |
Dilutive effect to participating securities | — |
| | 1 |
| | — |
| | 3 |
|
Numerator for diluted EPS | $ | (10,666 | ) | | $ | 2,940 |
| | $ | (5,099 | ) | | $ | 6,710 |
|
Denominator: | |
| | |
| | |
| | |
|
Weighted-average common shares outstanding - basic | 17,975,883 |
| | 16,900,387 |
| | 17,971,439 |
| | 16,893,775 |
|
Effect of dilutive shares | — |
| | 543,757 |
| | — |
| | 497,629 |
|
Weighted-average common shares outstanding - diluted | 17,975,883 |
| | 17,444,144 |
| | 17,971,439 |
| | 17,391,404 |
|
Net income (loss) per share - basic | $ | (0.59 | ) | | $ | 0.17 |
| | $ | (0.28 | ) | | $ | 0.39 |
|
Net income (loss) per share - diluted | $ | (0.59 | ) | | $ | 0.17 |
| | $ | (0.28 | ) | | $ | 0.39 |
|
stock as of the dates indicated: | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, |
| | | | | 2021 | | 2020 |
Numerator: | | | | | | | |
Net income | | | | | $ | 10,527 | | | $ | 5,753 | |
Allocation of earnings to participating securities | | | | | (92) | | | (50) | |
Numerator for basic EPS - Net income available to common stockholders | | | | | $ | 10,435 | | | $ | 5,703 | |
Effect of dilutive securities: | | | | | | | |
Dilutive effect to participating securities | | | | | 2 | | | 6 | |
Numerator for diluted EPS | | | | | $ | 10,437 | | | $ | 5,709 | |
Denominator: | | | | | | | |
Weighted-average common shares outstanding - basic | | | | | 15,761,247 | | | 16,230,990 | |
Effect of dilutive shares | | | | | 385,364 | | | 238,252 | |
Weighted-average common shares outstanding - diluted | | | | | 16,146,611 | | | 16,469,242 | |
Net income per share - basic | | | | | $ | 0.66 | | | $ | 0.35 | |
Net income per share - diluted | | | | | $ | 0.65 | | | $ | 0.35 | |
| | | | | | | |
Potential dilutive shares are excluded from the computation of earnings per share if their effect is anti-dilutive. There were no446,250 stock options that were anti-dilutive for the three months ended December 31, 2016.September 30, 2021, respectively. There were 46,500573,900 stock options that were anti-dilutive for the sixthree months ended December 31, 2016.September 30, 2020, respectively.
8. Equity Incentive Plan
The Company provides stock-based awards through the 2013 Omnibus Incentive Plan, which provides for awards of restricted stock, restricted stock units, stock options, stock appreciation rights and cash awards to directors, directors emeritus, directors, officers, employees and advisory directors. The cost of equity-based awards under the 2013 Omnibus Incentive Plan generally is based on the fair value of the awards on their grant date for current directors, officers, and employees. The fair value of equity-based awards is updated quarterly for certain nonemployee emeritus directors and advisory directors.date. The maximum number of shares that may be utilized for awards under the plan is 2,962,400, including 2,116,000 for stock options and stock appreciation rights and 846,400 for awards of restricted stock and restricted stock units.
Shares of common stock issued under the 2013 Omnibus Incentive Plan mayplan would be issued out of authorized but unissued shares, some or all of which may be repurchased shares. During fiscal 2013, theThe Company had repurchased theall 846,400 shares availableon the open market for awards of restricted stock and restricted stock unitsissuance under the 2013 Omnibus Incentive Plan, on the open market, for $13,297, at an average cost of $15.71 per share.share during the year ended June 30, 2013.
The table below presents share basedshare-based compensation expense and the estimated related tax benefit for stock options and restricted stock for the three and six months ended December 31, 2017September 30, 2021 and 2016:2020, respectively:
| | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, |
| | | | | 2021 | | 2020 |
Share-based compensation expense | | | | | $ | 415 | | | $ | 506 | |
Tax benefit | | | | | $ | 98 | | | $ | 119 | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended December 31, | | Six Months Ended December 31, |
| 2017 | | 2016 | | 2017 | | 2016 |
Share based compensation expense | $ | 841 |
| | $ | 2,053 |
| | $ | 2,014 |
| | $ | 2,792 |
|
Tax benefit | $ | 235 |
| | $ | 698 |
| | $ | 564 |
| | $ | 950 |
|
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
The table below presents stock option activity forand related information:
| | | | | | | | | | | | | | | | | | | | | | | |
| Options | | Weighted- Average Exercise Price | | Remaining Contractual Life (Years) | | Aggregate Intrinsic Value |
Options outstanding at June 30, 2020 | 1,615,500 | | | $ | 18.12 | | | 4.4 | | $ | 1,711 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Forfeited | 200 | | | 24.95 | | | — | | | — | |
| | | | | | | |
Options outstanding at September 30, 2020 | 1,615,300 | | | $ | 18.12 | | | 4.1 | | $ | — | |
Exercisable at September 30, 2020 | 1,303,000 | | | $ | 16.31 | | | 3.3 | | $ | — | |
Non-vested at September 30, 2020 | 312,300 | | | $ | 25.68 | | | 7.6 | | $ | — | |
| | | | | | | |
Options outstanding at June 30, 2021 | 1,319,456 | | | $ | 19.07 | | | 3.9 | | $ | 11,657 | |
| | | | | | | |
| | | | | | | |
Exercised | 46,200 | | | 15.16 | | | — | | | — | |
Forfeited | 2,600 | | | 25.42 | | | — | | | — | |
| | | | | | | |
Options outstanding at September 30, 2021 | 1,270,656 | | | $ | 19.19 | | | 3.7 | | $ | 11,164 | |
Exercisable at September 30, 2021 | 1,030,506 | | | $ | 17.75 | | | 2.9 | | $ | 10,546 | |
Non-vested at September 30, 2021 | 240,150 | | | $ | 25.41 | | | 7.3 | | $ | 617 | |
There were no options granted during the sixthree months ended December 31, 2017September 30, 2021 and 2016:
|
| | | | | | | | | | | | | |
| Options | | Weighted- average exercise price | | Remaining contractual life (years) | | Aggregate Intrinsic Value |
Options outstanding at June 30, 2016 | 1,529,300 |
| | $ | 14.50 |
| | 6.8 |
| | $ | 6,117 |
|
Exercised | — |
| | — |
| | — |
| | — |
|
Forfeited | — |
| | — |
| | — |
| | — |
|
Expired | — |
| | — |
| | — |
| | — |
|
Options outstanding at December 31, 2016 | 1,529,300 |
| | $ | 14.50 |
| | 6.3 |
| | $ | 17,433 |
|
Exercisable at December 31, 2016 | 829,400 |
| | $ | 14.40 |
| | | | |
| | | | | | | |
Options outstanding at June 30, 2017 | 1,470,043 |
| | $ | 15.22 |
| | 5.8 |
| | $ | 13,533 |
|
Exercised | 3,900 |
| | 14.37 |
| | — |
| | — |
|
Forfeited | 24,700 |
| | 14.43 |
| | — |
| | — |
|
Expired | 43,273 |
| | 23.82 |
| | — |
| | — |
|
Options outstanding at December 31, 2017 | 1,398,170 |
| | $ | 14.97 |
| | 5.4 |
| | $ | 15,077 |
|
Exercisable at December 31, 2017 | 986,670 |
| | $ | 14.43 |
| | 5.2 |
| | $ | 11,169 |
|
Non-vested at December 31, 2017 | 411,500 |
| | $ | 16.25 |
| | 6.0 |
| | $ | 3,908 |
|
At December 31, 2017,September 30, 2021, the Company had $835$1,083 of unrecognized compensation expense related to 411,500240,150 stock options originally scheduled to vest over five- and seven-yeara five-year vesting periods.period. The weighted average period over which compensation cost related to non-vested awards expected to be recognized was 0.71.4 years at December 31, 2017.September 30, 2021. At December 31, 2016,September 30, 2020, the Company had $2,444$1,535 of unrecognized compensation expense related to 699,900312,300 stock options originally scheduled to vest over five- and seven-yeara five-year vesting periods.period. The weighted average period over which compensation cost related to non-vested awards expected to be recognized was 0.91.5 years at December 31, 2016.September 30, 2020.
The table below presents restricted stock award activity forand related information:
| | | | | | | | | | | | | | | | | |
| Restricted Stock Awards | | Weighted- Average Grant Date Fair Value | | Aggregate Intrinsic Value |
Non-vested at June 30, 2020 | 144,046 | | | $ | 25.89 | | | $ | 2,305 | |
| | | | | |
Vested | 2,600 | | | 25.37 | | | — | |
Forfeited | 200 | | | 24.95 | | | — | |
Non-vested at September 30, 2020 | 141,246 | | | $ | 25.90 | | | $ | 1,918 | |
| | | | | |
Non-vested at June 30, 2021 | 151,575 | | | $ | 25.06 | | | $ | 4,229 | |
| | | | | |
Vested | 8,918 | | | 26.93 | | | — | |
Forfeited | 3,000 | | | 26.31 | | | — | |
Non-vested at September 30, 2021 | 139,657 | | | $ | 25.00 | | | $ | 3,908 | |
The table above includes non-vested performance-based restricted stock units totaling 23,662 and 16,440 at September 30, 2021 and 2020, respectively. Each issuance of these stock units is scheduled to vest over 3.0 years assuming certain performance metrics are met. In addition, the six8,918 vested shares reflected above includes a total of 7,118 performance-based restricted stock units which vested during the three months ended December 31, 2017 and 2016:September 30, 2021.
|
| | | | | | | | | | |
| Restricted stock awards | | Weighted- average grant date fair value | | Aggregate Intrinsic Value |
Non-vested at June 30, 2016 | 248,750 |
| | $ | 14.81 |
| | $ | 4,602 |
|
Granted | 2,000 |
| | 19.02 |
| | — |
|
Vested | — |
| | — |
| | — |
|
Non-vested at December 31, 2016 | 250,750 |
| | $ | 14.84 |
| | $ | 6,494 |
|
| | | | | |
Non-vested at June 30, 2017 | 185,630 |
| | $ | 17.46 |
| | $ | 4,780 |
|
Granted | 2,000 |
| | 23.05 |
| | — |
|
Vested | 400 |
| | 19.02 |
| | — |
|
Forfeited | 6,600 |
| | 14.37 |
| | — |
|
Non-vested at December 31, 2017 | 180,630 |
| | $ | 17.57 |
| | $ | 4,651 |
|
At December 31, 2017,September 30, 2021, unrecognized compensation expense was $1,671$2,483 related to 180,630139,657 shares of restricted stock originally scheduled to vest over five-three- and seven-yearfive-year vesting periods. The weighted average period over which compensation cost related to non-vested awards is expected to be recognized was 1.11.5 years at December 31, 2017.September 30, 2021. At December 31, 2016,September 30, 2020, unrecognized compensation expense was $2,230$2,715 related to 250,750141,246 shares of restricted stock originally scheduled to vest over five-three- and seven-yearfive-year vesting periods. The weighted average period over which compensation cost related to non-vested awards is expected to be recognized was 1.01.6 years at December 31, 2016.
September 30, 2020.
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
9. Commitments and Contingencies
| |
10. | Commitments and Contingencies |
Loan Commitments – Legally binding commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. In the normal course of business, there are various outstanding commitments to extend credit that are not reflected in the consolidated financial statements. At December 31, 2017September 30, 2021 and June 30, 2017,2021, respectively, loan commitments (excluding $123,262$205,848 and $158,380$277,600 of undisbursed portions of construction loans) totaled $54,720$83,616 and $43,730$123,463 of which $25,846$12,636 and $21,221$45,270 were variable rate commitments and $28,874$70,980 and $22,509$78,193 were fixed rate commitments. The fixed rate loans had interest rates ranging from 2.03%1.41% to 7.75%9.75% at December 31, 2017September 30, 2021 and 1.95%2.50% to 6.25%8.36% at June 30, 2017,2021, and terms ranging from three to 30 years. Pre-approved but unused lines of credit (principally second mortgage home equity loans and overdraft protection loans) totaled $447,787$571,362 and $414,373$530,505 at December 31, 2017September 30, 2021 and June 30, 2017,2021, respectively. These amounts represent the Company's exposure to credit risk, and in the opinion of management have no more than the normal lending risk that the Company commits to its borrowers. The Company has two types of commitments related to certain one-to-four family loans held for sale: rate lock commitments and forward loan commitments. Rate lock commitments are commitments to extend credit to a customer that has an interest rate lock and are considered derivative instruments. The rate lock commitments do not qualify for hedge accounting. In order to mitigate the risk from interest rate fluctuations, we enterthe Company enters into forward loan sale commitments on a “best efforts” basis, which do not meet the definition of a derivative instrument. The fair value of these interest rate lock commitments was not material at December 31, 2017September 30, 2021 or June 30, 2017.2021.
The Company grants construction and permanent loans collateralized primarily by residential and commercial real estate to customers throughout its primary market area.areas. In addition, the Company grants equipment financing throughout the United States and municipal leasesfinancing to customers throughout North and South Carolina. The Company'sCompany’s loan portfolio can be affected by the general economic conditions within these market areas. Management believes that the Company has no significant concentration of credit in the loan portfolio.
Restrictions on Cash – TheIn response to COVID-19, the FRB reduced the reserve requirements to zero on March 15, 2020. Prior to this change the Bank iswas required by regulation to maintain a varying cash reserve balance with the Federal Reserve System. The daily average calculated cash reserve required as of December 31, 2017 and June 30, 2017 was $2,513, and $2,152, respectively, which was satisfied by vault cash and balances held at the FRB.
Guarantees – Standby letters of credit obligate the Company to meet certain financial obligations of its customers, if, under the contractual terms of the agreement, the customers are unable to do so. The financial standby letters of credit issued by the Company are irrevocable and payment is only guaranteed upon the borrower's failure to perform its obligations to the beneficiary. Total commitments under standby letters of credit as of December 31, 2017September 30, 2021 and June 30, 20172021 were $9,927$9,671 and $5,164,$8,681, respectively. There was no liability recorded for these letters of credit at December 31, 2017September 30, 2021 or June 30, 2017,2021, respectively.
Litigation –TheFrom time to time, the Company is involved in several litigation matters in the ordinary course of business. These proceedings and the associated legal claims are often contested, and the outcome of individual matters is not always predictable. These claims and counter claims typically arise during the course of collection efforts on problem loans or with respect to actions to enforce liens on properties in which the Company holds a security interest. The Company is not a party to any pending legal proceedings that management believes would have a material adverse effect on the Company’s financial condition or results of operations.
| |
11. | Fair Value of Financial Instruments |
10. Fair Value of Financial Instruments
The Company utilizes fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. SecuritiesDebt securities available for sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets. The Company measures the fair value of loans receivable under the exit price notion. The fair value of nonperforming loans is based on the underlying value of the collateral.
Fair Value Hierarchy
The Company groups assets at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:
| |
Level 1: | Valuation is based upon quoted prices for identical instruments traded in active markets. |
| |
Level 2: | Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. |
| |
Level 3: | Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. |
Level 1: Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2: Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3: Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
Following is a description of valuation methodologies used for assets recorded at fair value. The Company does not have any liabilities recorded at fair value.
InvestmentDebt Securities Available for Sale
SecuritiesDebt securities available for sale are valued on a recurring basis at quoted market prices where available. If quoted market prices are not available, fair values are based on quoted prices of comparable securities. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange or U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securitiesMBS and debentures issued by government sponsored enterprises,GSEs, municipal bonds, and corporate debt securities. The Company has no Level 3 securities.
Loans Held for Sale
HOMETRUST BANCSHARES, INC. AND SUBSIDIARYLoans held for sale are adjusted to lower of cost or fair value. Fair value is based on commitments on hand from investors or, if commitments have not yet been obtained, what investors are currently offering for loans with similar characteristics. The Company considers all loans held for sale carried at fair value as nonrecurring Level 3.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
Individually Evaluated Loans
The Company does not record loans at fair value on a recurring basis. From time to time, however, a loan is considered impairedindividually evaluated and an allowance for loan lossescredit loss is established. Loans for which it is probableexpected that payment of interestprincipal and principalinterest will not be made in accordance with the contractual terms of the loan agreement are considered impaired.individually evaluated. Once a loan is identified, as individually impaired, the fair value is estimated using one of several methods, includingtwo ways, which include collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. The Company reviews all impairedindividually evaluated loans each quarter to determine if an allowance is necessary. Those impairedindividually evaluated loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.
The fair value of impaired loans is estimated in one of two ways, which include collateral value and discounted cash flows. Loans are considered collateral dependent if repayment is expected solely from the collateral. For these collateral dependent impaired loans, the Company obtains updated appraisals at least annually. These appraisals are reviewed for appropriateness and then discounted for estimated closing costs to determine if an allowance is necessary. As part of the quarterly review of impairedindividually evaluated loans, the Company reviews these appraisals to determine if any additional discounts to the fair value are necessary. If a current appraisal is not obtained, the Company determines whether a discount is needed to the value from the original appraisal based on the decline in value of similar properties with recent appraisals. For loans that are not collateral dependent, estimated fair value is based on the present value of expected future cash flows using the interest rate implicit in the original agreement. ImpairedIndividually evaluated loans where a charge-off has occurred or an allowance is established during the period being reported require classification in the fair value hierarchy. The Company records such impaired loans as a nonrecurring Level 3 in the fair value hierarchy.
Loans Held for Sale
Loans held for sale are adjusted to lower of cost or fair value. Fair value is based upon investor pricing. The Company considers all loans held for sale carried at fair value as nonrecurring Level 3.
Real Estate Owned
REO is considered held for sale and is adjusted to fair value less estimated selling costs upon transfer of the loan to foreclosed assets. Fair value is based upon independent market prices, appraised value of the collateral or management's estimation of the value of the collateral. The Company considers all REO that has been charged off or received an allowance during the period as nonrecurring Level 3.
Financial Assets Recorded at Fair Value on a Recurring Basis
The following table presents financial assets measured at fair value on a recurring basis at the dates indicated:
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 |
| Total | | Level 1 | | Level 2 | | Level 3 |
U.S government agencies | $ | 19,101 | | | $ | — | | | $ | 19,101 | | | $ | — | |
Residential MBS of U.S. government agencies and GSEs | 41,458 | | | — | | | 41,458 | | | — | |
Municipal bonds | 7,836 | | | — | | | 7,836 | | | — | |
Corporate bonds | 56,181 | | | — | | | 56,181 | | | — | |
| | | | | | | |
Total | $ | 124,576 | | | $ | — | | | $ | 124,576 | | | $ | — | |
|
| | | | | | | | | | | | | | | |
| December 31, 2017 |
Description | Total | | Level 1 | | Level 2 | | Level 3 |
U.S Government Agencies | $ | 47,693 |
| | $ | — |
| | $ | 47,693 |
| | $ | — |
|
Residential Mortgage-backed Securities of U.S. Government Agencies and Government Sponsored Enterprises | 81,278 |
| | — |
| | 81,278 |
| | — |
|
Municipal Bonds | 32,423 |
| | — |
| | 32,423 |
| | — |
|
Corporate Bonds | 6,212 |
| | — |
| | 6,212 |
| | — |
|
Equity Securities | 63 |
| | — |
| | 63 |
| | — |
|
Total | $ | 167,669 |
| | $ | — |
| | $ | 167,669 |
| | $ | — |
|
|
| | | | | | | | | | | | | | | |
| June 30, 2017 |
Description | Total | | Level 1 | | Level 2 | | Level 3 |
U.S Government Agencies | $ | 65,830 |
| | $ | — |
| | $ | 65,830 |
| | $ | — |
|
Residential Mortgage-backed Securities of U.S. Government Agencies and Government Sponsored Enterprises | 92,971 |
| | — |
| | 92,971 |
| | — |
|
Municipal Bonds | 34,510 |
| | — |
| | 34,510 |
| | — |
|
Corporate Bonds | 6,293 |
| | — |
| | 6,293 |
| | — |
|
Equity Securities | 63 |
| | — |
| | 63 |
| | — |
|
Total | $ | 199,667 |
| | $ | — |
| | $ | 199,667 |
| | $ | — |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 |
| Total | | Level 1 | | Level 2 | | Level 3 |
U.S government agencies | $ | 19,073 | | | $ | — | | | $ | 19,073 | | | $ | — | |
Residential MBS of U.S. government agencies and GSEs | 43,404 | | | — | | | 43,404 | | | — | |
Municipal bonds | 9,551 | | | — | | | 9,551 | | | — | |
Corporate bonds | 84,431 | | | — | | | 84,431 | | | — | |
| | | | | | | |
Total | $ | 156,459 | | | $ | — | | | $ | 156,459 | | | $ | — | |
There were no transfers between levels during the three or six months ended December 31, 2017.
September 30, 2021 and 2020.
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
The following table presents financial assets measured at fair value on a non-recurring basis at the dates indicated:
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 |
| Total | | Level 1 | | Level 2 | | Level 3 |
Individually evaluated loans | $ | 4,034 | | | $ | — | | | $ | — | | | $ | 4,034 | |
| | | | | | | |
| | | | | | | |
|
| | | | | | | | | | | | | | | |
| December 31, 2017 |
Description | Total | | Level 1 | | Level 2 | | Level 3 |
Impaired loans | $ | 8,538 |
| | $ | — |
| | $ | — |
| | $ | 8,538 |
|
REO | 3,018 |
| | — |
| | — |
| | 3,018 |
|
Total | $ | 11,556 |
| | $ | — |
| | $ | — |
| | $ | 11,556 |
|
|
| | | | | | | | | | | | | | | |
| June 30, 2017 |
Description | Total | | Level 1 | | Level 2 | | Level 3 |
Impaired loans | $ | 9,156 |
| | $ | — |
| | $ | — |
| | $ | 9,156 |
|
REO | 4,044 |
| | — |
| | — |
| | 4,044 |
|
Total | $ | 13,200 |
| | $ | — |
| | $ | — |
| | $ | 13,200 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 |
| Total | | Level 1 | | Level 2 | | Level 3 |
Individually evaluated loans | $ | 8,354 | | | $ | — | | | $ | — | | | $ | 8,354 | |
| | | | | | | |
| | | | | | | |
Quantitative information about Level 3 fair value measurements during the periodperiods ended December 31, 2017September 30, 2021 and June 30, 2021 is shown in the tabletables below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value at September 30, 2021 | | Valuation Techniques | | Unobservable Input | | Range | | Weighted Average |
| | | | | | | | | |
Nonrecurring measurements: | | | | | | | | | |
Individually evaluated loans | $ | 4,034 | | | Discounted appraisals and discounted cash flows | | Collateral discounts: Discount spread: | | 6% - 100% 0% | | 13 | % |
| | | | | | | | | |
|
| | | | | | | | | | | |
| Fair Value at December 31, 2017 | | Valuation Techniques | | Unobservable Input | | Range | | Weighted Average |
Nonrecurring measurements: | | | | | | | | | |
Impaired loans, net | $ | 8,538 |
| | Discounted appraisals and discounted cash flows | | Collateral discounts and discount spread | | 3% - 26%
1% - 4% | | 4% |
REO | $ | 3,018 |
| | Discounted appraisals | | Collateral discounts | | 10% - 20% | | 13% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value at June 30, 2021 | | Valuation Techniques | | Unobservable Input | | Range | | Weighted Average |
| | | | | | | | | |
Nonrecurring measurements: | | | | | | | | | |
Individually evaluated loans | $ | 8,354 | | | Discounted appraisals and discounted cash flows | | Collateral discounts: Discount spread: | | 0% - 52% 0% - 7% | | 6 | % |
| | | | | | | | | |
The stated carrying value and estimated fair value amounts of financial instruments as of December 31, 2017September 30, 2021 and June 30, 2017,2021, are summarized below:
| | | | | | | | | | | | | | September 30, 2021 |
| December 31, 2017 | | Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 |
| Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 | |
Cash and interest-bearing deposits | $ | 98,665 |
| | $ | 98,665 |
| | $ | 98,665 |
| | $ | — |
| | $ | — |
| |
Assets: | | Assets: | | | | | | | | | |
Cash and cash equivalents | | Cash and cash equivalents | $ | 42,573 | | | $ | 42,573 | | | $ | 42,573 | | | $ | — | | | $ | — | |
Commercial paper | 199,722 |
| | 199,722 |
| | 199,722 |
| | — |
| | — |
| Commercial paper | 196,652 | | | 196,652 | | | 196,652 | | | — | | | — | |
Certificates of deposit in other banks | 100,349 |
| | 100,349 |
| | — |
| | 100,349 |
| | — |
| Certificates of deposit in other banks | 35,495 | | | 35,495 | | | — | | | 35,495 | | | — | |
Securities available for sale | 167,669 |
| | 167,669 |
| | — |
| | 167,669 |
| | $ | — |
| |
Debt securities available for sale | | Debt securities available for sale | 124,576 | | | 124,576 | | | — | | | 124,576 | | | — | |
Loans held for sale | | Loans held for sale | 105,161 | | | 107,972 | | | — | | | — | | | 107,972 | |
Loans, net | 2,396,924 |
| | 2,312,758 |
| | — |
| | — |
| | 2,312,758 |
| Loans, net | 2,685,236 | | | 2,656,263 | | | — | | | — | | | 2,656,263 | |
Loans held for sale | 7,072 |
| | 7,213 |
| | — |
| | — |
| | 7,213 |
| |
FHLB stock | 31,582 |
| | 31,582 |
| | 31,582 |
| | — |
| | — |
| FHLB stock | 2,965 | | | 2,965 | | | 2,965 | | | — | | | — | |
FRB stock | 7,295 |
| | 7,295 |
| | 7,295 |
| | — |
| | — |
| FRB stock | 7,395 | | | 7,395 | | | 7,395 | | | — | | | — | |
SBIC investments | | SBIC investments | 10,531 | | | 10,531 | | | — | | | — | | | 10,531 | |
Accrued interest receivable | 9,371 |
| | 9,371 |
| | — |
| | 1,268 |
| | 8,103 |
| Accrued interest receivable | 8,429 | | | 8,429 | | | — | | | 611 | | | 7,818 | |
Liabilities: | | Liabilities: | |
Noninterest-bearing and NOW deposits | 803,161 |
| | 803,161 |
| | — |
| | 803,161 |
| | — |
| Noninterest-bearing and NOW deposits | 1,333,439 | | | 1,333,439 | | | — | | | 1,333,439 | | | — | |
Money market accounts | 638,259 |
| | 638,259 |
| | — |
| | 638,259 |
| | — |
| Money market accounts | 987,650 | | | 621,675 | | | — | | | 621,675 | | | — | |
Savings accounts | 224,732 |
| | 224,732 |
| | — |
| | 224,732 |
| | — |
| Savings accounts | 220,614 | | | 220,614 | | | — | | | 220,614 | | | — | |
Certificates of deposit | 442,056 |
| | 437,304 |
| | — |
| | 437,304 |
| | — |
| Certificates of deposit | 445,581 | | | 446,540 | | | — | | | 446,540 | | | — | |
Borrowings | 685,000 |
| | 684,852 |
| | — |
| | 684,852 |
| | — |
| Borrowings | 40,000 | | | 40,000 | | | — | | | 40,000 | | | — | |
Accrued interest payable | 655 |
| | 655 |
| | — |
| | 655 |
| | — |
| Accrued interest payable | 50 | | | 50 | | | — | | | 50 | | | — | |
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
| | | | | | | | | | | | | | June 30, 2021 |
| June 30, 2017 | | Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 |
| Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 | |
Cash and interest-bearing deposits | $ | 86,985 |
| | $ | 86,985 |
| | $ | 86,985 |
| | $ | — |
| | $ | — |
| |
Assets: | | Assets: | | | | | | | | | |
Cash and cash equivalents | | Cash and cash equivalents | $ | 50,990 | | | $ | 50,990 | | | $ | 50,990 | | | $ | — | | | $ | — | |
Commercial paper | 149,863 |
| | 149,863 |
| | 149,863 |
| | — |
| | — |
| Commercial paper | 189,596 | | | 189,596 | | | 189,596 | | | — | | | — | |
Certificates of deposit in other banks | 132,274 |
| | 132,274 |
| | — |
| | 132,274 |
| | — |
| Certificates of deposit in other banks | 40,122 | | | 40,122 | | | — | | | 40,122 | | | — | |
Securities available for sale | 199,667 |
| | 199,667 |
| | — |
| | 199,667 |
| | — |
| |
Debt securities available for sale | | Debt securities available for sale | 156,459 | | | 156,459 | | | — | | | 156,459 | | | — | |
Loans held for sale | | Loans held for sale | 93,539 | | | 94,779 | | | — | | | — | | | 94,779 | |
Loans, net | 2,330,319 |
| | 2,230,683 |
| | — |
| | — |
| | 2,230,683 |
| Loans, net | 2,697,799 | | | 2,668,570 | | | — | | | — | | | 2,668,570 | |
Loans held for sale | 5,607 |
| | 5,719 |
| | — |
| | — |
| | 5,719 |
| |
FHLB stock | 32,071 |
| | 32,071 |
| | 32,071 |
| | — |
| | — |
| FHLB stock | 6,153 | | | 6,153 | | | 6,153 | | | — | | | — | |
FRB stock | 7,284 |
| | 7,284 |
| | 7,284 |
| | — |
| | — |
| FRB stock | 7,386 | | | 7,386 | | | 7,386 | | | — | | | — | |
SBIC investments | | SBIC investments | 10,171 | | | 10,171 | | | — | | | — | | | 10,171 | |
Accrued interest receivable | 8,758 |
| | 8,758 |
| | 331 |
| | 1,078 |
| | 7,349 |
| Accrued interest receivable | 7,933 | | | 7,933 | | | 52 | | | 542 | | | 7,339 | |
Liabilities: | | Liabilities: | |
Noninterest-bearing and NOW deposits | 779,549 |
| | 779,549 |
| | — |
| | 779,549 |
| | — |
| Noninterest-bearing and NOW deposits | 1,281,372 | | | 1,281,372 | | | — | | | 1,281,372 | | | — | |
Money market accounts | 569,607 |
| | 569,607 |
| | — |
| | 569,607 |
| | — |
| Money market accounts | 975,001 | | | 975,001 | | | — | | | 975,001 | | | — | |
Savings accounts | 237,149 |
| | 237,149 |
| | — |
| | 237,149 |
| | — |
| Savings accounts | 226,391 | | | 226,391 | | | — | | | 226,391 | | | — | |
Certificates of deposit | 462,146 |
| | 458,818 |
| | — |
| | 458,818 |
| | — |
| Certificates of deposit | 472,777 | | | 474,397 | | | — | | | 474,397 | | | — | |
Borrowings | 696,500 |
| | 696,500 |
| | — |
| | 696,500 |
| | — |
| Borrowings | 115,000 | | | 115,000 | | | — | | | 115,000 | | | — | |
Accrued interest payable | 512 |
| | 512 |
| | — |
| | 512 |
| | — |
| Accrued interest payable | 52 | | | 52 | | | — | | | 52 | | | — | |
The Company had off-balance sheet financial commitments, which included approximately $625,769$860,826 and $616,483$931,568 of commitments to originate loans, undisbursed portions of interim construction loans, and unused lines of credit at December 31, 2017September 30, 2021 and June 30, 2017,2021, respectively (see Note 10)"Note 9 – Commitments and Contingencies"). Since these commitments are based on current rates, the carrying amount approximates the fair value.
Estimated fair values were determined using the following methods and assumptions:
Cash and interest-bearing deposits – The stated amounts approximate fair values as maturities are less than 90 days.
Commercial paper - – The stated amounts approximate fair value due to the short-term nature of these investments.
Certificates of deposit in other banks – The stated amounts approximate fair values.
SecuritiesDebt securities available for sale – Fair values are based on quoted market prices where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.
Loans held for sale – The fair value of mortgage loans held for sale is determined by outstanding commitments from investors on a "best efforts" basis or current investor yield requirements, calculated on the aggregate loan basis. The fair value of SBA loans and HELOCs held for sale is based on what investors are currently offering for loans with similar characteristics.
Loans, net – Fair values for loans are estimated by segregating the portfolio by type of loan and discounting scheduled cash flows using current market interest rates for loans with similar terms and credit quality. A prepayment assumption is used as an estimate of the portion of loans that will be repaid prior to their scheduled maturity. BothA liquidity premium assumption is used as an estimate for the carrying value and estimated fair value amountsadditional return required by an investor of assets that are shown net of the allowance for loan losses and purchase discounts.potentially considered illiquid.
FHLB and FRB stock– No ready market exists for these stocks and they have no quoted market value. However, redemptions of these securitiesstocks have historically been at par value. Accordingly, cost is deemed to be a reasonable estimate of fair value.
SBIC investments – No ready market exists for these investments and they have no quoted market value. SBIC investments are valued at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions of identical or similar investments. Accordingly, cost is deemed to be a reasonable estimate of fair value.
Deposits– Fair values for demand deposits, money market accounts, and savings accounts are the amounts payable on demand as of December 31, 2017September 30, 2021 and June 30, 2017.2021. The fair value of certificates of deposit is estimated by discounting the contractual cash flows using current market interest rates for accounts with similar maturities.
Borrowings – The fair value of advances from the FHLB is estimated based on current rates for borrowings with similar terms.
Accrued interest receivable and payable – The stated amounts of accrued interest receivable and payable approximate the fair value.
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
Limitations – Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on-and-off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, a significant asset not considered
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
a financial asset is premises and equipment. In addition, tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.
11. Leases
As Lessee - Operating Leases
The Company's operating leases primarily include office space and bank branches. Certain leases include one or more options to renew, with renewal terms that can extend the lease term up to 15 additional years. The exercise of lease renewal options is at management's sole discretion. When it is reasonably certain that the Company will exercise its option to renew or extend the lease term, that option is included in estimating the value of the ROU and lease liability. At September 30, 2021, there were no leases awaiting commencement. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. Most of the Company's lease agreements include periodic rate adjustments for inflation. The depreciable life of ROU assets and leasehold improvements are limited to the shorter of the useful life or the expected lease term. Leases with an initial term of 12 months or less are not recorded on the Company's Consolidated Balance Sheets. The Company recognizes lease expenses for these leases over the lease term.
The following table presents supplemental balance sheet information related to operating leases. ROU assets are included in other assets and lease liabilities are included in other liabilities.
| | | | | | | | | | | |
| | | |
Supplemental Balance Sheet Information: | September 30, 2021 | | June 30, 2021 |
ROU assets | $ | 6,103 | | | $ | 5,498 | |
| | | |
Lease liabilities | $ | 6,852 | | | $ | 5,926 | |
| | | |
Weighted-average remaining lease terms (years) | 9.70 | | 9.49 |
Weighted-average discount rate | 3.15 | % | | 3.18 | % |
The following schedule summarizes aggregate future minimum lease payments under these operating leases at September 30, 2021:
| | | | | |
Fiscal year ending September 30: | |
Remaining 2022 | $ | 1,100 | |
2023 | 1,479 | |
2024 | 1,010 | |
2025 | 630 | |
2026 | 512 | |
Thereafter | 3,218 | |
Total of future minimum payments | $ | 7,949 | |
The following table presents components of operating lease expense for the three months ended September 30, 2021 and 2020:
| | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, |
| | | | | 2021 | | 2020 |
Operating lease cost (included in occupancy expense) | | | | | $ | 484 | | | $ | 439 | |
Sublease income (included in other, net noninterest income) | | | | | (51) | | | (61) | |
Total operating lease expense, net | | | | | $ | 433 | | | $ | 378 | |
As Lessee - Finance Lease
The Company currently leases land for one of its branch office locations under a finance lease. The ROU asset for the finance lease totaled $2,052 at September 30, 2021 and June 30, 2021 and is included in other assets. The corresponding lease liability totaled $1,793 and $1,804 at September 30, 2021 and June 30, 2021, respectively, and is included in other liabilities. For the three months ended September 30, 2021 and September 30, 2020, interest expense on the lease liability totaled $23 and $24, respectively. The finance lease has a maturity date of July 2028 and a discount rate of 5.18%.
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
The following schedule summarizes aggregate future minimum lease payments under this finance lease obligation at September 30, 2021:
| | | | | |
Fiscal year ending September 30: | |
Remaining 2022 | $ | 100 | |
2023 | 134 | |
2024 | 145 | |
2025 | 146 | |
2026 | 146 | |
Thereafter | 1,702 | |
Total minimum lease payments | 2,373 | |
Less: amount representing interest | (580) | |
Present value of net minimum lease payments | $ | 1,793 | |
Supplemental lease cash flow information for the three months ended September 30, 2021 and 2020:
| | | | | | | | | | | |
| Three Months Ended September 30, |
| 2021 | | 2020 |
ROU assets - noncash additions (operating leases) | $ | 959 | | | $ | 533 | |
| | | |
Cash paid for amounts included in the measurement of lease liabilities (operating leases) | 628 | | | 524 | |
Cash paid for amounts included in the measurement of lease liabilities (finance leases) | 33 | | | 33 | |
As Lessor - General
The Company leases equipment to commercial end users under operating and finance lease arrangements. The Company's equipment finance leases consist mainly of construction, transportation, medical, and manufacturing equipment. Many of its operating and finance leases offer the lessee the option to purchase the equipment at fair value or for a nominal fixed purchase option; and most of the leases that do not have a nominal purchase option include renewal provisions resulting in some leases continuing beyond initial contractual terms. The Company's leases do not include early termination options, and continued rent payments are due if leased equipment is not returned at the end of the lease.
As Lessor - Operating Leases
Operating lease income is recognized as a component of noninterest income on a straight-line basis over the lease term. Lease terms range from 1 to 5 years. Assets related to operating leases are included in other assets and the corresponding depreciation expense is recorded on a straight-line basis as a component of other noninterest expense. The net book value of leased assets totaled $24,821 and $25,932 with a residual value of $14,693 and $15,330 as of September 30, 2021 and June 30, 2021, respectively.
The following schedule summarizes aggregate future minimum operating lease payments to be received at September 30, 2021:
| | | | | |
Fiscal year ending September 30: | |
Remaining 2022 | $ | 4,734 | |
2023 | 4,671 | |
2024 | 2,569 | |
2025 | 722 | |
2026 | 246 | |
Thereafter | 13 | |
Total of future minimum payments | $ | 12,955 | |
As Lessor - Finance Leases
Finance lease income is recognized as a component of loan interest income over the lease term. The finance leases are included as a component of the equipment finance class of financing receivables under the commercial loan segment. For the three months ended September 30, 2021 and 2020, total interest income on equipment finance leases totaled $759 and $530, respectively.
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
The following table presents components of finance lease net investment included within equipment finance class of financing receivables:
| | | | | | | | | | | |
| September 30, 2021 | | June 30, 2021 |
Lease receivables | $ | 63,741 | | | $ | 63,279 | |
| | | |
| | | |
The following schedule summarizes aggregate future minimum finance lease payments to be received at September 30, 2021:
| | | | | |
Fiscal year ending September 30: | |
Remaining 2022 | $ | 14,928 | |
2023 | 19,076 | |
2024 | 16,036 | |
2025 | 10,862 | |
2026 | 6,437 | |
Thereafter | 2,791 | |
Total minimum payments | 70,130 | |
Less: amount representing interest | (6,389) | |
Total | $ | 63,741 | |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain matters in this Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. Forward-looking statements are not statements of historical fact, but instead are based on certain assumptions and are generally identified by use of the words "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions or future or conditional verbs such as "may," "will," "should," "would," and "could." Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions, and statements about future economic performance and projections of financial items. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated or implied by our forward-looking statements, including,statements. The factors that could result in material differentiation include, but are not limited to: the effect of the COVID-19 pandemic, including on our credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID-19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate customers, including economic activity, employment levels and market liquidity; the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write offs and changes in our allowance for loancredit losses and provision for loancredit losses that may be impacted by deterioration in the housing and commercial real estate markets; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources; uncertainty regarding the future of LIBOR, and the potential transition away from LIBOR toward new interest rate benchmarks; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; decreases in the secondary market for the sale of loans that we originate; results of examinations of us by the Board of Governors of the Federal Reserve System (“Federal Reserve”), the North Carolina Office of the Commissioner of Banks (“NCCOB”),NCCOB, or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for loancredit losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings; legislative or regulatory changes that adversely affect our business including the effect of Dodd-Frank Wall Street Reform and Consumer Protection Act, (the "Dodd-Frank Act"), changes in laws or regulations, changes in regulatory policies and principles or the application or interpretation of laws and regulations by regulatory agencies and tax authorities, including changes in deferred tax asset and liability activity, or the interpretation of regulatory capital or other rules, including as a result of Basel III; our ability to attract and retain deposits; management's assumptions in determining the adequacy of the allowance for loancredit losses; our ability to control operating costs and expenses, especially costs associated with our operation as a public company; the use of estimates in determining fair value of certain assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risks associated with the loans on our balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; computerdisruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on which we depend could fail or experience a security breach;the third-party vendors who perform several of our critical processing functions; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; statements with respect to our intentions regarding disclosure and other changes resulting from the Jumpstart Our Business Startups Act of 2012 ("JOBS Act"); changes in accounting principles, policies or guidelines and practices, as may be adopted by the financial institution regulatory agencies, the Public Company Accounting Oversight Board or the Financial Accounting Standards Board; and other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services;services including the CARES Act; and the other risks detailed from time to time in our filings with the Securities and Exchange Commission ("SEC"),SEC, including our 20172021 Form 10-K.
AnyMany of the forward-looking statements are based upon management's beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise any forward-looking statements included in this report or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur and you should not put undue reliance on any forward-looking statements.
As used throughout this report, the terms "we", "our", "us", "HomeTrust Bancshares" or the "Company" refer to HomeTrust Bancshares, Inc. and its consolidated subsidiaries, includingsubsidiary, HomeTrust Bank (the "Bank"), unless the context indicates otherwise.
Overview
HomeTrust Bancshares, Inc., a Maryland corporation, was formed for the purpose of becoming the holding company for HomeTrust Bank in connection with HomeTrustthe Bank’s conversion from mutual to stock form, which was completed on July 10, 2012 (the “Conversion”). As a bank holding company and financial holding company, HomeTrust Bancshares, Inc. iswe are regulated by the Federal Reserve. As a North Carolina state-chartered bank, and member of the Federal Reserve System,FRB, the Bank's primary regulators are the NCCOB and the Federal Reserve. The Bank's deposits are federally insured up to applicable limits by the Federal Deposit Insurance Corporation ("FDIC").FDIC. The Bank is a member of the Federal Home Loan BankFHLB of Atlanta, (“FHLB” or “FHLB of Atlanta”), which is one of the 12 regional banks in the Federal Home Loan Bank System (“FHLB System”).System. Our headquarters is located in Asheville, North Carolina.
Our principal business consists of attracting deposits from the general public and investing those funds, along with borrowed funds, in commercial real estate loans, construction and development loans, commercial and industrial loans, equipment finance leases, municipal leases, loans secured by first and second mortgages on one-to-four family residences including home equity loans, and construction and land/lot loans, commercial real estate loans, construction and development loans, commercial and industrial loans, indirect automobile loans, and municipal leases. Municipal leases are secured primarily by a ground lease for a firehouse or an equipment lease for fire trucks and firefighting equipment to fire departments located throughout North and South Carolina.other consumer loans. We also purchase investmentoriginate one-to-four family loans, SBA loans, and HELOCs to sell to third parties. In addition, we invest in debt securities consisting primarily of securities issued
by United States Government agencies and government-sponsored enterprises, as well as,GSEs, corporate bonds, commercial paper and certificates of deposit in other banks insured by the FDIC.
We offer a variety of deposit accounts for individuals, businesses, and nonprofit organizations. Deposits and borrowings are our primary source of funds for our lending and investing activities.
We are significantly affected by prevailing economic conditions, as well as government policies and regulations concerning, among other things, monetary and fiscal affairs, housing and financial institutions. Deposit flows are influenced by a number of factors, including interest rates paid on competing time deposits, other investments, account maturities, and the overall level of personal income and savings. Lending activities are influenced by the demand for funds, the number and quality of lenders, and regional economic cycles.
Our primary source of pre-tax income is net interest income. Net interest income is the difference between interest income, which is the income that we earn on our loans and investments, and interest expense, which is the interest that we payis paid on our deposits and borrowings. Changes in levels of interest rates affect our net interest income. Because the length of the COVID-19 pandemic and the efficacy of the extraordinary measures put in place to address its economic consequences are unknown, including the 150 basis point reduction in the targeted federal funds rate during 2020, until the pandemic subsides, expect our net interest income and net interest margin to be adversely affected throughout fiscal 2022 and possibly longer.
A secondary source of income is noninterest income, which includes revenue we receive from providing products and services, including service charges and fees on deposit accounts, loan income and fees, SBA lending fees,lease income, gain on the sale of loans held for sale, and gains and losses from sales of debt securities.
An offset to net interest income is the provision for loancredit losses which is required to establish and maintain the allowanceACL. All financial assets measured at amortized cost and off balance sheet credit exposures, including loans, investment securities and unfunded commitments are evaluated for loan losses at a level that adequately providescredit losses. See "Note 1 – Summary of Significant Accounting Policies" in Item 1 of our 2021 Form 10-K for probable losses inherent in our loan portfolio. As a loan's risk rating improves, property values increase, or recoveries of amounts previously charged off are received, a recapture of previously recognized provision for loan losses may be added to net interest income.further discussion.
Our noninterest expenses consist primarily of salaries and employee benefits, expenses for occupancy marketingexpense, and computer services, and FDIC deposit insurance premiums.services. Salaries and benefits consist primarily of the salaries and wages paid to our employees, payroll taxes, expenses for retirement and other employee benefits. Occupancy expenses, which are the fixed and variable costs of buildings and equipment, consist primarily of lease payments, property taxes, depreciation charges, maintenance and costs of utilities.
In recent years, we have expanded ourOur geographic footprint intoincludes seven additional markets obtained through numerous strategic acquisitions as well as threetwo de novo commercial loan offices. Looking forward, we believe opportunities currently exist within our market areas to grow our franchise. We anticipate organicWhile COVID-19 has dampened our growth activities, we believe as the local and global economy and loan demand strengthens,returns to normalcy it remains in a position to create organic growth through our marketing efforts and as a result of the opportunities being created as a result of the consolidation of financial institutions occurring in our market areas.efforts. We may also seek to expand our franchise through the selective acquisition of individual branches, loan purchases and, to a lesser degree, whole bank transactions that meet our investment and market objectives. We will continue to be disciplined as it pertains to future expansion focusing primarily on organic growth in our current market areas.
On January 1, 2017, the Company completed its acquisition of TriSummit pursuant to an Agreement and Plan of Merger, dated as ofAt September 20, 2016, under which TriSummit merged with and into HomeTrust with HomeTrust as the surviving corporation in the Merger. Immediately following the Merger, TriSummit's wholly owned subsidiary bank, TriSummit Bank, merged with and into the Bank. See Note 3 of the Notes to Consolidated Financial Statements under Item 1 of this report for more details on the Merger.
On August 1, 2017, the Company opened a commercial loan production office in Greensboro, North Carolina.
At December 31, 2017,30, 2021, we had 43have over 30 locations in North Carolina (including the Asheville metropolitan area, Greensboro/"Piedmont"the "Piedmont" region, Charlotte, and Raleigh)Raleigh/Cary), Upstate South Carolina (Greenville), East Tennessee (including Kingsport/Johnson City/Bristol,City, Knoxville, and Morristown) and Southwest Virginia (including the Roanoke Valley). During the quarter ended September 30, 2021, we closed nine branches located in North Carolina, Tennessee, and Virginia.
Critical Accounting Policies and Estimates
Certain of our accounting policies are important to the portrayal of our financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances which could affect these judgments include, but are not limited to, changes in interest rates, changes in the performance of the economy and changes in the financial condition of borrowers. These policies relate
The following represent our critical accounting policies:
Allowance for Credit Losses or ACL. The ACL reflects our estimate of credit losses that will result from the inability of our borrowers to (i)make required loan payments. We record loans charged off against the determinationACL and subsequent recoveries, if any, increase the ACL when they are recognized. We use a systematic methodology to determine our ACL for loans held for investment and certain off-balance-sheet credit exposures. The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the loan portfolio. We consider the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the provisionloan portfolio. The estimate of our ACL involves a high degree of judgment; therefore, our process for determining expected credit losses may result in a range of expected credit losses. Our ACL recorded in the balance sheet reflects our best estimate within the range of expected credit losses. We recognize in net income the amount needed to adjust the ACL for management’s current estimate of expected credit losses. Our ACL is calculated using collectively evaluated and individually evaluated loans.
Goodwill and Intangibles. We review goodwill for potential impairment on an annual basis during the allowancefourth quarter, or more often if events or circumstances indicate there may be impairment. In testing goodwill for loan losses, (ii) business combinationsimpairment, we have the option to assess either qualitative or quantitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit is less than its carrying amount. If we elect to perform a qualitative assessment and acquired loans, (iii)determine that an impairment is more likely than not, we are then required to perform a quantitative impairment test, otherwise no further analysis is required. Under the valuationquantitative impairment test, the evaluation involves comparing the current fair value of REO, (iv)each reporting unit to its carrying value, including goodwill. If the valuationestimated fair value of a reporting unit exceeds its carrying value, goodwill is considered not to be impaired. If the carrying value exceeds estimated fair value an impairment charge is recognized for the difference, but limited by the amount of goodwill and otherallocated to that reporting unit. Other identifiable intangible assets and (v) the valuation ofare evaluated for impairment if events or recognition of deferred tax assets and liabilities. These policies and estimates are described in further detail in Part II, Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 1, Summary of Significant Accounting Policies with the 2017 Form 10-K. There have not been any material changes in the Company's critical accounting policies and estimates during the six months ended December 31, 2017 as compared to the disclosure contained in the Company's 2017 Form 10-K, with the exception of the revaluation of net deferred tax assets related to the Tax Act. For more information on the revaluation, see Note 7 of the Notes to Consolidated Financial Statements under Item 1 of this report.circumstances indicate a possible impairment.
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an "emerging growth company" we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period, although we have not done so to date. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards or disclosures.
Reclassifications and corrections. To maintain consistency and comparability, certain amounts from prior periods have been reclassified to conform to current period presentation with no effect on net income, stockholders’ equity, or shareholders’ equitycash flows as previously reported.
Recent Accounting Pronouncements. Refer to Note See "Note 2 of our consolidated financial statements– Recent Accounting Pronouncements" in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements including the respective dates of adoption and effects on results of operations and financial condition.
Non-GAAP Financial Measures
In addition to results presented in accordance with GAAP, this report contains certain non-GAAP financial measures, which include: tangible book value; tangible book value per share;share, tangible equity to tangible assets ratio; net interest income and net interest margin as adjusted to exclude additional FHLB borrowings and proceeds from such borrowings; net income, earnings per share ("EPS"), return on assets ("ROA"), and return on equity ("ROE") excluding merger-related expenses, certain state tax expense, adjustments for the change in federal tax law, and gain from the sale of premises and equipment; and the ratio of the allowance for loan lossesACL to total loans excluding acquiredPPP loans. Management elected to utilize short-term FHLB borrowings beginning in November 2014 as part of a leverage strategy to increase net interest income. The Company believes that showing the effects of these borrowings on net interest income and net interest margin is useful to both management and investors as these measures are commonly used to measure financial institution's performance and against peers.
Management has presented the non-GAAP financial measures in this discussion and analysis excluding merger-related expenses, certain state tax expense, adjustments for the change in federal tax law, and gain from the sale of premises because it believes excludingincluding these items is more indicative of and provides useful and comparative information to assess trends in our core operations while facilitating comparison of the quality and composition of the Company’sour earnings over time and in comparison to itsour competitors. However, these non-GAAP financial measures are supplemental, are not audited and are not a substitute for operating results or any analysis determined in accordance with GAAP. Where applicable, we have also presented comparable earnings information using GAAP financial measures. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies. See “Comparison of Results of Operations for the Three and Six Months Ended December 31, 2017September 30, 2021 and 2016”2020” for more detailed information about our financial performance.
Set forth below is a reconciliation to GAAP of tangible book value and tangible book value per share:
| | | | As of | | | | | | | | | | | | | | | | | |
| | December 31, | | June 30, | | December 31, | | As of |
(Dollars in thousands, except per share data) | | 2017 | | 2017 | | 2016 | (Dollars in thousands, except per share data) | | September 30, | | June 30, | | September 30, |
| | | 2021 | | 2021 | | 2020 |
Total stockholders' equity | | $ | 395,361 |
| | $ | 397,647 |
| | $ | 367,776 |
| Total stockholders' equity | | $ | 396,511 | | | $ | 396,519 | | | $ | 400,351 | |
Less: goodwill, core deposit intangibles, net of taxes | | 30,083 |
| | 30,157 |
| | 16,795 |
| Less: goodwill, core deposit intangibles, net of taxes | | 25,830 | | | 25,902 | | | 26,285 | |
Tangible book value (1) | | $ | 365,278 |
| | $ | 367,490 |
| | $ | 350,981 |
| Tangible book value (1) | | $ | 370,681 | | | $ | 370,617 | | | $ | 374,066 | |
Common shares outstanding | | 18,967,175 |
| | 18,967,875 |
| | 18,000,750 |
| Common shares outstanding | | 16,307,658 | | | 16,636,483 | | | 17,020,724 | |
Tangible book value per share | | $ | 19.26 |
| | $ | 19.37 |
| | $ | 19.50 |
| Tangible book value per share | | $ | 22.73 | | | $ | 22.28 | | | $ | 21.98 | |
Book value per share | | $ | 20.84 |
| | $ | 20.96 |
| | $ | 20.43 |
| Book value per share | | $ | 24.31 | | | $ | 23.83 | | | $ | 23.52 | |
| |
(1) | Tangible book value is equal to total stockholders' equity less goodwill and core deposit intangibles, net of related deferred tax liabilities. |
(1) Tangible book value is equal to total stockholders' equity less goodwill and core deposit intangibles, net of related deferred tax liabilities.
Set forth below is a reconciliation to GAAP of tangible equity to tangible assets:
| | | | As of | | | | | | | | | | | | | | | | | | | |
| | December 31, | | June 30, | | December 31, | | As of |
(Dollars in thousands) | | 2017 | | 2017 | | 2016 | (Dollars in thousands) | | September 30, | | | June 30, | | September 30, | |
Tangible book value(1) | | $ | 365,278 |
| | $ | 367,490 |
| | $ | 350,981 |
| |
| | | 2021 | | | 2021 | | 2020 | |
Tangible equity (1) | | Tangible equity (1) | | $ | 370,681 | | | | $ | 370,617 | | | $ | 374,066 | | |
Total assets | | 3,250,588 |
| | 3,206,533 |
| | 2,774,240 |
| Total assets | | 3,481,360 | | | | 3,524,723 | | | 3,674,034 | | |
Less: goodwill, core deposit intangibles, net of taxes | | 30,083 |
| | 30,157 |
| | 16,795 |
| Less: goodwill, core deposit intangibles, net of taxes | | 25,830 | | | | 25,902 | | | 26,285 | | |
Total tangible assets(2) | | $ | 3,220,505 |
| | $ | 3,176,376 |
| | $ | 2,757,445 |
| Total tangible assets(2) | | $ | 3,455,530 | | | | $ | 3,498,821 | | | $ | 3,647,749 | | |
Tangible equity to tangible assets | | 11.34 | % | | 11.57 | % | | 12.73 | % | Tangible equity to tangible assets | | 10.73 | % | | | 10.59 | % | | 10.25 | % | |
(1) Tangible equity (or tangible book value) is equal to total stockholders' equity less goodwill and core deposit intangibles, net of related deferred tax liabilities.
(2) Total tangible assets is equal to total assets less goodwill and core deposit intangibles, net of related deferred tax liabilities.
| | | | | | | | | | | | | | | | | | | | |
(1) | Tangible equity (or tangible book value) is equal to total stockholders' equity less goodwill and core deposit intangibles, net of related deferred tax liabilities. |
| | | | | | | | |
(2) | Total tangible assets is equal to total assets less goodwill and core deposit intangibles, net of related deferred tax liabilities. |
Set forth below is a reconciliation to GAAP of net interest income and net interest margin as adjusted to exclude additional FHLB borrowings and proceeds from such borrowings:
|
| | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, |
| 2017 | | 2016 |
(Dollars in thousands) | Average Balance Outstanding | | Interest Earned / Paid | | Yield/ Rate | | Average Balance Outstanding | | Interest Earned / Paid | | Yield/ Rate |
Interest-earning assets (1) | $ | 2,974,198 |
| | $ | 29,226 |
| | 3.93 | % | | $ | 2,521,311 |
| | $ | 22,636 |
| | 3.59 | % |
Less: Interest-earning assets funded by additional FHLB borrowings (2) | 255,000 |
| | 1,056 |
| | 1.66 | % | | 340,000 |
| | 908 |
| | 1.07 | % |
Interest-earning assets - adjusted | $ | 2,719,198 |
| | $ | 28,170 |
| | 4.14 | % | | $ | 2,181,311 |
| | $ | 21,728 |
| | 3.98 | % |
| | | | | | | | | | | |
Interest-bearing liabilities | $ | 2,469,855 |
| | $ | 3,618 |
| | 0.58 | % | | $ | 2,088,325 |
| | $ | 1,648 |
| | 0.31 | % |
Additional FHLB borrowings | 255,000 |
| | 782 |
| | 1.23 | % | | 340,000 |
| | 378 |
| | 0.44 | % |
Interest-bearing liabilities - adjusted | $ | 2,214,855 |
| | $ | 2,836 |
| | 0.51 | % | | $ | 1,748,325 |
| | $ | 1,270 |
| | 0.29 | % |
| | | | | | | | | | | |
Tax equivalent net interest income and net interest margin | | | $ | 25,608 |
| | 3.44 | % | | | | $ | 20,988 |
| | 3.33 | % |
Tax equivalent net interest income and net interest margin - adjusted | | | 25,334 |
| | 3.73 | % | | | | 20,458 |
| | 3.75 | % |
Difference | | | $ | 274 |
| | (0.29 | )% | | | | $ | 530 |
| | (0.42 | )% |
|
| | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended December 31, |
| 2017 | | 2016 |
(Dollars in thousands) | Average Balance Outstanding | | Interest Earned / Paid | | Yield/ Rate | | Average Balance Outstanding | | Interest Earned / Paid | | Yield/ Rate |
Interest-earning assets (1) | $ | 2,946,607 |
| | $ | 57,508 |
| | 3.90 | % | | $ | 2,524,362 |
| | $ | 46,017 |
| | 3.65 | % |
Less: Interest-earning assets funded by additional FHLB borrowings (2) | 250,000 |
| | 2,024 |
| | 1.62 | % | | 367,500 |
| | 1,907 |
| | 1.04 | % |
Interest-earning assets - adjusted | $ | 2,696,607 |
| | $ | 55,484 |
| | 4.12 | % | | $ | 2,156,862 |
| | $ | 44,110 |
| | 4.20 | % |
| | | | | | | | | | | |
Interest-bearing liabilities | $ | 2,444,457 |
| | $ | 6,933 |
| | 0.56 | % | | $ | 2,093,127 |
| | $ | 3,302 |
| | 0.31 | % |
Less: Additional FHLB borrowings | 250,000 |
| | 1,505 |
| | 1.20 | % | | 367,500 |
| | 788 |
| | 0.43 | % |
Interest-bearing liabilities - adjusted | $ | 2,194,457 |
| | $ | 5,428 |
| | 0.49 | % | | $ | 1,725,627 |
| | $ | 2,514 |
| | 0.29 | % |
| | | | | | | | | | | |
Tax equivalent net interest income and net interest margin | | | $ | 50,575 |
| | 3.43 | % | | | | $ | 42,715 |
| | 3.38 | % |
Tax equivalent net interest income and net interest margin - adjusted | | | 50,056 |
| | 3.71 | % | | | | 41,596 |
| | 3.86 | % |
Difference | | | $ | 519 |
| | (0.28 | )% | | | | $ | 1,119 |
| | (0.48 | )% |
| | |
(1) | Interest income used in the average interest/earned and yield calculation includes the tax equivalent adjustment of $378 and $573 for the three months ended December 31, 2017 and 2016, respectively, calculated based on a combined federal and state tax rate of 30% and 37%, respectively. Interest income used in the average interest/earned and yield calculation includes the tax equivalent adjustment of $764 and $1,163 for the six months ended December 31, 2017 and 2016, respectively, calculated based on a combined federal and state tax rate of 30% and 37%, respectively. |
| | |
(2) | Proceeds from the additional borrowings were invested in various interest-earning assets including: deposits with the FRB, FHLB stock, certificates of deposit in other banks, and commercial paper. |
Set forth below is a reconciliation to GAAP net income (loss), EPS, ROA, and ROE as adjusted to exclude merger-related expenses, certain state tax expense, adjustments for the change in federal tax law, and gain from the sale of premises and equipment:
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six months ended |
(Dollars in thousands, except per share data) | | December 31, | | December 31, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Merger-related expenses | | $ | — |
| | $ | 27 |
| | $ | — |
| | $ | 334 |
|
State tax expense adjustment (1) | | — |
| | — |
| | 133 |
| | 490 |
|
Change in federal tax law adjustment (2) | | 17,693 |
| | — |
| | 17,693 |
| | — |
|
Gain from sale of premises and equipment | | — |
| | — |
| | (164 | ) | | (385 | ) |
Total adjustments | | 17,693 |
| | 27 |
| | 17,662 |
| | 439 |
|
Tax effect (3) | | — |
| | (10 | ) | | 49 |
| | 49 |
|
Total adjustments, net of tax | | 17,693 |
| | 17 |
| | 17,711 |
| | 488 |
|
| |
|
| |
|
| |
|
| |
|
|
Net income (loss) (GAAP) | | (10,666 | ) | | 2,983 |
| | (5,099 | ) | | 6,807 |
|
| | | | | | | | |
Net income (non-GAAP) | | $ | 7,027 |
| | $ | 3,000 |
| | $ | 12,612 |
| | $ | 7,295 |
|
| | | | | | | | |
Per Share Data | | | | | | | | |
Average shares outstanding - basic | | 17,975,883 |
| | 16,900,387 |
| | 17,971,439 |
| | 16,893,775 |
|
Average shares outstanding - diluted | | 17,975,883 |
| | 17,444,144 |
| | 17,971,439 |
| | 17,391,404 |
|
Average shares outstanding - diluted (adjusted) (4) | | 18,689,894 |
| | 17,444,144 |
| | 18,655,048 |
| | 17,391,404 |
|
| | | | | | | | |
Basic EPS | | | | | | | | |
EPS (GAAP) | | $ | (0.59 | ) | | $ | 0.17 |
| | $ | (0.28 | ) | | $ | 0.39 |
|
Non-GAAP adjustment | | 0.98 |
| | 0.01 |
| | 0.98 |
| | 0.04 |
|
EPS (non-GAAP) | | $ | 0.39 |
| | $ | 0.18 |
| | $ | 0.70 |
| | $ | 0.43 |
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| | | | | | | | |
Diluted EPS | | | | | | | | |
EPS (GAAP) | | $ | (0.59 | ) | | $ | 0.17 |
| | $ | (0.28 | ) | | $ | 0.39 |
|
Non-GAAP adjustment | | 0.97 |
| | — |
| | 0.96 |
| | 0.04 |
|
EPS (non-GAAP) | | $ | 0.38 |
| | $ | 0.17 |
| | $ | 0.68 |
| | $ | 0.43 |
|
| | | | | | | | |
Average Balances | | | | | | | | |
Average assets | | $ | 3,249,632 |
| | $ | 2,765,047 |
| | $ | 3,223,758 |
| | $ | 2,764,985 |
|
Average equity | | 405,993 |
| | 365,740 |
| | 403,708 |
| | 364,018 |
|
| | | | | | | | |
ROA | | | | | | | | |
ROA (GAAP) | | (1.31 | )% | | 0.43 | % | | (0.32 | )% | | 0.49 | % |
Non-GAAP adjustment | | 2.17 | % | | — | % | | 1.10 | % | | 0.04 | % |
ROA (non-GAAP) | | 0.86 | % | | 0.43 | % | | 0.78 | % | | 0.53 | % |
| | | | | | | | |
ROE | | | | | | | | |
ROE (GAAP) | | (10.51 | )% | | 3.26 | % | | (2.53 | )% | | 3.74 | % |
Non-GAAP adjustment | | 17.43 | % | | 0.02 | % | | 8.78 | % | | 0.27 | % |
ROE (non-GAAP) | | 6.92 | % | | 3.28 | % | | 6.25 | % | | 4.01 | % |
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(1) | State tax adjustment is a result of a decrease in value of our deferred tax assets stemming from recent decreases in North Carolina's corporate tax rate. |
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(2) | Revaluation of net deferred tax assets due to the Tax Cuts and Jobs Act. |
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(3) | Tax amounts have been adjusted for certain nondeductible merger-related expenses. |
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(4) | Average shares outstanding - diluted were adjusted for the three and six months ended December 31, 2017 to include potentially dilutive shares not considered due to the corresponding net losses under GAAP. | | | | | | | | | |
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Set forth below is a reconciliation to GAAP of the allowance for loan lossesACL to total loans and the allowance for loancredit losses as adjusted to exclude acquiredPPP loans:
| | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | September 30, | | | | | | June 30, | | September 30, |
| 2021 | | | | | | 2021 | | 2020 |
Total loans receivable (GAAP) | $ | 2,719,642 | | | | | | | $ | 2,733,267 | | | $ | 2,769,396 | |
Less: PPP loans (1) | 28,762 | | | | | | | 46,650 | | | 80,816 | |
Adjusted loans (non-GAAP) | $ | 2,690,880 | | | | | | | $ | 2,686,617 | | | $ | 2,688,580 | |
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Allowance for credit losses (GAAP) | $ | 34,406 | | | | | | | $ | 35,468 | | | $ | 43,132 | |
Allowance for credit losses / Adjusted loans (non-GAAP) | 1.28 | % | | | | | | 1.32 | % | | 1.60 | % |
(1) PPP loans are fully guaranteed loans by the U.S. government.
Recent Developments: COVID-19, the CARES Act, and Our Response
The COVID-19 pandemic has caused economic and social disruption on an unprecedented scale. While some industries have been impacted more severely than others, all businesses have been impacted to some degree. This disruption resulted in business closures across the country, significant job loss, and aggressive measures by the federal government.
Congress, the President, and the Federal Reserve have taken several actions designed to cushion the economic fallout. Most notably, the CARES Act (Coronavirus Aid, Relief, and Economic Security Act of 2020) was signed into law on March 27, 2020 as a $2.2 trillion legislative package. The purpose of the CARES Act was to prevent a severe economic downturn through various measures, including direct financial aid to families and economic stimulus to significantly impacted industry sectors. The package also included extensive emergency funding for hospitals and healthcare providers. On December 27, 2020, the 2021 Consolidated Appropriations Act was signed into law providing an additional $900 billion in stimulus relief. Effective February 24, 2021, the Biden Administration extended the national emergency declaration for one year due to COVID-19. In addition to the general impact of COVID-19, certain provisions of the CARES Act as well as the Consolidated Appropriations Act and regulatory relief efforts have had a material impact on our operations.
In response to the COVID-19 pandemic, we offered a variety of relief options designed to support our customers and the communities we serve. As businesses reopened and the economy started to improve, we began to see our markets return to some normalcy; however, we continue to monitor the impact of the Delta variant of COVID-19 which has prompted many public health officials and municipalities to reinstate mask mandates and reconsider lifting pandemic restrictions. While it is not possible to know the full extent of the impact as of the date of this filing, set forth (below) are potentially material items of which we are aware.
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| | | | | | | | | | | |
| As of |
(Dollars in thousands) | December 31, | | June 30, | | December 31, |
| 2017 | | 2017 | | 2016 |
Total gross loans receivable (GAAP) | $ | 2,419,256 |
| | $ | 2,352,415 |
| | $ | 1,955,629 |
|
Less: acquired loans | 311,508 |
| | 374,538 |
| | 169,234 |
|
Adjusted gross loans (non-GAAP) | $ | 2,107,748 |
| | $ | 1,977,877 |
| | $ | 1,786,395 |
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| | | | | |
Allowance for loan losses (GAAP) | $ | 21,090 |
| | $ | 21,151 |
| | $ | 20,986 |
|
Less: allowance for loan losses on acquired loans | 566 |
| | 727 |
| | 336 |
|
Adjusted allowance for loan losses (non-GAAP) | $ | 20,524 |
| | $ | 20,424 |
| | $ | 20,650 |
|
Adjusted allowance for loan losses / Adjusted gross loans (non-GAAP) | 0.97 | % | | 1.03 | % | | 1.16 | % |
Paycheck Protection Program Participation. The CARES Act authorized the SBA to temporarily guarantee loans under the new PPP loan program. The goal of the PPP was to avoid as many layoffs as possible, and to encourage small businesses to maintain payrolls. As a qualified SBA lender, we were automatically authorized to originate PPP loans upon commencement of the program in April 2020. PPP loans have: (a) an interest rate of 1.0%, (b) a two-year loan term to maturity; and (c) principal and interest payments deferred for six months from the date of disbursement. The SBA guarantees 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be forgiven and repaid by the SBA so long as employee and compensation levels of the business are maintained and 60% of the loan proceeds are used for payroll expenses, with the remaining 40% of the loan proceeds used for other qualifying expenses.
During the previous quarter ended June 30, 2021, we completed our origination participation in the SBA PPP as the program came to an end. As of September 30, 2021, PPP loans totaled $28.8 million, which included $611,000 in net deferred fees that will be accreted into interest income over the remaining life of the loans. If the loans are forgiven, these fees will be accelerated into income at that time. For the three months ended September 30, 2021, we earned $424,000 in fees through accretion, including accelerated accretion resulting from loan forgiveness. During the quarter ended September 30, 2021, $18.3 million in PPP loans were forgiven as compared to $28.3 million in the prior period. We have worked with the SBA to forgive a total of $82.5 million in PPP loans for our customers during our participation in the program.
Loan Modifications.As of September 30, 2021, we had $1.0 million in loans with full principal and interest payment deferrals related to COVID-19 compared to $107,000 at June 30, 2021. The increase from June 30, 2021 resulted from small balance loans in the equipment finance and retail consumer loan categories. Substantially all loans placed on full payment deferral during the pandemic have come out of deferral and borrowers are either making regular loan payments or interest-only payments through the end of calendar year 2021. As of September 30, 2021, we had $67.8 million in commercial loan deferrals on interest-only payments compared to $78.9 million at June 30, 2021. We believe the steps we have taken and continue to take are necessary to effectively manage our portfolio and assist our customers through the ongoing uncertainty surrounding the duration, impact and government response to the COVID-19 pandemic. In addition, we will continue to work with our customers to determine the best option for repayment of accrued interest on the deferred payments.
Branch Operations and Support Personnel.Throughout the pandemic we have provided banking services with a focus on the health and safety of our customers and employees. We continue to monitor the effects of customer behavior specific to in-person branch transactions and have experienced meaningful increases in digital banking activity and online deposit account openings. Partially in response to these changes, we closed nine branches in North Carolina, Tennessee, and Virginia during the three months ended September 30, 2021. We continue to respond to the banking needs of our customers whether through physical branch locations and/or digital banking services.
Comparison of Financial Condition at December 31, 2017September 30, 2021 and June 30, 20172021
General. General. Total assets increased $44.0and liabilities both decreased by $43.4 million or 1.4%down to $3.3$3.5 billion and $3.1 billion, respectively, at December 31, 2017 from $3.2 billion atSeptember 30, 2021 as compared to June 30, 2017. Total liabilities increased $46.3 million, or 1.6% to $2.9 billion at December 31, 2017 from $2.8 billion at June 30, 2017. Deposit growth of $59.8 million, or 2.9% and the2021. The decrease in assets was primarily driven by a cumulative decrease of $63.9$44.9 million, or 19.3%18.1% in cash and cash equivalents, certificates of deposit in other banks, and debt securities available for sale, and a $13.6 million, or 0.5% decrease in loans receivable as the Company redirected its excess liquidity to continue paying down borrowings during the period. These decreases were partially offset by an $11.6 million, or 12.4% increase in loans held for sale primarily related to additional SBA commercial loans, one-to-four family residential mortgage loans and home equity loans originated for sale during the period, and a $7.1 million, or 3.7% increase in commercial paper.
Cash, cash equivalents, and commercial paper. Total cash and cash equivalents decreased $8.4 million, or 16.5% to $42.6 million at September 30, 2021 from $51.0 million at June 30, 2021. Commercial paper increased $7.1 million, or 3.7% to $196.7 million at September 30, 2021 from $189.6 million at June 30, 2021 as a result of the decline in debt securities available for sale during the first six months of fiscal 2018 were used to partially fund the $66.5period.
Investments. Debt securities available for sale decreased $31.9 million, or 2.8% increase in total loans, the $49.9 million, or 33.3% increase in commercial paper, and reduce borrowings by $11.5 million, or 1.7%. We continue to utilize our leveraging strategy, where designated short-term FHLB borrowings are invested in various short-term liquid assets to generate additional net interest income, as well as the required purchase of additional FHLB stock which generates increased dividend income.
Cash, cash equivalents, and commercial paper. Total cash and cash equivalents increased $11.7 million, or 13.4%20.4%, to $98.7$124.6 million at December 31, 2017September 30, 2021 from $87.0$156.5 million at June 30, 2017 mainly due to additional funds held at the Federal Reserve Bank. In conjunction with our leveraging strategy, we purchase commercial paper to take advantage of higher returns with relatively low risk while remaining highly liquid. The commercial paper balance increased $49.9 million, or 33.3% to $199.7 million at December 31, 2017 from $149.9 million at June 30, 2017.
Investments. Securities available for sale decreased $32.0 million, or 16.0%, to $167.7 million at December 31, 2017 from $199.7 million at June 30, 2017.2021. During the sixthree months ended December 31, 2017, $19.7September 30, 2021, $5.3 million of securities were purchased, $33.2 million of securities matured, and $10.9$3.0 million of MBS principal payments were received. At December 31, 2017,September 30, 2021, certificates of deposit in other banks decreased $32.0$4.6 million, or 24.1%11.5% to $100.3$35.5 million compared to $132.3$40.1 million at June 30, 2017.2021. The decrease in certificates of deposit in other banks was due to $44.5$5.6 million in maturities partially offset by $12.6$1.0 million in purchases. All certificates of deposit in other banks are fully insured by the FDIC. We evaluate individual investmentManagement evaluates securities for impairment where there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value on at least a quarterly for other-than-temporary declines inbasis, and more frequently when economic or market value. We didconcerns warrant such evaluation. Management does not believe that there were any other-than-temporary impairmentscredit losses at December 31, 2017;September 30, 2021; therefore, no impairment losses were recorded during the first sixthree months of fiscal 2018.2022. Other investments at cost decreased $2.8 million, or 11.9%, to $20.9 million at December 31, 2017September 30, 2021 from $23.7 million at June 30, 2021. Other investments at cost included SBIC investments, FRB stock, and FHLB stock totaling $7.3$10.5 million, $7.4 million, and $31.6$3.0 million, respectively. In total, other investments decreased $478,000,The overall decrease was driven by a $3.2 million, or 1.2% from June 30, 201751.8% reduction in FHLB stock as a result of required redemptions of FHLB stock due to reductionsthe paydowns in our FHLB borrowings.borrowings during the current period.
Loans held for sale. Loans held for sale increased $1.5$11.6 million, or 26.1%12.4% to $105.2 million at December 31, 2017 to $7.1 millionSeptember 30, 2021 from $5.6$93.5 million at June 30, 2017.2021. The increase was primarily driven by volume increases as a result of expanding our$7.2 million, or 22.5% increase in mortgage operations into our newer market areasloans held for sale, a $2.5 million, or 60.2% increase in SBA loans held for sale, and adding additional seasoned loan officers.a $1.9 million, or 25.9% increase in HELOCs originated for sale.
Loans. Net Total loans receivable increased $66.6decreased $13.6 million, or 2.9%,0.5% to $2.7 billion at December 31, 2017 to $2.4 billionSeptember 30, 2021 from the balance at June 30, 2017 primarily due to $66.82021. The decrease was driven by PPP loan forgiveness of $18.3 million of organic loan growth.
For the six-month period ended December 31, 2017, retail loan portfolio originations increased $16.2and a $32.7 million, or 11.0% to $163.7 million4.3% decrease in retail consumer loans resulting from $147.5 million, compared to the same perioda reduction in the previous year. For the six-month period ended December 31, 2017, commercial loan portfolio originations increased $68.2one-to-four family loans and indirect auto finance loans. This decrease was partially offset by a $37.0 million, or 30.2% to $294.0 million, from $225.8 million, compared to1.9% increase in commercial loans (excluding PPP loans) as the same period inCompany continues its focus on the previous year. For the quarter ended December 31, 2017, organic netgrowth of this loan growth, which excludes loans acquired through acquisitionssegment.
Commercial and purchases of HELOCs, was $66.8 million or 6.1% annualized.
Retailretail consumer and commercial loans consist of the following at the dates indicated: | | | As of | | | | | | Percent of total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, | | June 30, | | Change | | December 31, | | June 30, | | As of | | Percent of total |
(Dollars in thousands) | 2017 | | 2017 | | $ | | % | | 2017 | | 2017 | (Dollars in thousands) | September 30, | | June 30, | | Change | | September 30, | | June 30, |
| | | 2021 | | 2021 | | $ | | % | | 2021 | | 2021 |
Commercial loans: | | Commercial loans: | | | | | | | | | | | |
Commercial real estate | | Commercial real estate | $ | 1,132,764 | | | $ | 1,142,276 | | | $ | (9,512) | | | (0.8) | % | | 41.7 | % | | 41.8 | % |
Construction and development | | Construction and development | 187,900 | | | 179,427 | | | 8,473 | | | 4.7 | | | 6.9 | | | 6.6 | |
Commercial and industrial | | Commercial and industrial | 153,612 | | | 141,341 | | | 12,271 | | | 8.7 | | | 5.6 | | | 5.2 | |
Equipment finance | | Equipment finance | 341,995 | | | 317,920 | | | 24,075 | | | 7.6 | | | 12.6 | | | 11.6 | |
Municipal leases | | Municipal leases | 142,100 | | | 140,421 | | | 1,679 | | | 1.2 | | | 5.2 | | | 5.1 | |
PPP loans | | PPP loans | 28,762 | | | 46,650 | | | (17,888) | | | (38.3) | | | 1.1 | | | 1.7 | |
Total commercial loans | | Total commercial loans | 1,987,133 | | | 1,968,035 | | | 19,098 | | | 1.0 | | | 73.1 | | | 72.0 | |
| Retail consumer loans: | | | | | | | | | | | | Retail consumer loans: | |
One-to-four family | $ | 686,229 |
| | $ | 684,089 |
| | $ | 2,140 |
| | 0.3 | % | | 28.4 | % | | 29.1 | % | One-to-four family | 384,901 | | | 406,549 | | | (21,648) | | | (5.3) | | | 14.2 | | | 14.9 | |
HELOCs - originated | 150,084 |
| | 157,068 |
| | (6,984 | ) | | (4.4 | ) | | 6.2 |
| | 6.7 |
| HELOCs - originated | 129,791 | | | 130,225 | | | (434) | | | (0.3) | | | 4.8 | | | 4.8 | |
HELOCs - purchased | 162,181 |
| | 162,407 |
| | (226 | ) | | (0.1 | ) | | 6.7 |
| | 6.9 |
| HELOCs - purchased | 33,943 | | | 38,976 | | | (5,033) | | | (12.9) | | | 1.2 | | | 1.4 | |
Construction and land/lots | 60,805 |
| | 50,136 |
| | 10,669 |
| | 21.3 |
| | 2.5 |
| | 2.1 |
| Construction and land/lots | 69,835 | | | 66,027 | | | 3,808 | | | 5.8 | | | 2.6 | | | 2.4 | |
Indirect auto finance | 150,042 |
| | 140,879 |
| | 9,163 |
| | 6.5 |
| | 6.2 |
| | 6.0 |
| Indirect auto finance | 106,184 | | | 115,093 | | | (8,909) | | | (7.7) | | | 3.9 | | | 4.2 | |
Consumer | 9,699 |
| | 7,900 |
| | 1,799 |
| | 22.8 |
| | 0.4 |
| | 0.3 |
| Consumer | 7,855 | | | 8,362 | | | (507) | | | (6.1) | | | 0.3 | | | 0.3 | |
Total retail consumer loans | 1,219,040 |
| | 1,202,479 |
| | 16,561 |
| | 1.4 |
| | 50.4 |
| | 51.1 |
| Total retail consumer loans | 732,509 | | | 765,232 | | | (32,723) | | | (4.3) | | | 26.9 | | | 28.0 | |
Commercial loans: | |
| | |
| | | | | | | | | |
Commercial real estate | 786,381 |
| | 730,408 |
| | 55,973 |
| | 7.7 |
| | 32.5 |
| | 31.0 |
| |
Construction and development | 185,921 |
| | 197,966 |
| | (12,045 | ) | | (6.1 | ) | | 7.7 |
| | 8.4 |
| |
Commercial and industrial | 127,709 |
| | 120,387 |
| | 7,322 |
| | 6.1 |
| | 5.3 |
| | 5.1 |
| |
Municipal leases | 100,205 |
| | 101,175 |
| | (970 | ) | | (1.0 | ) | | 4.1 |
| | 4.3 |
| |
Total commercial loans | 1,200,216 |
| | 1,149,936 |
| | 50,280 |
| | 4.4 |
| | 49.6 |
| | 48.9 |
| |
Total loans | $ | 2,419,256 |
| | $ | 2,352,415 |
| | $ | 66,841 |
| | 2.8 | % | | 100.0 | % | | 100.0 | % | Total loans | $ | 2,719,642 | | | $ | 2,733,267 | | | $ | (13,625) | | | (0.5) | % | | 100.0 | % | | 100.0 | % |
Recently, our expansion into larger metro markets as well as in-market acquisitions combined with improvements in the economy, employment rates, stronger real estate prices, and a general lack of new housing inventory in certain markets have led to us significantly increasing originations of construction loans for properties located in our market areas. We have hired experienced commercial real estate relationship managers, credit officers, and developed a construction risk management group to better manage construction risk, as part of our efforts to grow the construction portfolio. We will continue to take a disciplined approach in our construction and land development lending by concentrating our efforts on smaller one-to-four residential loans to builders known to us and developers of commercial real estate and multifamily properties with proven success in this type of construction. At December 31, 2017, construction and land/lots totaled $60.8 million including $46.4 million of one-to-four family construction loans that will roll over to permanent loans upon completion of the construction period, excluding unfunded loan commitments of $59.3 million. Total construction and development loans at December 31, 2017, were $185.9 million, excluding unfunded loan commitments of $123.3 million, of which $69.5 million was for non-residential commercial real estate construction, $65.0 million was for land development, $39.6 million was for speculative construction of single family properties, and $11.8 million was for multi-family construction. Undisbursed construction and development loan commitments at December 31, 2017 included $80.9 million of commercial real estate projects, multi-family residential projects of $8.7 million and $33.7 million for the speculative construction of one- to four-family residential properties.
Asset Quality. Our overall asset quality metrics continue to demonstrate our commitment to growing and maintaining a loan portfolio with a moderate risk profile. profile; however, we will remain diligent in our review of the portfolio and overall economy as we continue to maneuver through the uncertainty surrounding COVID-19. See "Recent Developments: COVID-19, the CARES Act, and Our Response" above for additional information regarding our response to COVID-19.
Nonperforming assets decreased $800,000 to $19.2by $6.0 million, or 0.59%47.0% to $6.8 million, or 0.19% of total assets at December 31, 2017September 30, 2021 from $20.0$12.8 million, or 0.36% of total assets at June 30, 2017.2021. The significant decrease from June 30, 2021 was primarily a result of the payoff of two commercial real estate loan relationships totaling $5.1 million. Nonperforming assets included $14.4$6.7 million in nonaccruing loans and $4.8 million$45,000 in REO at December 31, 2017,September 30, 2021, compared to $13.7$12.6 million and $6.3 million,$188,000 in nonaccruing loans and REO, respectively, at June 30, 2017.2021. Included in nonperforming loans at September 30, 2021 are $4.8 million$930,000 of TDR loans restructured from their original terms of which $2.1 million were$186,000 was current with respect to their modified payment terms. The increase in nonaccruing loans was primarily due to one construction and development relationship totaling $771,000, partially offset by loans returning to performing status as payment history and the borrower's financial status improved. At December 31, 2017, $4.6September 30, 2021, $3.4 million, or 32.1%51.2%, of nonaccruing loans were current on their loan payments. Purchased credit impairedThe ratio of nonperforming loans aggregating $4.6 millionto total loans was 0.25% at September 30, 2021 and 0.46% at June 30, 2021. Performing TDRs that were excluded from nonaccruing loans due to the accretion of discounts established in accordance with the acquisition method of accounting for business combinations. Nonperforming loans to total loans was 0.59%totaled $11.3 million and $11.1 million at December 31, 2017 compared to 0.58% atSeptember 30, 2021 and June 30, 2017.2021, respectively.
The ratio of classified assets to total assets decreased to 1.39%0.65% at December 31, 2017September 30, 2021 from 1.57%0.76% at June 30, 2017.2021. Classified assets decreased 10.8% to $44.8$22.5 million at December 31, 2017September 30, 2021 compared to $50.2$26.7 million at June 30, 20172021 primarily due to payoffsthe payoff of the two commercial real estate loans totaling $1.6 million and the decrease in REO of $1.5 million. Delinquent loans (loans delinquent 30 days or more) increased to $17.3 million at December 31, 2017, from $15.2 million at June 30, 2017 primarily due to one construction and development loan relationship in the 90+ day category and one-to-four family loans in the 30-60 day category.discussed above.
As of December 31, 2017, we had identified $40.8 million of impaired loans compared to $43.0 million at June 30, 2017. Our impairedindividually evaluated loans are comprised of loans meeting certain thresholds, loans on non-accrualnonaccrual status, and all TDRs, whether performing or on non-accrualnonaccrual status under their restructured terms. ImpairedIndividually evaluated loans may be evaluated for reserve purposes using either a specific impairment analysisthe cash flow or on a collective basis as part of homogeneous pools.the collateral valuation method. As of December 31, 2017,September 30, 2021, there were $19.8$4.6 million in loans individually evaluated for impairment and $21.0 million were collectively evaluated. For more information on these impairedindividually evaluated loans, see Note 5 of the Notes to Consolidated Financial Statements under Item 1 of this report.
"Note 6 - Loans and Allowance for loanCredit Losses on Loans" in this Quarterly Report on Form 10-Q.
Allowance for credit losses. We establish an allowance for loan losses by charging amounts to the loan loss provision at a level required to reflect estimated credit losses in the loan portfolio. In evaluating the level of the allowance for loan losses, management considers, among other factors, historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect borrowers' ability
to repay, estimated value of any underlying collateral, prevailing economic conditions and current risk factors specifically related to each loan type.
The allowance for loan lossesACL was $21.1$34.4 million, or 0.87%1.27% of total loans at December 31, 2017September 30, 2021 compared to $21.2$35.5 million, or 0.90%1.30% of total loans at June 30, 2017.2021. The allowance for loan lossesACL to total gross loans excluding acquiredPPP loans was 0.97%1.28% at December 31, 2017,September 30, 2021, compared to 1.03%1.32% at June 30, 2017. Loans acquired from acquisitions are recorded at fair value, which includes a2021. The overall decrease was driven by lower expected credit discount, therefore, no allowance for loan losses is established for these acquired loans unless the credit quality deteriorates further subsequent to the acquisition. The allowance for our acquired loans at December 31, 2017 was $566,000 compared to $727,000 at June 30, 2017.estimated by management based on an improving economic outlook.
There was no provisiona net benefit for loan loss during the three and six months ended December 31, 2017 and December 31, 2016 as the allowance for loancredit losses required by our loan growth was offset by continued improvements in our asset quality. Net loan charge offs totaled $907,000of $1.5 million for the three months ended December 31, 2017September 30, 2021, compared to a $950,000 provision for the corresponding period in fiscal year 2021. Net loan recoveries totaled $273,000 for the three months ended September 30, 2021, compared to net recoveriescharge-offs of $35,000$699,000 for the same period during the prior fiscallast year. Net charge offs totaled $61,000 for the six months ended December 31, 2017 compared to $306,000 for the same period during the prior fiscal year. Net charge offsrecoveries as a percentage of average loans increased to 0.15%were (0.04)% for the three months ended December 31, 2017 fromSeptember 30, 2021 compared to net recoveriescharge-offs of (0.01)%0.10% for the same periodcorresponding quarter last fiscal year. Net charge offs as a percentage of average loans decreased to 0.01% compared to 0.03% for the same period last fiscal year.
The allowance as a percentage of nonaccruing loans decreasedincreased to 146.79%510.63% at December 31, 2017September 30, 2021 from 154.77%281.38% at June 30, 2017.2021.
We believe thatManagement believes the allowance for loan lossesACL as of December 31, 2017September 30, 2021 was adequate to absorb the known and inherent risks of lossestimated losses in the loan portfolio at that date. While we believemanagement believes the estimates and assumptions used in our determination of the adequacy of the allowance are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future provisions will not exceed the amount of past provisions or that any increased provisions that may be required will not adversely impact our financial condition and results of operations. In addition, the determination of the amount of the allowance for loan lossesACL is subject to review by bank regulators as part of the routine examination process, which may result in the establishment of additional reserves based upon their judgment of information available to them at the time of their examination. Lastly, inflation and a further decline in national and local economic conditions, as a result of the COVID-19 pandemic or other factors, could result in a material increase in the ACL and may adversely affect our financial condition and results of operations.
Real estate owned. REO decreased $1.5 million,$143,000, or 76.1% to $4.8 million$45,000 at December 31, 2017 primarily dueSeptember 30, 2021 entirely related to $2.2 million in REO sales during the period, partially offset by $591,000 in properties transferred to REO and a gain on sale of REO of $393,000 during the period. The total balance of REO at December 31, 2017 included $1.9 million in land, construction and development projects (both residential and commercial), $1.8 million in commercial real estate, and $1.1 million in single-family homes.three months endedSeptember 30, 2021.
Deferred income taxes. Deferred income taxes decreased $20.9$1.2 million, or 36.4%7.0%, to $36.5$15.7 million at December 31, 2017September 30, 2021 from $57.4$16.9 million at June 30, 2017.2021. The decrease was primarily driven by the previously mentioned revaluationutilization of net operating losses and reduction of the ACL.
Premises and equipment, net. Premises and equipment, net decreased $2.3 million, or 3.3% to $68.6 million at September 30, 2021 from $70.9 million at June 30, 2021. The decrease was a result of the nine branch closures that occurred mid-September.
Goodwill. Goodwill remained unchanged at $25.6 million at September 30, 2021 and June 30, 2021.
Other assets. Other assets increased $957,000, or 1.7%, to $58.4 million at September 30, 2021 from $57.5 million at June 30, 2021. The increase was primarily driven by a reclassification of assets held for sale from premises and equipment related to the nine branch closures, partially offset by lower net operating lease assets and lower current taxes receivable.
Deposits. Deposits increased $31.7 million, or 1.1% during the three months ended September 30, 2021 to $3.0 billion which was driven by a $58.9 million, or 2.4% increase as a result of the Tax Act, the realizationour successful efforts to increase core deposits. As part of net operating losses through increases in taxable income, and to a lesser extent, the revaluation of deferred tax assets relating to a change in North Carolina's corporate tax rate, as discussed below.
Goodwill. Goodwill remained at $25.6 million at December 31, 2017 and June 30, 2017.
Deposits. Deposits increased $59.8 million, or 2.9%, to $2.1 billion at December 31, 2017 as compared to $2.0 billion at June 30, 2017. The increase was primarily due to an increase of $79.8 million in our core deposits (which excludes certificates of deposit) as a result of recent deposit gathering initiatives, which were partially offset by a $20.1 million managed run off in our higher costingrunoff, certificates of deposit and brokered deposits by competing less aggressively for time deposits.decreased $27.2 million, or 5.8% to $445.6 million atSeptember 30, 2021.
The following table sets forth our deposits by type of deposit account as of the dates indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of | | | | Percent of total |
(Dollars in thousands) | September 30, | | June 30, | | Change | | September 30, | | June 30, |
| 2021 | | 2021 | | $ | | % | | 2021 | | 2021 |
Core deposits: | | | | | | | | | | | |
Noninterest-bearing accounts | $ | 711,764 | | | $ | 636,414 | | | $ | 75,350 | | | 11.8 | % | | 23.8 | % | | 21.5 | % |
NOW accounts | 621,675 | | | 644,958 | | | (23,283) | | | (3.6) | % | | 20.8 | % | | 21.8 | % |
Money market accounts | 987,650 | | | 975,001 | | | 12,649 | | | 1.3 | % | | 33.1 | % | | 33.0 | % |
Savings accounts | 220,614 | | | 226,391 | | | (5,777) | | | (2.6) | % | | 7.4 | % | | 7.7 | % |
Core deposits | 2,541,703 | | | 2,482,764 | | | 58,939 | | | 2.4 | % | | 85.1 | % | | 84.0 | % |
Certificates of deposit | 445,581 | | | 472,777 | | | (27,196) | | | (5.8) | % | | 14.9 | % | | 16.0 | % |
Total | $ | 2,987,284 | | | $ | 2,955,541 | | | $ | 31,743 | | | 1.1 | % | | 100.0 | % | | 100.0 | % |
| | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| As of | | | | Percent of total |
| December 31, | | June 30, | | Change | | December 31, | | June 30, |
(Dollars in thousands) | 2017 | | 2017 | | $ | | % | | 2017 | | 2017 |
Core deposits: | | | | | | | | | | | |
Noninterest-bearing accounts | $ | 313,493 |
| | $ | 310,172 |
| | 3,321 |
| | 1.1 | % | | 14.9 | % | | 15.1 | % |
NOW accounts | 489,668 |
| | 469,377 |
| | 20,291 |
| | 4.3 | % | | 23.2 | % | | 22.9 | % |
Money market accounts | 638,259 |
| | 569,607 |
| | 68,652 |
| | 12.1 | % | | 30.3 | % | | 27.8 | % |
Savings accounts | 224,732 |
| | 237,149 |
| | (12,417 | ) | | (5.2 | )% | | 10.7 | % | | 11.6 | % |
Core deposits | 1,666,152 |
| | 1,586,305 |
| | 79,847 |
| | 5.0 | % | | 79.0 | % | | 77.4 | % |
Certificates of deposit | 442,056 |
| | 462,146 |
| | (20,090 | ) | | (4.3 | )% | | 21.0 | % | | 22.6 | % |
Total | $ | 2,108,208 |
| | $ | 2,048,451 |
| | 59,757 |
| | 2.9 | % | | 100.0 | % | | 100.0 | % |
Borrowings. Borrowings decreased $75.0 million, or 65.2% to $685.0$40.0 million at December 31, 2017 from $696.5September 30, 2021 compared to $115.0 million at June 30, 2017. A total of $585.0 million of these FHLB advances have2021 as excess liquidity was used to pay down borrowings. At September 30, 2021, borrowings had maturities of less than 9030 days with a weighted average interest rate of 1.34% at December 31, 2017.or less.
Equity.Equity. Stockholders' equity remained at December 31, 2017 decreased to $395.4 million from $397.6$396.5 million at September 30, 2021 as compared to June 30, 2017. The decrease was primarily driven by $5.12021. Increases within stockholders' equity including $10.5 million in net losses due to the deferred tax revaluation,income, and a $601,000 decrease$1.1 million in other comprehensive income, partially offset by $2.0 million representing stock-based compensation and $680,000stock option exercises were offset by repurchases of 376,435 shares of common stock at an average cost of $27.71 per share, or approximately $10.4 million and $1.3 million related to cash dividends declared. As ofSeptember 30, 2021, the Company and the Bank were both considered "well capitalized" in a cumulative adjustment foraccordance with the adoption of Accounting Standard Update 2016-09, "Improvements to Employee Share-Based Payment Accounting."
regulatory capital guidelines and exceeded all regulatory capital requirements.
Average Balances, Interest and Average Yields/Cost
The following table sets forth for the periods indicated, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities, resultant yields, interest rate spread, net interest margin (otherwise known as net yield on interest-earning assets), and the ratio of average interest-earning assets to average interest-bearing liabilities. All average balances are daily average balances. Nonaccruing loans have been included in the table as loans carrying a zero yield.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, |
| 2021 | | 2020 |
(Dollars in thousands) | Average Balance Outstanding | | Interest Earned/ Paid(2) | | Yield/ Rate(2) | | Average Balance Outstanding | | Interest Earned/ Paid(2) | | Yield/ Rate(2) |
| |
Assets: | | | | | | | | | | | |
Interest-earning assets: | | | | | | | | | | | |
Loans receivable(1) | $ | 2,819,716 | | | $ | 28,205 | | | 3.97 | % | | $ | 2,875,432 | | | $ | 28,902 | | | 4.02 | % |
Commercial paper and deposits in other banks | 277,564 | | | 331 | | | 0.47 | % | | 424,170 | | | 881 | | | 0.83 | % |
Securities available for sale | 138,435 | | | 524 | | | 1.50 | % | | 106,268 | | | 528 | | | 1.99 | % |
Other interest-earning assets(3) | 21,731 | | | 555 | | | 10.13 | % | | 38,946 | | | 448 | | | 4.61 | % |
Total interest-earning assets | 3,257,446 | | | 29,615 | | | 3.61 | % | | 3,444,816 | | | 30,759 | | | 3.57 | % |
Other assets | 260,976 | | | | | | | 251,648 | | | | | |
Total assets | $ | 3,518,422 | | | | | | | $ | 3,696,464 | | | | | |
Liabilities and equity: | | | | | | | | | | | |
Interest-bearing deposits: | | | | | | | | | | | |
Interest-bearing checking accounts | $ | 635,456 | | | $ | 397 | | | 0.25 | % | | $ | 560,481 | | | $ | 397 | | | 0.28 | % |
Money market accounts | 988,990 | | | 367 | | | 0.15 | % | | 825,545 | | | 550 | | | 0.27 | % |
Savings accounts | 223,658 | | | 41 | | | 0.07 | % | | 200,543 | | | 37 | | | 0.07 | % |
Certificate accounts | 457,865 | | | 767 | | | 0.67 | % | | 689,709 | | | 2,269 | | | 1.32 | % |
Total interest-bearing deposits | 2,305,969 | | | 1,572 | | | 0.27 | % | | 2,276,278 | | | 3,253 | | | 0.57 | % |
Borrowings | 55,464 | | | 26 | | | 0.18 | % | | 475,000 | | | 1,687 | | | 1.42 | % |
Total interest-bearing liabilities | 2,361,433 | | | 1,598 | | | 0.27 | % | | 2,751,278 | | | 4,940 | | | 0.72 | % |
Noninterest-bearing deposits | 708,219 | | | | | | | 484,336 | | | | | |
Other liabilities | 52,305 | | | | | | | 59,935 | | | | | |
Total liabilities | 3,121,957 | | | | | | | 3,295,549 | | | | | |
Stockholders' equity | 396,465 | | | | | | | 400,915 | | | | | |
Total liabilities and stockholders' equity | $ | 3,518,422 | | | | | | | $ | 3,696,464 | | | | | |
| | | | | | | | | | | |
Net earning assets | $ | 896,013 | | | | | | | $ | 693,538 | | | | | |
Average interest-earning assets to | | | | | | | | | | | |
average interest-bearing liabilities | 137.94 | % | | | | | | 125.21 | % | | | | |
Tax-equivalent: | | | | | | | | | | | |
Net interest income | | | $ | 28,017 | | | | | | | $ | 25,819 | | | |
Interest rate spread | | | | | 3.34 | % | | | | | | 2.85 | % |
Net interest margin(4) | | | | | 3.41 | % | | | | | | 3.00 | % |
Non-tax-equivalent: | | | | | | | | | | | |
Net interest income | | | $ | 27,707 | | | | | | | $ | 25,509 | | | |
Interest rate spread | | | | | 3.30 | % | | | | | | 2.82 | % |
Net interest margin(4) | | | | | 3.37 | % | | | | | | 2.96 | % |
|
| | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended December 31, |
| 2017 | | 2016 |
| Average Balance Outstanding | | Interest Earned/ Paid(2) | | Yield/ Rate(2) | | Average Balance Outstanding | | Interest Earned/ Paid(2) | | Yield/ Rate(2) |
| (Dollars in thousands) |
Assets: | | | | | | | | | | | |
Interest-earning assets: | | | | | | | | | | | |
Loans receivable(1) | $ | 2,406,014 |
| | $ | 26,518 |
| | 4.41 | % | | $ | 1,910,134 |
| | $ | 20,444 |
| | 4.28 | % |
Deposits in other financial institutions | 151,197 |
| | 517 |
| | 1.37 | % | | 178,119 |
| | 478 |
| | 1.07 | % |
Investment securities | 175,039 |
| | 903 |
| | 2.06 | % | | 188,023 |
| | 862 |
| | 1.83 | % |
Other interest-earning assets(3) | 241,948 |
| | 1,288 |
| | 2.13 | % | | 245,035 |
| | 852 |
| | 1.39 | % |
Total interest-earning assets | 2,974,198 |
| | 29,226 |
| | 3.93 | % | | 2,521,311 |
| | 22,636 |
| | 3.59 | % |
Other assets | 275,434 |
| | | | | | 243,736 |
| | | | |
Total assets | 3,249,632 |
| | | | | | 2,765,047 |
| | | | |
Liabilities and equity: | | | | | | | | | | | |
Interest-bearing deposits: | | | | | | | | | | | |
Interest-bearing checking accounts | 471,474 |
| | 236 |
| | 0.20 | % | | 405,340 |
| | 172 |
| | 0.17 | % |
Money market accounts | 644,928 |
| | 585 |
| | 0.36 | % | | 518,095 |
| | 351 |
| | 0.27 | % |
Savings accounts | 227,933 |
| | 76 |
| | 0.13 | % | | 210,223 |
| | 70 |
| | 0.13 | % |
Certificate accounts | 448,507 |
| | 644 |
| | 0.57 | % | | 408,314 |
| | 448 |
| | 0.44 | % |
Total interest-bearing deposits | 1,792,842 |
| | 1,541 |
| | 0.33 | % | | 1,541,972 |
| | 1,041 |
| | 0.28 | % |
Borrowings | 677,013 |
| | 2,077 |
| | 1.22 | % | | 546,353 |
| | 607 |
| | 0.44 | % |
Total interest-bearing liabilities | 2,469,855 |
| | 3,618 |
| | 0.58 | % | | 2,088,325 |
| | 1,648 |
| | 0.31 | % |
Noninterest-bearing deposits | 307,934 |
| | | | | | 250,914 |
| | | | |
Other liabilities | 65,850 |
| | | | | | 60,068 |
| | | | |
Total liabilities | 2,843,639 |
| | | | | | 2,399,307 |
| | | | |
Stockholders' equity | 405,993 |
| | | | | | 365,740 |
| | | | |
Total liabilities and stockholders' equity | $ | 3,249,632 |
| | | | | | $ | 2,765,047 |
| | | | |
| | | | | | | | | | | |
Net earning assets | $ | 504,343 |
| | |
| | | | $ | 432,986 |
| | | | |
Average interest-earning assets to | | | | | | | | | | | |
average interest-bearing liabilities | 120.42 | % | | | | | | 120.73 | % | | | | |
Tax-equivalent: | | | | | | | | | | | |
Net interest income | | | $ | 25,608 |
| | | | | | $ | 20,988 |
| | |
Interest rate spread | | | | | 3.35 | % | | | | | | 3.28 | % |
Net interest margin(4) | | | | | 3.44 | % | | | | | | 3.33 | % |
Non-tax-equivalent: | | | | | | | | | | | |
Net interest income | | | $ | 25,230 |
| | | | | | $ | 20,415 |
| | |
Interest rate spread | | | | | 3.30 | % | | | | | | 3.18 | % |
Net interest margin(4) | | | | | 3.39 | % | | | | | | 3.24 | % |
(1) The average loans receivable, net balances include loans held for sale and nonaccruing loans.
(2) Interest income used in the average interest/interest earned and yield calculation includes the tax equivalent adjustment of $378,000 and $573,000$310 for the three months ended December 31, 2017 September 30, 2021
and 2016,2020, respectively, calculated based on a combined federal and state tax rate of 30% and 37%, respectively.24%.
(3) The average other interest-earning assets consistsconsist of FRB stock, FHLB stock, and commercial paper. See Comparison of Results of Operation for the Three Months Ended December 31, 2017 for discussion of our leveraging strategy.SBIC investments.
(4) Net interest income divided by average interest-earning assets.
|
| | | | | | | | | | | | | | | | | | | | | |
| For the Six Months Ended December 31, |
| 2017 | | 2016 |
| Average Balance Outstanding | | Interest Earned/ Paid(2) | | Yield/ Rate(2) | | Average Balance Outstanding | | Interest Earned/ Paid(2) | | Yield/ Rate(2) |
(Dollars in thousands) | |
Assets: | | | | | | | | | | | |
Interest-earning assets: | | | | | | | | | | | |
Loans receivable(1) | $ | 2,383,768 |
| | $ | 52,154 |
| | 4.38 | % | | $ | 1,879,110 |
| | $ | 41,515 |
| | 4.42 | % |
Deposits in other financial institutions | 155,175 |
| | 1,053 |
| | 1.36 | % | | 184,918 |
| | 974 |
| | 1.05 | % |
Investment securities | 182,479 |
| | 1,875 |
| | 2.06 | % | | 192,456 |
| | 1,742 |
| | 1.81 | % |
Other interest-earning assets(3) | 225,185 |
| | 2,426 |
| | 2.15 | % | | 267,878 |
| | 1,786 |
| | 1.33 | % |
Total interest-earning assets | 2,946,607 |
| | 57,508 |
| | 3.90 | % | | 2,524,362 |
| | 46,017 |
| | 3.65 | % |
Other assets | 277,151 |
| | | | | | 240,623 |
| | | | |
Total assets | $ | 3,223,758 |
| | | | | | $ | 2,764,985 |
| | | | |
Liabilities and equity: | | | | | | | | | | | |
Interest-bearing liabilities: | | | | | | | | | | | |
Interest-bearing checking accounts | 467,201 |
| | 452 |
| | 0.19 | % | | 404,581 |
| | 345 |
| | 0.17 | % |
Money market accounts | 625,095 |
| | 1,062 |
| | 0.34 | % | | 518,672 |
| | 698 |
| | 0.27 | % |
Savings accounts | 230,436 |
| | 153 |
| | 0.13 | % | | 210,201 |
| | 140 |
| | 0.13 | % |
Certificate accounts | 449,173 |
| | 1,220 |
| | 0.54 | % | | 419,552 |
| | 957 |
| | 0.46 | % |
Total interest-bearing deposits | 1,771,905 |
| | 2,887 |
| | 0.33 | % | | 1,553,006 |
| | 2,140 |
| | 0.27 | % |
Borrowings | 672,552 |
| | 4,046 |
| | 1.20 | % | | 540,121 |
| | 1,162 |
| | 0.43 | % |
Total interest-bearing liabilities | 2,444,457 |
| | 6,933 |
| | 0.56 | % | | 2,093,127 |
| | 3,302 |
| | 0.31 | % |
Noninterest-bearing deposits | 309,265 |
| | | | | | 246,212 |
| | | | |
Other liabilities | 66,328 |
| | | | | | 61,628 |
| | | | |
Total liabilities | 2,820,050 |
| | | | | | 2,400,967 |
| | | | |
Stockholders' equity | 403,708 |
| | | | | | 364,018 |
| | | | |
Total liabilities and stockholders' equity | $ | 3,223,758 |
| | | | | | $ | 2,764,985 |
| | | | |
| | | | | | | | | | | |
Net earning assets | $ | 502,150 |
| | | | | | $ | 431,235 |
| | | | |
Average interest-earning assets to | | | | | | | | | | | |
average interest-bearing liabilities | 120.54 | % | | | | | | 120.60 | % | | | | |
Tax-equivalent: | | | | | | | | | | | |
Net interest income | | | $ | 50,575 |
| | | | | | $ | 42,715 |
| | |
Interest rate spread | | | | | 3.34 | % | | | | | | 3.34 | % |
Net interest margin(4) | | | | | 3.43 | % | | | | | | 3.38 | % |
Non-tax-equivalent: | | | | | | | | | | | |
Net interest income | | | $ | 49,811 |
| | | | | | $ | 41,552 |
| | |
Interest rate spread | | | |
| | 3.29 | % | | | | | | 3.24 | % |
Net interest margin(4) | | | | | 3.38 | % | | | | | | 3.29 | % |
__________________
(1) The average loans receivable, net balances include loans held for sale and nonaccruing loans.
(2) Interest income used in the average interest/earned and yield calculation includes the tax equivalent adjustment of $764,000 and $1,163,000 for the six months ended December 31, 2017 and 2016, respectively, calculated based on a combined federal and state tax rate of 30% and 37%, respectively.
(3) The average other interest-earning assets consists of FRB stock, FHLB stock, and commercial paper. See Comparison of Results of Operation for the Six Months Ended December 31, 2017 for discussion of our leveraging strategy.
(4) Net interest income divided by average interest-earning assets.
Rate/Volume Analysis
The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It distinguishes between the changes related to outstanding balances and that due to the changes in interest rates. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (i.e., changes in volume multiplied by old rate) and (ii) changes in rate (i.e., changes in rate multiplied by old volume). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2021 |
| Compared to |
| Three Months Ended September 30, 2020 |
(Dollars in thousands) | Increase/ (decrease) due to | | Total increase/(decrease) |
| Volume | | Rate | |
Interest-earning assets: | | | | | |
Loans receivable(1) | $ | (554) | | | $ | (143) | | | $ | (697) | |
Commercial paper and deposits in other banks | (305) | | | (245) | | | (550) | |
Debt securities available for sale | 160 | | | (164) | | | (4) | |
Other | (198) | | | 305 | | | 107 | |
Total interest-earning assets | $ | (897) | | | $ | (247) | | | $ | (1,144) | |
Interest-bearing liabilities: | | | | | |
Interest-bearing checking accounts | $ | 53 | | | $ | (53) | | | $ | — | |
Money market accounts | 109 | | | (292) | | | (183) | |
Savings accounts | 4 | | | — | | | 4 | |
Certificate accounts | (763) | | | (739) | | | (1,502) | |
Borrowings | (1,490) | | | (171) | | | (1,661) | |
Total interest-bearing liabilities | (2,087) | | | (1,255) | | | (3,342) | |
Net increase (decrease) in tax equivalent interest income | $ | 1,190 | | | $ | 1,008 | | | $ | 2,198 | |
|
| | | | | | | | | | | |
| Three Months Ended December 31, 2017 |
| Compared to |
| Three Months Ended December 31, 2016 |
| Increase/ (decrease) due to | | Total increase/(decrease) |
(Dollars in thousands) | Volume | | Rate | |
Interest-earning assets: | | | | | |
Loans receivable(1) | $ | 5,306 |
| | $ | 768 |
| | $ | 6,074 |
|
Deposits in other financial institutions | (72 | ) | | 111 |
| | 39 |
|
Investment securities | (60 | ) | | 101 |
| | 41 |
|
Other interest-earning assets | (11 | ) | | 447 |
| | 436 |
|
Total interest-earning assets | $ | 5,163 |
| | $ | 1,427 |
| | $ | 6,590 |
|
Interest-bearing liabilities: | | | | | |
Interest-bearing checking accounts | $ | 29 |
| | $ | 35 |
| | $ | 64 |
|
Money market accounts | 85 |
| | 149 |
| | 234 |
|
Savings accounts | 6 |
| | — |
| | 6 |
|
Certificate accounts | 44 |
| | 152 |
| | 196 |
|
Borrowings | 145 |
| | 1,325 |
| | 1,470 |
|
Total interest-bearing liabilities | 309 |
| | 1,661 |
| | 1,970 |
|
Net increase (decrease) in tax equivalent interest income | $ | 4,854 |
| | $ | (234 | ) | | $ | 4,620 |
|
|
| | | | | | | | | | | |
| Six Months Ended December 31, 2017 |
| Compared to |
| Six Months Ended December 31, 2016 |
| Increase/ (decrease) due to | | Total increase/(decrease) |
(Dollars in thousands) | Volume | | Rate | |
Interest-earning assets: | | | | | |
Loans receivable(1) | $ | 11,151 |
| | $ | (512 | ) | | $ | 10,639 |
|
Deposits in other financial institutions | (156 | ) | | 235 |
| | 79 |
|
Investment securities | (90 | ) | | 223 |
| | 133 |
|
Other interest-earning assets | (285 | ) | | 925 |
| | 640 |
|
Total interest-earning assets | 10,620 |
| | 871 |
| | 11,491 |
|
Interest-bearing liabilities: | | | | | |
Interest-bearing checking accounts | $ | 54 |
| | $ | 53 |
| | $ | 107 |
|
Money market accounts | 143 |
| | 221 |
| | 364 |
|
Savings accounts | 13 |
| | — |
| | 13 |
|
Certificate accounts | 68 |
| | 195 |
| | 263 |
|
Borrowings | 285 |
| | 2,599 |
| | 2,884 |
|
Total interest-bearing liabilities | 563 |
| | 3,068 |
| | 3,631 |
|
Net increase (decrease) in tax equivalent interest income | $ | 10,057 |
| | $ | (2,197 | ) | | $ | 7,860 |
|
______________________________________________________________________________(1) Interest income used in the average interest/interest earned and yield calculation includes the tax equivalent adjustment of $378,000 and $573,000$310 for the three months ended December 31, 2017September 30, 2021 and 2016,2020, respectively, calculated based on a combined federal and state income tax rate of 30% and 37%. Interest income used in the average interest/earned and yield calculation includes the tax equivalent adjustment of $764,000 and $1,163,000 for the six months ended December 31, 2017 and 2016, respectively, calculated based on a combined federal and state tax rate of 30% and 37%24%.
Comparison of Results of OperationOperations for the Three Months Ended December 31, 2017September 30, 2021 and 20162020
General. During the three months ended December 31, 2017, we had aSeptember 30, 2021, net loss of $10.7income increased $4.8 million, driven by an estimated $17.7or 83.0% to $10.5 million deferred tax revaluation resulting from enactment of the Tax Cuts and Jobs Act (the "Tax Act”), compared to net income of $3.0$5.8 million for the three months ended December 31, 2016. The Company'sSeptember 30, 2020. Our diluted lossearnings per share was $0.59increased to $0.65 for the three months ended December 31, 2017September 30, 2021 compared to earning per share of $0.17$0.35 for the same period in fiscal 2017. The Tax Act, among other things, reduced the federal corporate tax rate to 21% effective January 1, 2018 requiring the Company to revalue2021. First quarter earnings were positively impacted by a $2.2 million increase in net deferred tax assets. The resulting estimated $17.7interest income driven by lower borrowing costs, a $1.7 million deferred tax revaluation was reflected as an increase to the Company's income tax expense. Netin noninterest income, and diluted earnings per share before the change in the federal tax rate and prior year merger-related expensesa $1.5 million net benefit for the quarter ended December 31, 2017 was $7.0 million and $0.38, compared to $3.0 million and $0.17, respectively.credit losses.
Net Interest Income. Net interest income increased $4.8$2.2 million, or 23.6%8.6% to $25.2$27.7 million for the quarter ended December 31, 2017September 30, 2021, compared to $20.4$25.5 million for the corresponding periodcomparative quarter in 2016. The increase in net interest income for the quarter ended December 31, 2017 was driven by a $6.8 million, or 30.8% increase in interestfiscal 2021. Interest and dividend income duedecreased by $1.1 million, or 3.8%, primarily to an increasedriven by lower average balances on loans and commercial paper combined with lower yields. This decrease was more than offset by a $3.3 million decrease in average interest-earning assets.interest expense.
Average interest-earning assets increased $452.9decreased $187.4 million, or 18.0%5.4% to $3.0$3.3 billion for the quarter ended December 31, 2017 compared to $2.5 billion for the corresponding quarter in fiscal 2017.September 30, 2021. The average balance of total loans receivable for the quarter ended December 31, 2017 increased $495.9decreased by $55.7 million, or 26.0% due to the TriSummit acquisition and organic net loan growth, which was mainly funded by the cumulative decrease of $43.0 million, or 7.0% in average interest-earning deposits with banks, securities available for sale, and other interest-earning assets, an increase in average deposits of $307.9 million, or 17.2%, and an increase in average FHLB borrowings of $130.7 million, or 23.9% as1.9% compared to the same quarter last year.year primarily due to the decrease in PPP loans outstanding. The average balance of commercial paper and deposits in other banks decreased $146.6 million, or 34.6% as we used excess liquidity to reduce borrowings between periods, primarily during the quarter ended June 30, 2021. The average balance of other interest-earning assets decreased $17.2 million, or 44.2% driven by a decrease in FHLB stock due to the reduction in FHLB borrowings, and an increase in SBIC investments resulting in higher rates earned for the current period. Net interest margin (on a fully taxable-equivalent basis) for the three months ended December 31, 2017September 30, 2021 increased to 3.44%3.41% from 3.33%3.00% for the same period a year ago. Duringago as all higher rate long-term borrowings were repaid during the three monthsquarter ended December 31, 2017 our leveraging strategy produced an additional $1.1 million in interest and dividend income at an average yield of 1.66%, while the average cost of the borrowings was 1.23%, resulting in approximately $274,000 in net interest income. During the same quarter in the prior fiscal year, our leveraging strategy produced an additional $908,000 in interest and dividend income at an average yield of 1.07%, while the average cost of the borrowings was 0.44%, resulting in approximately $530,000 in net interest income. Excluding the effects of the leveraging strategy, the tax equivalent net interest margin would be 3.73% and 3.75% for the quarters ended December 31, 2017 and 2016, respectively.June 30, 2021.
Total interest and dividend income increased $6.8decreased $1.1 million, or 30.8%3.8% for the three months ended December 31, 2017September 30, 2021 as compared to the same period last year, which was primarily driven by a $6.3 million,result of a $697,000, or 31.6% increase2.4% decrease in loan interest income, a $364,000,$550,000, or 38.8% increase62.4% decrease in interest income on certificates of depositfrom commercial paper and deposits in other interest-bearing deposits, andbanks, partially offset by a $110,000,$107,000, or 28.1%23.9% increase in other investment interest income. The additional loanlower interest income in each category was primarily due todriven by the increasedecrease in the average balance of loans receivable as well as an increase in thebalances, discussed above. In addition, average
loan yields due to increases in the federal funds rate over the past 12 months. Average loan yields increased 13decreased 5 basis points to 4.41%3.97% for the quarter ended December 31, 2017September 30, 2021 from 4.28%4.02% in the corresponding quarter from last year. In addition, there was a $146,000, or 18.9% increaseAverage yields on commercial paper and deposits in the accretion of purchase discounts on acquired loansother banks decreased 36 basis points to $920,0000.47% for the quarter ended December 31, 2017September 30, 2021 from $774,0000.83% in the corresponding quarter last year. Average yields on securities available for sale decreased 49 basis points to 1.50% for the same quarter ended September 30, 2021 from 1.99% in fiscal 2017the corresponding quarter last year. Average yields on total interest-earning assets increased four basis points to 3.61% for the quarter ended September 30, 2021 from 3.57% in the corresponding quarter last year primarily as a result of prepayments. Accretable income on acquired loans stems from the discount established at the time these loan portfolios were acquired and the related impactchange in mix of prepayments on purchased loans. Each quarter, the Company analyzes the cash flow assumptions on the PCI loan pools and, at least semi-annually, the Company updates loss estimates, prepayment speeds and other variables when analyzing cash flows. In addition to this accretion income, which is recognized over the estimated life of the loan pools, if a loan is removed from a pool due to payoff or foreclosure, the unaccreted discount in excess of losses is recognizedinterest-earning assets, as an accretion gain in interest income. As a result income from loan pools can be volatile from quarterof using excess liquidity to quarter. For the quarters ended December 31, 2017repay long-term borrowings and 2016, the average loan yields included 15 and 16 basis points, respectively, from the accretion of purchase discounts on acquired loans.reduce short-term interest-earning assets with lower yields.
Total interest expense increased $2.0decreased $3.3 million, or 119.5%67.7% for the quarterthree months ended December 31, 2017September 30, 2021 compared to the same period last year. This increaseThe decrease was primarily related to the TriSummit acquisition and recent deposit gathering initiatives contributing todriven by a $250.9$1.7 million, or 16.3% increase51.7% decrease in interest expense on deposits and a $1.7 million, or 98.5% decrease in interest expense on borrowings. Average interest-bearing deposits for the quarter ended September 30, 2021 increased $29.7 million, or 1.3%, which was more than offset by the 30 basis point decrease in the average balancecost of interest-bearing deposits. In addition, averagedeposits, down to 0.27% compared to 0.57% in the same period last year. Average borrowings consisting primarily of short-term FHLB advances, increased by $130.7for the quarter ended September 30, 2021 decreased $419.5 million, to $677.0 million due to funding for loan growthor 88.3% along with a 78124 basis point increasedecrease in the average cost of such borrowings during the quarter as compared to the same quarterperiod last year. The increase in average deposits (interest and noninterest-bearing) was due to successful deposit gathering campaigns and funds from PPP loans and other government stimulus. The decrease in the average cost of borrowings was primarily driven by the early retirement of long-term borrowings reducing the average balance and partially driven by a shift to short-term borrowings at lower rates. The overall average cost of funds increased 27decreased 45 basis points to 0.58%0.27% for the current quarter as compared to 0.72% in the same quarter last year due primarily to the impact of the recent increases in the federal funds rate on our borrowings.lower rates.
Provision (Benefit) for LoanCredit Losses. During the three months ended December 31, 2017 and 2016,September 30, 2021 there was noa $1.5 million net benefit for credit losses compared to a $950,000 provision for loan losses as improved credit quality measures have been sufficient to cover reserves needed for loan growth and changes in the mixcorresponding quarter of loans.fiscal 2021. Net loan charge-offsrecoveries totaled $907,000$273,000 for the three months ended December 31, 2017September 30, 2021, compared to net recoveriescharge-offs of $35,000$699,000 for the same period last year. Net charge-offsrecoveries as a percentage of average loans increased to 0.15%were (0.04)% for the three monthsquarter ended December 31, 2017 fromSeptember 30, 2021 compared to net recoveriescharge-offs of (0.01%)0.10% for the same periodcorresponding quarter last fiscal year.
See Comparison"Comparison of Financial Condition - Asset QualityQuality" for additional details.
Noninterest Income. Noninterest income increased $846,000,$1.7 million, or 21.5%,19.8% to $4.8$10.4 million for the three months ended December 31, 2017September 30, 2021 from $3.9$8.6 million for the same period in the comparative quarterprevious year primarily due to a $713,000, or 21.3% increase in gain on sale of 2016. The leading factors of theloans, a $505,000, or 106.5% increase includedin loan income and fees, a $299,000,$275,000, or 15.9%13.1% increase in service charges and fees on deposit accounts, and a $215,000, or 16.2% increase in operating lease income. The increase in gain on the sale of loans was driven by an increase in gains from sales of SBA loans in the current period as this line of business improves from the effects of the COVID-19 pandemic. During the quarter ended September 30, 2021, $63.8 million of residential mortgage loans originated for sale which were sold with gains of $2.1 million compared to $96.0 million sold and gains of $2.2 million in the corresponding quarter in the prior year. There were $14.4 million of the guaranteed portion of SBA commercial loans sold with gains of $1.7 million in the current quarter compared to $15.1 million sold and gains of $1.0 million in the corresponding quarter in the prior year. In addition, $47.4 million of home equity loans were sold during the quarter ended September 30, 2021 for a gain of $267,000 compared to $20.0 million sold and gains of $100,000 in the corresponding quarter. The $505,000, or 106.5% increase in loan income and fees was primarily a result of $313,000 in additional loan servicing fees from bringing our SBA loan servicing process in-house beginning July 1, 2021 and $257,000 in additional prepayment fee income from our equipment finance line of business during the current quarter. Other increases in noninterest income were primarily driven by an increase in customer spending as a result of the increase in deposit accounts as well as a $424,000, or 45.3% increase in loan incomeeconomic recovery from the gain on sale of mortgage loans and various commercial loan-related fees driven by the new SBA loan line of business.pandemic.
Noninterest Expense. Noninterest expense for the quarter ended December 31, 2017 increased $695,000, or 3.4%, to $21.2 million compared to $20.5of $26.0 million for the quarterthree months ended December 31, 2016. The TriSummit acquisition led to additional noninterest expenses as shown in the cumulative increase of $973,000, or 17.4% in net occupancy expense; telephone, postage,and supplies; core deposit intangible amortization; and
other expenses. Deposit insurance premiums increased $216,000, or 106.4% as the net asset base has increased. These increases in noninterest expense were partially offset by the absence of $27,000 in merger-related expenses, a $140,000, or 30.5% decrease in marketing and advertising expense, and a $408,000, or 56.9% decrease in real estate owned ("REO") related expenses for the quarter ended December 31, 2017September 30, 2021 was unchanged compared to the same period last year. ForAn increase of $380,000, or 116.9% in marketing and advertising was partially offset by a decrease of $367,000, or 8.6% in other noninterest expense primarily driven by lower depreciation expense on operating lease equipment for the three months ended December 31, 2017, there was a $235,000 decrease on writedowns and losses from REO salesSeptember 30, 2021 compared to the corresponding quartersame period last year; and a $173,000 decrease in REO expenses as a result of fewer REO properties held.year.
Income Taxes. The Company had Our income tax expense of $19.5for the three months ended September 30, 2021 increased $1.6 million to $3.0 million from $1.4 million for the three months ended December 31, 2017, an increaseSeptember 30, 2020 as a result of $18.6 millionhigher pre-tax book income. The higher effective tax rate in the current period compared to $893,000the prior period was driven by a comparable amount of tax-exempt income in each period with higher pre-tax book income for the three months ended December 31, 2016 as a result of the Tax Act. As previously mentioned, the reduction in the corporateSeptember 30, 2021. The effective tax rate required the Company to revalue net deferred tax assets, resulting in a $17.7 million adjustment through income tax expense. In addition, our Junefor September 30, fiscal year end required the use of a blended rate as prescribed by the Internal Revenue Code. The blended federal rate of 27.5%2021 and 2020 was effective retroactively to July 1, 201722.0% and will be used for the entire fiscal year ended June 30, 2018. As a result of this blended rate, income tax expense for the quarter ended December 31, 2017 includes approximately $418,000 in tax benefit from adjusting the federal income tax rate to 27.5% from 34% for the first quarter of the fiscal year. Excluding the effect of the revaluation of net deferred tax assets, the additional income tax expense was due to higher taxable income. For more information on the Tax Act's impact on the Company's income tax expense, see Note 7 of the Notes to Consolidated Financial Statements under Item 1 of this report.20.1%, respectively.
Comparison of Results of Operation for the Six Months Ended December 31, 2017 and 2016
General. During the six months ended December 31, 2017, we had a net loss of $5.1 million compared to net income of $6.8 million for the six months ended December 31, 2016 as a result of the previously mentioned deferred tax revaluation. Diluted loss per share was $0.28 for the first six months of fiscal year 2018, compared to $0.39 per share in the same period in fiscal 2017. Net income and diluted earnings per share before the change in the federal tax rate, prior year merger-related expenses, certain state income tax expenses, and gains from the sale of premises and equipment for the six months ended December 31, 2017 was $12.6 million and $0.68, compared to $7.3 million and $0.43, respectively.
Net Interest Income. Net interest income increased $8.3 million, or 19.9% to $49.8 million for the six months ended December 31, 2017 compared to $41.6 million for the six months ended December 31, 2016. This increase in net interest income was driven by an $11.9 million, or 26.5% increase in interest and dividend income partially offset by a $3.6 million, or 110.0% increase in interest expense.
Average interest-earning assets increased $422.2 million, or 16.7% to $2.9 billion for the six months ended December 31, 2017 compared to $2.5 billion in the same period in fiscal 2017. The $504.7 million, or 26.9% increase in average balance of loans receivable for the six months ended December 31, 2017 was due to the TriSummit acquisition and increased organic loan growth, which was mainly funded by the cumulative decrease of $82.4 million, or 12.8% in average interest-earning deposits with banks, securities available for sale, and other interest-earning assets, an increase in average deposits of $282.0 million, or 15.7% and an increase in average FHLB borrowings of $132.4 million, or 24.5%. Net interest margin (on a fully taxable-equivalent basis) for the six months ended December 31, 2017 increased five basis points to 3.43% from 3.38% for the period last year. For the six months ended December 31, 2017, our leveraging strategy produced an additional $2.0 million in interest and dividend income at an average yield of 1.62%, while the average cost of the borrowings was 1.20%, resulting in approximately $519,000 in net interest income. Our leveraging strategy produced an additional $1.9 million in interest and dividend income at an average yield of 1.04% during the corresponding period in fiscal 2017, while the average cost of the borrowings was 0.43%, resulting in approximately $1.1 million in net interest income. Excluding the effects of the leveraging strategy, the tax equivalent net interest margin would be 3.71% and 3.86% for the six months ended December 31, 2017 and 2016, respectively.
Total interest income increased $11.9 million, or 26.5% for the six months ended December 31, 2017 as compared to the same period last year. The increase was primarily driven by an $11.0 million, or 27.4% increase in loan interest income, a $490,000, or 24.7% increase in certificates of deposit and other interest-bearing deposits, and a $229,000, or 29.4% increase in other investment income. The additional loan interest income was primarily due to the increase in the average balance of loans receivable, which was partially offset by a $908,000 decrease in the accretion of purchase discounts on acquired loans to $1.7 million for the six months ended December 31, 2017 from $2.6 million for the same period in fiscal 2017, as a result of full repayments of several loans with large discounts in the previous year. Overall, average loan yields decreased four basis points to 4.38% for the six months ended December 31, 2017 from 4.42% in the fiscal 2017 period. Excluding the effects of the accretion on purchase discounts on acquired loans, loan yields increased nine basis points to 4.23% for the six months ended December 31, 2017 compared to 4.14% in the same period last year.
Total interest expense increased $3.6 million, or 110.0% for the six months ended December 31, 2017 compared to the same period last year. This increase was primarily related to the increase in average borrowings and the corresponding 77 basis point increase in the average cost of those borrowings, resulting in additional interest expense of $2.9 million for the six months ended December 31, 2017 as compared to the same period in the prior year. The overall increase in average interest-bearing deposits and the seven basis point increase in cost of funds resulted in an additional $747,000 in interest expense for the six months ended December 31, 2017 compared to the corresponding period last year.
Provision for Loan Losses. There was no provision for loan losses during the six months ended December 31, 2017 or 2016. Net charge-offs for the six months ended December 31, 2017 and 2016 were $61,000 and $306,000, respectively. Net charge-offs as a percentage of average loans was 0.01% for the six months ended December 31, 2017 compared to 0.03% for the same period last fiscal year.
See Comparison of Financial Condition - Asset Quality for additional details.
Noninterest Income. Noninterest income increased $1.2 million, or 14.4%, to $9.4 million for the six months ended December 31, 2017 from $8.2 million for the six months ended December 31, 2016. The increase was primarily the result of a $424,000, or 11.2% increase in service charges on deposit accounts; a $549,000, or 28.7% increase in loan income from the gain on sale of mortgage loans and various commercial
loan-related fees; and $414,000, or 40.6% increase in other income. Partially offsetting these increases was a $221,000, or 57.4% decrease in gains from the sale of fixed assets for the six months ended December 31, 2017 compared to the same period last year.
Noninterest Expense. Noninterest expense for the six months ended December 31, 2017 increased $2.6 million, or 6.7%, to $42.3 million compared to $39.6 million for the six months ended December 31, 2016. Salaries and employee benefits increased $1.8 million, or 8.0% primarily as a result of the TriSummit acquisition. The TriSummit acquisition was the leading factor in the $1.5 million, or 13.0% cumulative increase in net occupancy expense; telephone, postage, and supplies; core deposit intangible amortization; and other expenses. Partially offsetting these increases was the absence of $334,000 in merger-related expenses, and a $587,000, or 59.2% decrease in REO-related expenses for the six months ended December 31, 2017 compared to the same period last year, which was driven by a $42,000 gain on the sale of REO compared to a $469,000 loss on the sale of REO in the corresponding period in the prior year.
Income Taxes. For the six months ended December 31, 2017, the Company's income tax expense was $22.0 million compared to $3.3 million for the six months ended December 31, 2016. The increase was a result of the deferred tax revaluation and to a lesser extent, higher taxable income. In addition, the Company had a $133,000 and a $490,000 charge during the six months ended December 31, 2017 and 2016, respectively, related to the decrease in value of our deferred tax assets based on decreases in North Carolina's corporate tax rate.
Liquidity
Management maintains a liquidity position that it believes will adequately provide funding for loan demand and deposit run-off that may occur in the normal course of business. We rely on a number of different sources in order to meet our potential liquidity demands. The primary sources are increases in deposit accounts, and cash flows from loan payments, commercial paper, and the securities portfolio.
In addition to these primary sources of funds, management has several secondary sources available to meet potential funding requirements. As of December 31, 2017,September 30, 2021, the Bank had an available borrowing capacity of $56.3$278.7 million with the FHLB of Atlanta, a $115.4$77.6 million line of credit with the FRB and three linesa line of credit with each of three unaffiliated banks totaling $60.0$100.0 million. At December 31, 2017,September 30, 2021, we had $685.0$30.0 million in FHLB advances outstanding, $10.0 million in FRB advances outstanding, and nothing outstanding under our other lines of credit. Additionally, the Company classifies itswe classify our securities portfolio as available for sale, providing an additional source of liquidity. Management believes that our security portfolio is of high quality and the securities would therefore be marketable. In addition, we have historically sold longer term
fixed-rate mortgage loans in the secondary market to reduce interest rate risk and to create still another source of liquidity. From time to time we also utilize brokered time deposits to supplement our other sources of funds. Brokered time deposits are obtained by utilizing an outside broker that is paid a fee. This funding requires advance notification to structure the type of deposit desired by us. Brokered deposits can vary in term from one month to several years and have the benefit of being a source of longer-term funding. We also may utilize brokered deposits to help manage interest rate risk by extending the term to repricing of our liabilities, enhance our liquidity and fund asset growth. Brokered deposits are typically from outside our primary market areas, and our brokered deposit levels may vary from time to time depending on competitive interest rate conditions and other factors. At December 31, 2017September 30, 2021 brokered deposits totaled $11.8$2.3 million, or 0.6%0.1% of total deposits.deposits compared to $4.3 million, or 0.2% of total deposits at June 30, 2021.
Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in short-term investments, such as overnight deposits, federal funds, and federal funds.commercial paper. On a longer term basis, we maintain a strategy of investing in various lending products and investment securities, including mortgage-backed securities and commercial paper.securities. HomeTrust Bancshares on a stand-alone level is a separate legal entity from the Bank and we must provide for itsour own liquidity and pay itsour own operating expenses. The Company'sOur primary source of funds consists of the net proceeds retained from the Conversion. The CompanyWe also hashave the ability to receive dividends or capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to pay dividends. At December 31, 2017, the Company (on an unconsolidated basis)September 30, 2021, HomeTrust Bancshares on a stand-alone basis had liquid assets of $20.1$4.8 million.
We use our sources of funds primarily to meet our ongoing commitments, pay maturing deposits and fund withdrawals, and to fund loan commitments. At December 31, 2017,September 30, 2021, the total approved loan commitments and unused lines of credit outstanding amounted to $178.0$289.5 million and $447.8$571.4 million, respectively, as compared to $202.1$401.1 million and $414.4$530.5 million, respectively, as of June 30, 2017.2021. Certificates of deposit scheduled to mature in one year or less at December 31, 2017,September 30, 2021, totaled $302.2$386.2 million. It is management's policy to manage deposit rates that are competitive with other local financial institutions. Based on this management strategy, we believe that a majority of our maturing deposits will remain with us.
During the first sixthree months of fiscal 2018,2022, cash and cash equivalents increased $11.7decreased $8.4 million, or 13.4%16.5%, from $87.0to $42.6 million as of JuneSeptember 30, 2017 to $98.72021 from $51.0 million as of December 31, 2017.June 30, 2021. Cash provided by operating and financinginvesting activities was $13.0$49.4 million, and $48.3 million, respectively; while cash used in investingfinancing and operating activities was $49.6 million.$54.3 million and $3.5 million, respectively. Primary sources of cash for the sixthree months ended December 31, 2017September 30, 2021 included $19.7$33.2 million in proceeds from the maturity ofmaturing securities available for sale, $31.9a $31.7 million increase in deposits, a $19.3 million decrease in loans, and a $5.6 million in maturingmaturities of certificates of deposit in other banks, net of purchases, $10.9 million in principal repayments from mortgage-backed securities, and a $59.8 million increase in deposits.purchases. Primary uses of cash during the period included a net increase$75.0 million reduction in commercial paper of $48.4short-term borrowings, a $9.0 million an increase in loans held for sale, $10.4 million in shares repurchased, $6.9 million in purchases of $65.8commercial paper, $5.3 million in purchases of debt securities available for sale, $2.4 million in purchases of premises and a $11.5equipment, and $1.3 million decrease in borrowings.cash dividends. All sources and uses of cash reflect our cash management strategy to increase our number of higher yielding investments and loans by increasing lower costing borrowings and reducing our holdings inof lower yielding investments.
Off-Balance Sheet Activities
In the normal course of operations, we engage in a variety of financial transactions that are not recorded in our financial statements. These transactions involve varying degrees of off-balance sheet credit, interest rate and liquidity risks. These transactions are used primarily to manage customers' requests for funding and take the form of loan commitments and lines of credit. For the sixthree months ended December 31, 2017,September 30, 2021, we engageddid not engage in noany off-balance sheet transactions likely to have a material effect on our financial condition, results of operations or cash flows.
A summary of our off-balance sheet commitments to extend credit at December 31, 2017,September 30, 2021, is as follows (in thousands):follows:
| | | | | |
| |
(Dollars in thousands) | |
| |
Undisbursed portion of construction loans | $ | 205,848 | |
Commitments to make loans | 83,616 | |
Unused lines of credit | 571,362 | |
Standby letters of credit | 9,671 | |
Total loan commitments | $ | 870,497 | |
|
| | | |
Undisbursed portion of construction loans | $ | 123,262 |
|
Commitments to make loans | 54,720 |
|
Unused lines of credit | 447,787 |
|
Unused letters of credit | 9,927 |
|
Total loan commitments | $ | 635,696 |
|
Capital Resources
At December 31, 2017, stockholder'sSeptember 30, 2021, stockholders' equity totaled $395.4$396.5 million. HomeTrust Bancshares, Inc. is a bank holding company and a financial holding company subject to regulation by the Federal Reserve. As a bank holding company, we are subject to capital adequacy requirements of the Federal Reserve under the Bank Holding Company Act of 1956, as amended and the regulations of the Federal Reserve. Our subsidiary, the Bank, an FDIC-insured, North Carolina state-chartered bank and a member of the Federal Reserve, System, is supervised and regulated by the Federal Reserve and the NCCOB and is subject to minimum capital requirements applicable to state member banks established by the Federal Reserve that are calculated in a manner similar to those applicable to bank holding companies.
Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
At December 31, 2017, HomeTrust Bancshares, Inc. and the Bank each exceeded all regulatory capital requirements as of that date.September 30, 2021. Consistent with our goals to operate a sound and profitable organization, our policy is for the Bank to maintain a “well-capitalized” status under the regulatory capital categories of the Federal Reserve. The Bank was categorized as "well-capitalized" at December 31, 2017September 30, 2021 under applicable regulatory requirements.
HomeTrust Bancshares, Inc. and the Bank's actual and required minimum capital amounts and ratiosare as follows (dollars in thousands):follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Regulatory Requirements |
(Dollars in thousands) | Actual | | Minimum for Capital Adequacy Purposes | | Minimum to Be Well Capitalized |
| Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
HomeTrust Bancshares, Inc. | | | | | | | | | | | |
September 30, 2021 | | | | | | | | | | | |
CTE1 Capital (to risk-weighted assets) | $ | 375,799 | | | 11.25 | % | | $ | 150,258 | | | 4.50 | % | | $ | 217,040 | | | 6.50 | % |
Tier I Capital (to total adjusted assets) | $ | 375,799 | | | 10.75 | % | | $ | 139,873 | | | 4.00 | % | | $ | 174,841 | | | 5.00 | % |
Tier I Capital (to risk-weighted assets) | $ | 375,799 | | | 11.25 | % | | $ | 200,344 | | | 6.00 | % | | $ | 267,126 | | | 8.00 | % |
Total Risk-based Capital (to risk-weighted assets) | $ | 397,997 | | | 11.92 | % | | $ | 267,126 | | | 8.00 | % | | $ | 333,907 | | | 10.00 | % |
| | | | | | | | | | | |
June 30, 2021 | | | | | | | | | | | |
CTE1 Capital (to risk-weighted assets) | $ | 375,320 | | | 11.26 | % | | $ | 149,943 | | | 4.50 | % | | $ | 216,584 | | | 6.50 | % |
Tier I Capital (to total adjusted assets) | $ | 375,320 | | | 10.29 | % | | $ | 145,915 | | | 4.00 | % | | $ | 182,393 | | | 5.00 | % |
Tier I Capital (to risk-weighted assets) | $ | 375,320 | | | 11.26 | % | | $ | 199,924 | | | 6.00 | % | | $ | 266,565 | | | 8.00 | % |
Total Risk-based Capital (to risk-weighted assets) | $ | 398,408 | | | 11.96 | % | | $ | 266,565 | | | 8.00 | % | | $ | 333,206 | | | 10.00 | % |
| | | | | | | | | | | |
HomeTrust Bank: | | | | | | | | | | | |
September 30, 2021 | | | | | | | | | | | |
CTE1 Capital (to risk-weighted assets) | $ | 363,085 | | | 10.87 | % | | $ | 150,258 | | | 4.50 | % | | $ | 217,040 | | | 6.50 | % |
Tier I Capital (to total adjusted assets) | $ | 363,085 | | | 10.38 | % | | $ | 139,913 | | | 4.00 | % | | $ | 174,891 | | | 5.00 | % |
Tier I Capital (to risk-weighted assets) | $ | 363,085 | | | 10.87 | % | | $ | 200,344 | | | 6.00 | % | | $ | 267,126 | | | 8.00 | % |
Total Risk-based Capital (to risk-weighted assets) | $ | 385,283 | | | 11.54 | % | | $ | 267,126 | | | 8.00 | % | | $ | 333,907 | | | 10.00 | % |
| | | | | | | | | | | |
June 30, 2021 | | | | | | | | | | | |
CTE1 capital (to risk-weighted assets) | $ | 357,767 | | | 10.74 | % | | $ | 149,936 | | | 4.50 | % | | $ | 216,575 | | | 6.50 | % |
Tier I Capital (to total adjusted assets) | $ | 357,767 | | | 9.81 | % | | $ | 145,933 | | | 4.00 | % | | $ | 182,417 | | | 5.00 | % |
Tier I Capital (to risk-weighted assets) | $ | 357,767 | | | 10.74 | % | | $ | 199,915 | | | 6.00 | % | | $ | 266,553 | | | 8.00 | % |
Total Risk-based Capital (to risk-weighted assets) | $ | 380,855 | | | 11.43 | % | | $ | 266,553 | | | 8.00 | % | | $ | 333,192 | | | 10.00 | % |
|
| | | | | | | | | | | | | | | | | | | | |
| | | Regulatory Requirements |
| Actual | | Minimum for Capital Adequacy Purposes | | Minimum to Be Well Capitalized |
| Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
HomeTrust Bancshares, Inc. | | | | | | | | | | | |
| | | | | | | | | | | |
As of December 31, 2017 | | | | | | | | | | | |
Common Equity Tier I Capital to Risk-Weighted Assets | $ | 354,765 |
| | 13.02 | % | | $ | 122,649 |
| | 4.50 | % | | $ | 177,160 |
| | 6.50 | % |
Tier I Capital (to Total Adjusted Assets) | $ | 354,765 |
| | 11.06 | % | | $ | 128,323 |
| | 4.00 | % | | $ | 160,404 |
| | 5.00 | % |
Tier I Capital (to Risk-weighted Assets) | $ | 354,765 |
| | 13.02 | % | | $ | 163,533 |
| | 6.00 | % | | $ | 218,043 |
| | 8.00 | % |
Total Risk-based Capital (to Risk-weighted Assets) | $ | 376,310 |
| | 13.81 | % | | $ | 218,043 |
| | 8.00 | % | | $ | 272,554 |
| | 10.00 | % |
| | | | | | | | | | | |
As of June 30, 2017 | |
| | |
| | |
| | |
| | |
| | |
|
Common Equity Tier I Capital to Risk-Weighted Assets | $ | 342,664 |
| | 13.07 | % | | $ | 118,024 |
| | 4.50 | % | | $ | 170,478 |
| | 6.50 | % |
Tier I Capital (to Total Adjusted Assets) | $ | 342,664 |
| | 11.13 | % | | $ | 123,149 |
| | 4.00 | % | | $ | 153,936 |
| | 5.00 | % |
Tier I Capital (to Risk-weighted Assets) | $ | 342,664 |
| | 13.07 | % | | $ | 157,365 |
| | 6.00 | % | | $ | 209,820 |
| | 8.00 | % |
Total Risk-based Capital (to Risk-weighted Assets) | $ | 364,269 |
| | 13.89 | % | | $ | 209,820 |
| | 8.00 | % | | $ | 262,275 |
| | 10.00 | % |
| | | | | | | | | | | |
HomeTrust Bank: | |
| | |
| | |
| | |
| | |
| | |
|
| | | | | | | | | | | |
As of December 31, 2017 | |
| | |
| | |
| | |
| | |
| | |
|
Common Equity Tier I Capital to Risk-Weighted Assets | $ | 318,394 |
| | 11.73 | % | | $ | 122,157 |
| | 4.50 | % | | $ | 176,449 |
| | 6.50 | % |
Tier I Capital (to Total Adjusted Assets) | $ | 318,394 |
| | 9.95 | % | | $ | 128,038 |
| | 4.00 | % | | $ | 160,047 |
| | 5.00 | % |
Tier I Capital (to Risk-weighted Assets) | $ | 318,394 |
| | 11.73 | % | | $ | 162,876 |
| | 6.00 | % | | $ | 217,168 |
| | 8.00 | % |
Total Risk-based Capital (to Risk-weighted Assets) | $ | 339,816 |
| | 12.52 | % | | $ | 217,168 |
| | 8.00 | % | | $ | 271,461 |
| | 10.00 | % |
| | | | | | | | | | | |
As of June 30, 2017 | |
| | |
| | |
| | |
| | |
| | |
|
Common Equity Tier I Capital to Risk-Weighted Assets | $ | 305,216 |
| | 11.68 | % | | $ | 117,560 |
| | 4.50 | % | | $ | 169,809 |
| | 6.50 | % |
Tier I Capital (to Total Adjusted Assets) | $ | 305,216 |
| | 9.97 | % | | $ | 122,453 |
| | 4.00 | % | | $ | 153,066 |
| | 5.00 | % |
Tier I Capital (to Risk-weighted Assets) | $ | 305,216 |
| | 11.68 | % | | $ | 156,747 |
| | 6.00 | % | | $ | 208,996 |
| | 8.00 | % |
Total Risk-based Capital (to Risk-weighted Assets) | $ | 326,635 |
| | 12.50 | % | | $ | 208,996 |
| | 8.00 | % | | $ | 261,245 |
| | 10.00 | % |
In addition to the minimum common equity Tier 1 ("CET1"),CET1, Tier 1 and total risk-based capital ratios, both HomeTrust Bancshares, Inc. and the Bank now have to maintain a capital conservation buffer consisting of additional CET1 capital of more than 2.5% above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions. This new capitalAt September 30, 2021, the conservation buffer requirement has phased in starting in January 2016 at 0.625% of risk-weighted assetswas 3.92% and will increase each year until fully implemented to an amount equal to 2.5% of risk-weighted assets in January 2019. At December 31, 2017,3.54%for HomeTrust Bancshares, Inc. and the Bank’s CET1 capital exceeded the required capital conservation buffer of 1.25%.Bank, respectively.
Impact of Inflation
The effects of price changes and inflation can vary substantially for most financial institutions. While management believes that inflation affects the growth of total assets, it believes that it is difficult to assess the overall impact. Management believes this to be the case due to the fact that generally neither the timing nor the magnitude of the inflationary changes in the consumer price index ("CPI")CPI coincides with changes in interest rates. The price of one or more of the components of the CPI may fluctuate considerably and thereby influence the overall CPI without having a corresponding effect on interest rates or upon the cost of those goods and services normally purchased by the Company.us. In years of high inflation and
high interest rates, intermediate and long-term interest rates tend to increase, thereby adversely impacting the market values of investment securities, mortgage loans and other long-term fixed rate loans. In addition, higher short-term interest rates caused by inflation tend to increase the cost of funds. In other years, the opposite may occur.
Item 3.Quantitative and Qualitative Disclosure About Market Risk
There has not been any material change in the market risk disclosures contained in our 20172021 Form 10-K.
Item 4.Controls and Procedures
An evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the "Act")) as of December 31, 2017,September 30, 2021, was carried out under the supervision and with the participation of the Company's Chief Executive Officer, Chief Financial Officerand several other members of the Company's senior management.The Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures in effect as of December 31, 2017,September 30, 2021, were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is: (i) accumulated and communicated to the Company's management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. In addition, there have beenon July 1, 2020, the Company adopted the CECL accounting standard. In connection with the adoption of CECL, the Company implemented relevant changes and enhancements to its internal control environment and processes related to estimating credit losses in accordance with the standard. There were no other changes in ourthe Company's internal control over financial reporting (as defined in Rule 13a-15(f) of the Act) that occurred during the quarterthree months ended December 31, 2017,September 30, 2021 that have materially affected, or are reasonably likely to materially affect, ourthe Company’s internal control over financial reporting.
The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all errorerrors and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls may be circumvented by the individual acts of some persons, by collusion of two or more people, or by override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
The "Litigation" section of Note 10"Note 9 - Commitments and Contingencies" to the Consolidated Financial Statements included in Part I, Item 1 is incorporated herein by reference.
Item 1A. Risk Factors
There have been no material changes in the Risk Factors previously disclosed in Item 1A of the Company's 20172021 Form 10-K.
46
| |
Item 2. | Unregistered Sales of Equity Securities and use of Proceeds |
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
(a) Not applicable
(b) Not applicable
(c) The following table provides information about repurchases of common stock by the Company during the quarter ended December 31, 2017:Not applicable
|
| | | | | | | | | | | | |
Period | Total Number
Of Shares Purchased
| | Average
Price Paid per Share
| | Total Number Of Shares Purchased as Part of Publicly Announced Plans | | Maximum
Number of
Shares that May
Yet Be Purchased Under Publicly Announced Plans
|
October 1 - October 31, 2017 | — |
| | $ | — |
| | — |
| | 443,155 |
|
November 1 - November 30, 2017 | — |
| | — |
| | — |
| | 443,155 |
|
December 1 - December 31, 2017 | — |
| | — |
| | — |
| | 443,155 |
|
Total | — |
| | $ | — |
| | — |
| | 443,155 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Total Number Of Shares Purchased | | Average Price Paid per Share | | Total Number Of Shares Purchased as Part of Publicly Announced Plans | | Maximum Number of Shares that May Yet Be Purchased Under Publicly Announced Plans |
July 1 - July 31, 2021 | 117,657 | | | $ | 27.81 | | | 117,657 | | | 825,941 | |
August 1 - August 31, 2021 | 70,737 | | | 27.67 | | | 70,737 | | | 755,204 | |
September 1 - September 30, 2021 | 188,041 | | | 27.67 | | | 188,041 | | | 567,163 | |
Total | 376,435 | | | $ | 27.71 | | | 376,435 | | | 567,163 | |
On December 15, 2015April 2, 2020, the Company announced that its Board of Directors had authorized the repurchase of up to 922,855851,004 shares of the Company's common stock, representing 5% of the Company'sits outstanding shares at the time of the announcement. The shares may be purchased in the open market or in privately negotiated transactions, from time to time depending upon market conditions and other factors. As of December 31, 2017, 479,700 ofOn July 26, 2021, the stock repurchase plan was completed with shares approved on December 15, 2015 had been purchased at an average price of $18.00.
$22.83. On July 28, 2021, an additional 825,941 shares of common stock were authorized for repurchase representing 5% of the Company's outstanding shares at the time of the announcement.
| |
Item 3. | Defaults Upon Senior Securities |
Item 3. Defaults Upon Senior Securities
Nothing to report.
| |
Item 4. | Mine Safety Disclosures |
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Nothing to report.
See Exhibit Index.
Item 6. Exhibits
| | | | | | | | |
Regulation S-K Exhibit Number | Document | Reference to Prior Filing or Exhibit Number Attached Hereto |
| | |
| | |
3.1 | | (a) |
3.2 | | (b) |
| | |
3.3 | | (f) |
4.1 | | (b) |
4.2 | | (d) |
4.3 |
| (e) |
10.1 | | 10.1 |
10.2 | | (g) |
10.3 | | (g) |
10.3A | | (h) |
10.3B | | (i) |
10.3C | | (c) |
10.4 |
| (g) |
10.5 | | (g) |
10.6 | | (a) |
10.7 | | (a) |
10.7A | | (a) |
10.7B | | (a) |
10.7C | | (a) |
10.7D | | (a) |
10.7E |
| (a) |
10.7F | | (a) |
10.7G | | (a) |
10.7H | | (a) |
10.7I | | (j) |
10.8 | | (a) |
10.8A | | (a) |
10.8B | | (a) |
10.8C | | (a) |
10.8D | | (a) |
10.8E | | (a) |
10.8F | | (a) |
10.8G | | (a) |
| | | | | | | | |
10.9 | | (a) |
10.10 | | (a) |
10.11 | | (a) |
10.12 | | (k) |
10.13 | | (l) |
10.14 | | (l) |
10.15 | | (l) |
10.16 | | (l) |
10.17 | | (l) |
10.18 | | (f) |
10.19 | Reserved | |
10.20 | | (m) |
10.21 | | (m) |
10.22 | | (m) |
10.23 | | (m) |
10.24 | | (m) |
10.25 | | (m) |
10.26 |
| (n) |
10.27 | | (o) |
10.28 | | (g) |
10.29 | | (p) |
31.1 | | 31.1 |
31.2 | | 31.2 |
32 | | 32.0 |
101 | The following materials from HomeTrust Bancshares' Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in Extensible Business Reporting Language (XBRL): (a) Consolidated Balance Sheets; (b) Consolidated Statements of Income; (c) Consolidated Statements of Comprehensive Income; (d) Consolidated Statements of Changes in Stockholders' Equity; (e) Consolidated Statements of Cash Flows; and (f) Notes to Consolidated Financial Statements. | 101 |
(a)Filed as an exhibit to HomeTrust Bancshares's Registration Statement on Form S-1 (File No. 333-178817) filed on December 29, 2011.
(b)Filed as an exhibit to HomeTrust Bancshares's Current Report on Form 8-K filed on September 25, 2012 (File No. 001-35593).
(c)Filed as an exhibit to HomeTrust Bancshares's Current Report on Form 8-K filed on July 26, 2021 (File No. 001-35593).
(d)Filed as an exhibit to HomeTrust Bancshares's Current Report on Form 8-K filed on August 31, 2015 (File No. 001-35593).
(e)Filed as an exhibit to HomeTrust Bancshares’s Current Report on Form 8-K filed on August 21, 2018 (File No. 001-35593).
(f)Filed as an exhibit to HomeTrust Bancshares's Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 (File No. 001-35593).
(g)Filed as an exhibit to HomeTrust Bancshares's Current Report on Form 8-K filed on September 11, 2018 (File No. 001-35593).
(h)Filed as an exhibit to HomeTrust Bancshares’s Current Report on Form 8-K filed on September 25, 2018 (File No. 001-35593.
(i)Filed as an exhibit to HomeTrust Bancshares's Current Report on Form 8-K filed on October 28, 2020 (File No. 001-35593).
(j)Filed as an exhibit to Amendment No. One to HomeTrust Bancshares's Registration Statement on Form S-1 (File No. 333-178817) filed on March 9, 2012.
(k)Attached as Appendix A to HomeTrust Bancshares's definitive proxy statement filed on December 5, 2012 (File No. 001-35593).
(l)Filed as an exhibit to HomeTrust Bancshares's Registration Statement on Form S-8 (File No. 333-186666) filed on February 13, 2013.
(m)Filed as an exhibit to HomeTrust Bancshares's Annual Report on Form 10-K for the fiscal year ended June 30, 2014 (File No. 001-35593).
(n)Filed as an exhibit to HomeTrust Bancshares's Annual Report on Form 10-K for the fiscal year ended June 30, 2015 (File No. 001-35593).
(o)Filed as an exhibit to HomeTrust Bancshares's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 (File No. 001-35593).
(p)Filed as an exhibit to HomeTrust Bancshares's Annual Report on Form 10-K for the fiscal year ended June 30, 2018 (File No. 001-35593).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | |
| HomeTrust Bancshares, Inc. |
| | |
| | |
Date: November 5, 2021 | HomeTrust Bancshares, Inc. |
By: | | |
| | |
Date: February 9, 2018 | By: | /s/ Dana L. Stonestreet |
| | Dana L. Stonestreet |
| | Chairman President and CEO |
| | (Duly Authorized Officer) |
| | |
Date: February 9, 2018 | By: | /s/ Tony J. VunCannon |
| | Tony J. VunCannon |
| | Executive Vice President, CFO, and Treasurer |
| | (Principal Financial and Accounting Officer) |
| | |
| | |
EXHIBIT INDEX
|
| | |
Regulation S-K Exhibit NumberDate: November 5, 2021 | DocumentBy: | Reference to Prior Filing or Exhibit Number Attached Hereto |
| | |
2.1 |
| (a) |
3.1 | | (b) |
3.2 | | (c) |
3.3 | | (d) |
3.4 | | (q) |
4.1 | | (e) |
4.2 | | (m) |
10.1 | | (p) |
10.2 | | (e) |
10.3 | | (b) |
10.4 | | (f) |
10.5 | | (b) |
10.6 | | (b) |
10.7 | | (b) |
10.7A | | (b) |
10.7B | | (b) |
10.7C | | (b) |
10.7D | | (b)Executive Vice President, CFO, Corporate Secretary and Treasurer |
10.7E | | (b)(Principal Financial and Accounting Officer) |
10.7F | | (b) |
10.7G | | (b) |
10.7H | | (b) |
10.7I | | (g) |
10.8 | | (b) |
10.8A | | (b) |
10.8B | | (b) |
10.8C | | (b) |
10.8D | | (b) |
10.8E | | (b) |
10.8F | | (b) |
10.8G | | (b) |
10.9 | | (b) |
10.10 | | (b) |
10.11 | | (b) |
10.12 | | (n) |
10.13 | | (h) |
10.14 | | (i) |
|
| | |
10.15 | | (i) |
10.16 | | (i) |
10.17 | | (i) |
10.18 | | (i) |
10.19 | | (j) |
10.20 | | (k) |
10.21 | | (l) |
10.22 | | (l) |
10.23 | | (l) |
10.24 | | (l) |
10.25 | | (l) |
10.26 | | (l) |
10.27 | | (n) |
10.28 | | (n) |
10.29 | | (o) |
31.1 | | 31.1 |
31.2 | | 31.2 |
32 | | 32.0 |
101 | The following materials from HomeTrust Bancshares' Quarterly Report on Form 10-Q for the quarter ended December 31, 2017, formatted in Extensible Business Reporting Language (XBRL): (a) Consolidated Balance Sheets; (b) Consolidated Statements of Income; (c) Consolidated Statements of Comprehensive Income; (d) Consolidated Statements of Changes in Stockholders' Equity; (e) Consolidated Statements of Cash Flows; and (f) Notes to Consolidated Financial Statements.
| 101 |
| |
(a) | Attached as Appendix A to the proxy statement/prospectus filed by HomeTrust Bancshares on November 2, 2016 pursuant to Rule 424(b) of the Securities Act of 1933. |
| |
(b) | Filed as an exhibit to HomeTrust Bancshares's Registration Statement on Form S-1 (File No. 333-178817) filed on December 29, 2011. |
| |
(c) | Filed as an exhibit to HomeTrust Bancshares's Current Report on Form 8-K filed on September 25, 2012 (File No. 001-35593). |
| |
(d) | Filed as an exhibit to HomeTrust Bancshares's Current Report on Form 8-K filed on January 29, 2014 (File No. 001-35593). |
| |
(e) | Filed as an exhibit to HomeTrust Bancshares's Current Report on Form 8-K filed on November 27, 2013 (File No. 001-35593). |
| |
(f) | Filed as an exhibit to HomeTrust Bancshares's Annual Report on Form 10-K for the fiscal year ended June 30, 2012 (File No. 001-35593). |
| |
(g) | Filed as an exhibit to Amendment No. One to HomeTrust Bancshares's Registration Statement on Form S-1 (File No. 333-178817) filed on March 9, 2012. |
| |
(h) | Attached as Appendix A to HomeTrust Bancshares's definitive proxy statement filed on December 5, 2012 (File No. 001-35593). |
| |
(i) | Filed as an exhibit to HomeTrust Bancshares's Registration Statement on Form S-8 (File No. 333-186666) filed on February 13, 2013. |
| |
(j) | Filed as an exhibit to HomeTrust Bancshares's Current Report on Form 8-K filed on June 3, 2014 (File No. 001-35593). |
| |
(k) | Filed as an exhibit to Jefferson Bancshares, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2008 (File No. 000-50347). |
| |
(l) | Filed as an exhibit to HomeTrust Bancshares's Annual Report on Form 10-K for the fiscal year ended June 30, 2014 (File No. 001-35593). |
| |
(m) | Filed as an exhibit to HomeTrust Bancshares's Current Report on Form 8-K filed on August 31, 2015 (File No. 001-35593) |
| |
(n) | Filed as an exhibit to HomeTrust Bancshares's Annual Report on Form 10-K for the fiscal year ended June 30, 2015 (File No. 001-35593). |
| |
(o) | Filed as an exhibit to HomeTrust Bancshares's Current Report on Form 8-K filed on January 29, 2016 (File No. 001-35593) |
| |
(p) | Filed as an exhibit to HomeTrust Bancshares's Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 (File No. 001-35593). |
| |
(q) | Filed as an exhibit to HomeTrust Bancshares's Current Report on Form 8-K filed on January 30, 2018 (File No. 001-35593) |