UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December~~March 31, ~~2020~~2021

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to ________

Commission file number: 001-35593

HOMETRUST BANCSHARES, INC.

(Exact name of registrant as specified in its charter)


Maryland						45-5055422
(State or other jurisdiction of incorporation of organization)						(I.R.S. Employer Identification No.)

10 Woodfin Street, Asheville, North Carolina 28801

(Address of principal executive offices; Zip Code)

(828) 259-3939

(Registrant's telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.01 per share	HTBI	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 and 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☒

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were ~~16,686,601~~16,616,594 shares of common stock, par value of $.01 per share, issued and outstanding as of ~~February 3,~~May 4, 2021.

HOMETRUST BANCSHARES, INC. AND SUBSIDIARIES

10-Q

TABLE OF CONTENTS


			Page Number
PART I FINANCIAL INFORMATION

Item 1.	Financial Statements

		Consolidated Balance Sheets (Unaudited) at ~~December~~ 3 1 ~~, 2020~~March 31, 2021 and June 30, 2020	3

		Consolidated Statements of Income (Unaudited) for the Three and ~~Six~~ Nine Months Ended ~~December~~ 3 1 ,March 31, 2021 and 2020 ~~and 2019~~	4

		Consolidated Statements of Comprehensive Income (Unaudited) for the Three and ~~Six~~ Nine Months Ended ~~December 3~~1 ,March 31, 2021 and 2020 ~~and 2019~~	5

		Consolidated Statements of Changes in Stockholders' Equity (Unaudited) for the Three and ~~Six~~ Nine Months Ended ~~December 3~~1 ,March 31, 2021 and 2020 ~~and 2019~~	6

		Consolidated Statements of Cash Flows (Unaudited) for the ~~Six~~Nine Months Ended ~~December 3~~1 ,March 31, 2021 and 2020 ~~and 2019~~	8

		Notes to Consolidated Financial Statements	10

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		40

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		56

Item 4.	Controls and Procedures		56

PART II OTHER INFORMATION

Item 1.	Legal Proceedings		56

Item 1A.	Risk Factors		56

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		56

Item 3.	Defaults Upon Senior Securities		57

Item 4.	Mine Safety Disclosures		57

Item 5	Other Information		57

Item 6.	Exhibits		57

SIGNATURES			60

Glossary of Defined Terms

The following items may be used throughout this Form 10-Q, including the Notes to Consolidated Financial Statements in Item 1 and Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of this Form 10-Q.


Term						Definition
ACL						Allowance for Credit Losses
AFS						Available-For-Sale
ASC						Accounting Standard Codification
ASU						Accounting Standard Update

BOLI						Bank Owned Life Insurance
CARES Act						Coronavirus Aid, Relief, and Economic Security Act of 2020
CD						Certificates of Deposit
CDA						Collateral Dependent Asset
CECL						Current Expected Credit Losses
CET1						Common Equity Tier 1
COVID-19						Coronavirus Disease 2019
CPI						Consumer Price Index
DCF						Discounted Cash Flow
ECL						Expected Credit Losses
EPS						Earnings Per Share
ESOP						Employee Stock Ownership Plan
FASB						Financial Accounting Standards Board
FDIC						Federal Deposit Insurance Corporation
FHLB						Federal Home Loan Bank
FRB						Federal Reserve Bank of Richmond
GAAP						Generally Accepted Accounting Principles in the United States
GSE						Government-Sponsored Enterprises
HELOC						Home Equity Line of Credit
LIBOR						London Interbank Offered Rate
MBS						Mortgage-Backed Security
NCCOB						North Carolina Office of the Commissioner of Banks
OTTI						Other Than Temporary Impairment
PCD						Purchased Credit Deteriorated
PCI						Purchase Credit Impaired
PPP						Paycheck Protection Program
REO						Real Estate Owned
ROU						Right of Use
SEC						Securities and Exchange Commission
SBA						Small Business Administration
SBIC						Small Business Investment Companies
TDR						Troubled Debt Restructuring

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Consolidated Balance Sheets

(Dollars in thousands, except per share data)


		(Unaudited)					(Unaudited)
		December 31, 2020		June 30, 2020 (1)			March 31, 2021		June 30, 2020 (1)
Assets	Assets					Assets
Cash	Cash	$	27,365	$	31,908	Cash	$	24,621	$	31,908
Interest-bearing deposits	Interest-bearing deposits	198,979		89,714		Interest-bearing deposits	139,474		89,714
Cash and cash equivalents	Cash and cash equivalents	226,344		121,622		Cash and cash equivalents	164,095		121,622
Commercial paper, net	Commercial paper, net	183,778		304,967		Commercial paper, net	238,445		304,967
Certificates of deposit in other banks	Certificates of deposit in other banks	48,637		55,689		Certificates of deposit in other banks	42,015		55,689
Debt securities available for sale, at fair value (amortized cost of $150,807 and $124,918 at December 31, 2020 and June 30, 2020, respectively)		153,540		127,537
Debt securities available for sale, at fair value (amortized cost of $160,521 and $124,918 at March 31, 2021 and June 30, 2020, respectively)						Debt securities available for sale, at fair value (amortized cost of $160,521 and $124,918 at March 31, 2021 and June 30, 2020, respectively)	162,417		127,537
Other investments, at cost	Other investments, at cost	39,572		38,946		Other investments, at cost	28,899		38,946
Loans held for sale	Loans held for sale	118,439		77,177		Loans held for sale	86,708		77,177
Total loans, net of deferred loan costs	Total loans, net of deferred loan costs	2,678,624		2,769,119		Total loans, net of deferred loan costs	2,690,153		2,769,119
Allowance for credit losses	Allowance for credit losses	(39,844)		(28,072)		Allowance for credit losses	(36,059)		(28,072)
Net loans	Net loans	2,638,780		2,741,047		Net loans	2,654,094		2,741,047
Premises and equipment, net	Premises and equipment, net	70,104		58,462		Premises and equipment, net	70,886		58,462
Accrued interest receivable	Accrued interest receivable	9,796		12,312		Accrued interest receivable	8,271		12,312
REO	REO	252		337		REO	143		337
Deferred income taxes	Deferred income taxes	18,626		16,334		Deferred income taxes	16,889		16,334
BOLI	BOLI	93,326		92,187		BOLI	93,877		92,187
Goodwill	Goodwill	25,638		25,638		Goodwill	25,638		25,638
Core deposit intangibles	Core deposit intangibles	638		1,078		Core deposit intangibles	473		1,078
Other assets	Other assets	52,501		49,519		Other assets	55,763		49,519
Total Assets	Total Assets	$	3,679,971	$	3,722,852	Total Assets	$	3,648,613	$	3,722,852
Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Liabilities	Liabilities					Liabilities
Deposits	Deposits	$	2,743,269	$	2,785,756	Deposits	$	2,908,478	$	2,785,756
Borrowings	Borrowings	475,000		475,000		Borrowings	275,000		475,000

Other liabilities	Other liabilities	56,978		53,833		Other liabilities	58,683		53,833
Total liabilities	Total liabilities	3,275,247		3,314,589		Total liabilities	3,242,161		3,314,589
Stockholders' Equity	Stockholders' Equity					Stockholders' Equity
Preferred stock, $0.01 par value, 10,000,000 shares authorized, NaN issued or outstanding	Preferred stock, $0.01 par value, 10,000,000 shares authorized, NaN issued or outstanding	0		0		Preferred stock, $0.01 par value, 10,000,000 shares authorized, NaN issued or outstanding	0		0
Common stock, $0.01 par value, 60,000,000 shares authorized, 16,791,027 shares issued and outstanding at December 31, 2020; 17,021,357 at June 30, 2020		168		170
Common stock, $0.01 par value, 60,000,000 shares authorized, 16,655,347 shares issued and outstanding at March 31, 2021; 17,021,357 at June 30, 2020						Common stock, $0.01 par value, 60,000,000 shares authorized, 16,655,347 shares issued and outstanding at March 31, 2021; 17,021,357 at June 30, 2020	167		170
Additional paid in capital	Additional paid in capital	166,352		169,648		Additional paid in capital	162,010		169,648
Retained earnings	Retained earnings	242,182		242,776		Retained earnings	248,767		242,776
Unearned ESOP shares	Unearned ESOP shares	(6,083)		(6,348)		Unearned ESOP shares	(5,951)		(6,348)
Accumulated other comprehensive income	Accumulated other comprehensive income	2,105		2,017		Accumulated other comprehensive income	1,459		2,017
Total stockholders' equity	Total stockholders' equity	404,724		408,263		Total stockholders' equity	406,452		408,263
Total Liabilities and Stockholders' Equity	Total Liabilities and Stockholders' Equity	$	3,679,971	$	3,722,852	Total Liabilities and Stockholders' Equity	$	3,648,613	$	3,722,852

(1) Derived from audited financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Income

(Dollars in thousands, except per share data)


		(Unaudited)									(Unaudited)
		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		December 31,				December 31,					March 31,				March 31,
		2020		2019		2020		2019			2021		2020		2021		2020
Interest and Dividend Income	Interest and Dividend Income									Interest and Dividend Income
Loans	Loans	$	28,343	$	32,119	$	56,935	$	64,385	Loans	$	27,629	$	29,781	$	84,564	$	94,166
Commercial paper and interest-bearing deposits	Commercial paper and interest-bearing deposits	614		1,912		1,495		4,165		Commercial paper and interest-bearing deposits	611		1,794		2,106		5,959
Securities available for sale	Securities available for sale	504		1,093		1,032		1,989		Securities available for sale	496		912		1,528		2,901
Other investments	Other investments	696		772		1,144		1,604		Other investments	585		550		1,729		2,154
Total interest and dividend income	Total interest and dividend income	30,157		35,896		60,606		72,143		Total interest and dividend income	29,321		33,037		89,927		105,180
Interest Expense	Interest Expense									Interest Expense
Deposits	Deposits	2,347		6,321		5,600		12,174		Deposits	1,996		5,971		7,596		18,145
Borrowings	Borrowings	1,688		2,541		3,375		5,862		Borrowings	1,632		1,757		5,007		7,619
Total interest expense	Total interest expense	4,035		8,862		8,975		18,036		Total interest expense	3,628		7,728		12,603		25,764
Net Interest Income	Net Interest Income	26,122		27,034		51,631		54,107		Net Interest Income	25,693		25,309		77,324		79,416
Provision (Benefit) for Credit Losses	Provision (Benefit) for Credit Losses	(3,030)		400		(2,080)		400		Provision (Benefit) for Credit Losses	(4,100)		5,400		(6,180)		5,800
Net Interest Income after Provision (Benefit) for Credit Losses	Net Interest Income after Provision (Benefit) for Credit Losses	29,152		26,634		53,711		53,707		Net Interest Income after Provision (Benefit) for Credit Losses	29,793		19,909		83,504		73,616
Noninterest Income	Noninterest Income									Noninterest Income
Service charges and fees on deposit accounts	Service charges and fees on deposit accounts	2,416		2,605		4,513		5,048		Service charges and fees on deposit accounts	2,194		2,304		6,707		7,352
Loan income and fees	Loan income and fees	569		871		1,043		1,753		Loan income and fees	636		294		1,679		2,047

Gain on sale of loans held for sale	Gain on sale of loans held for sale	3,704		3,775		7,048		6,074		Gain on sale of loans held for sale	4,881		1,503		11,929		7,577
BOLI income	BOLI income	511		509		1,043		1,206		BOLI income	508		518		1,551		1,724

Other, net	Other, net	2,144		1,314		4,336		2,653		Other, net	2,459		1,756		6,795		4,409
Total noninterest income	Total noninterest income	9,344		9,074		17,983		16,734		Total noninterest income	10,678		6,375		28,661		23,109
Noninterest Expense	Noninterest Expense									Noninterest Expense
Salaries and employee benefits	Salaries and employee benefits	15,700		14,170		30,907		28,082		Salaries and employee benefits	15,784		14,455		46,691		42,537
Net occupancy expense	Net occupancy expense	2,261		2,384		4,554		4,726		Net occupancy expense	2,456		2,246		7,010		6,972
Computer services	Computer services	2,220		1,985		4,527		4,009		Computer services	2,581		2,023		7,108		6,032
Telephone, postage, and supplies	Telephone, postage, and supplies	871		798		1,533		1,600		Telephone, postage, and supplies	812		862		2,345		2,462
Marketing and advertising	Marketing and advertising	327		641		652		1,320		Marketing and advertising	319		396		971		1,716
Deposit insurance premiums	Deposit insurance premiums	487		12		998		12		Deposit insurance premiums	363		462		1,361		474
Loss (gain) on sale and impairment of REO	Loss (gain) on sale and impairment of REO	0		122		(35)		103		Loss (gain) on sale and impairment of REO	(14)		(15)		(49)		88
REO expense	REO expense	165		238		413		496		REO expense	98		250		511		746
Core deposit intangible amortization	Core deposit intangible amortization	202		373		440		784		Core deposit intangible amortization	165		334		605		1,118

Prepayment penalty on borrowings										Prepayment penalty on borrowings	3,656		0		3,656		0
Other	Other	4,210		3,318		8,454		6,442		Other	4,286		3,890		12,740		10,332
Total noninterest expense	Total noninterest expense	26,443		24,041		52,443		47,574		Total noninterest expense	30,506		24,903		82,949		72,477
Income Before Income Taxes	Income Before Income Taxes	12,053		11,667		19,251		22,867		Income Before Income Taxes	9,965		1,381		29,216		24,248
Income Tax Expense	Income Tax Expense	2,592		2,476		4,037		4,872		Income Tax Expense	2,096		188		6,133		5,060
Net Income	Net Income	$	9,461	$	9,191	$	15,214	$	17,995	Net Income	$	7,869	$	1,193	$	23,083	$	19,188
Per Share Data:	Per Share Data:									Per Share Data:
Net income per common share:	Net income per common share:									Net income per common share:
Basic	Basic	$	0.58	$	0.54	$	0.93	$	1.05	Basic	$	0.49	$	0.07	$	1.42	$	1.12
Diluted	Diluted	$	0.57	$	0.52	$	0.92	$	1.01	Diluted	$	0.48	$	0.07	$	1.40	$	1.08

Average shares outstanding:	Average shares outstanding:									Average shares outstanding:
Basic	Basic	16,202,844		16,906,457		16,216,917		17,002,052		Basic	15,979,590		16,688,646		16,139,059		16,898,391
Diluted	Diluted	16,563,359		17,567,680		16,514,831		17,660,687		Diluted	16,485,718		17,258,428		16,339,130		17,524,252

The accompanying notes are an integral part of these consolidated financial statements.

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Comprehensive Income

(Dollars in thousands)


		(Unaudited)									(Unaudited)
		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		December 31,				December 31,					March 31,				March 31,
		2020		2019		2020		2019			2021		2020		2021		2020
Net Income	Net Income	$	9,461	$	9,191	$	15,214	$	17,995	Net Income	$	7,869	$	1,193	$	23,083	$	19,188
Other Comprehensive Income (Loss)	Other Comprehensive Income (Loss)									Other Comprehensive Income (Loss)
Unrealized holding gains (losses) on securities available for sale	Unrealized holding gains (losses) on securities available for sale									Unrealized holding gains (losses) on securities available for sale
Gains (losses) arising during the period	Gains (losses) arising during the period	(84)		(270)		114		25		Gains (losses) arising during the period	(839)		395		(724)		419
Deferred income tax benefit (expense)	Deferred income tax benefit (expense)	19		62		(26)		(6)		Deferred income tax benefit (expense)	193		(91)		166		(96)

Total other comprehensive income (loss)	Total other comprehensive income (loss)	$	(65)	$	(208)	$	88	$	19	Total other comprehensive income (loss)	$	(646)	$	304	$	(558)	$	323
Comprehensive Income	Comprehensive Income	$	9,396	$	8,983	$	15,302	$	18,014	Comprehensive Income	$	7,223	$	1,497	$	22,525	$	19,511

The accompanying notes are an integral part of these consolidated financial statements.

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders' Equity

(Dollars in thousands)

(Unaudited)
Three Months Ended December 31, 2020
Common Stock Additional
Paid In
Capital Retained
Earnings Unearned
ESOP
Shares Accumulated
Other
Comprehensive
Income (loss) Total
Stockholders'
Equity
Shares Amount
Balance at September 30, 2020 17,020,724 $ 170 $ 170,204 $ 234,023 $ (6,216) $ 2,170 $ 400,351
Net income — — — 9,461 — — 9,461
Cash dividends declared on common stock, $0.08/common share — — — (1,302) — — (1,302)
Stock repurchased (277,122) (3) (5,176) — — — (5,179)
Forfeited restricted stock (6,575) — — — — — —
Exercised stock options 54,000 1 775 — — — 776
Stock option expense — — 153 — — — 153
Restricted stock expense — — 301 — — — 301
ESOP shares allocated — — 95 — 133 — 228
Other comprehensive loss — — — — — (65) (65)
Balance at December 31, 2020 16,791,027 $ 168 $ 166,352 $ 242,182 $ (6,083) $ 2,105 $ 404,724
(Unaudited)
Six Months Ended December 31, 2020
Common Stock Additional
Paid In
Capital Retained
Earnings Unearned
ESOP
Shares Accumulated
Other
Comprehensive
Income Total
Stockholders'
Equity
Shares Amount
Balance at June 30, 2020 17,021,357 $ 170 $ 169,648 $ 242,776 $ (6,348) $ 2,017 $ 408,263
Net income — — — 15,214 — — 15,214
Cumulative-effect adjustment due to the adoption of ASU 2016-13 — — — (13,358) — — (13,358)
Cash dividends declared on common stock, $0.15/common share — — — (2,450) — — (2,450)
Stock repurchased (277,122) (3) (5,176) — — — (5,179)
Forfeited restricted stock (6,575) — — — — — —
Retired stock (633) — (9) — — — (9)
Exercised stock options 54,000 1 775 — — — 776
Stock option expense — — 317 — — — 317
Restricted stock expense — — 643 — — — 643
ESOP shares allocated — — 154 — 265 — 419
Other comprehensive income — — — — — 88 88
Balance at December 31, 2020 16,791,027 $ 168 $ 166,352 $ 242,182 $ (6,083) $ 2,105 $ 404,724


	(Unaudited)
	Three Months Ended March 31, 2021
	Common Stock			Additional Paid In Capital		Retained Earnings		Unearned ESOP Shares		Accumulated Other Comprehensive Income (loss)		Total Stockholders' Equity
	Shares	Amount
Balance at December 31, 2020	16,791,027	$	168	$	166,352	$	242,182	$	(6,083)	$	2,105	$	404,724
Net income	—	—		—		7,869		—		—		7,869

Cash dividends declared on common stock, $0.08/common share	—	—		—		(1,284)		—		—		(1,284)
Stock repurchased	(289,333)	(3)		(6,541)		—		—		—		(6,544)
Forfeited restricted stock	0	0		—		—		—		—		0
Retired stock	(8,473)	—		(195)		—		—		—		(195)

Granted restricted stock	43,260	0		—		—		—		—		0
Exercised stock options	118,866	2		1,712		—		—		—		1,714
Stock option expense	—	—		156		—		—		—		156
Restricted stock expense	—	—		333		—		—		—		333
ESOP shares allocated	—	—		193		—		132		—		325
Other comprehensive loss	—	—		—		—		—		(646)		(646)
Balance at March 31, 2021	16,655,347	$	167	$	162,010	$	248,767	$	(5,951)	$	1,459	$	406,452


	(Unaudited)
	Nine Months Ended March 31, 2021
	Common Stock			Additional Paid In Capital		Retained Earnings		Unearned ESOP Shares		Accumulated Other Comprehensive Income (loss)		Total Stockholders' Equity
	Shares	Amount
Balance at June 30, 2020	17,021,357	$	170	$	169,648	$	242,776	$	(6,348)	$	2,017	$	408,263
Net income	—	—		—		23,083		—		—		23,083
Cumulative-effect adjustment due to the adoption of ASU 2016-13	—	—		—		(13,358)		—		—		(13,358)
Cash dividends declared on common stock, $0.23/common share	—	—		—		(3,734)		—		—		(3,734)
Stock repurchased	(566,455)	(6)		(11,717)		—		—		—		(11,723)
Forfeited restricted stock	(6,575)	0		—		—		—		—		0
Retired stock	(9,106)	—		(204)		—		—		—		(204)

Granted restricted stock	43,260	0		—		—		—		—		0
Exercised stock options	172,866	3		2,487		—		—		—		2,490
Stock option expense	—	—		473		—		—		—		473
Restricted stock expense	—	—		976		—		—		—		976
ESOP shares allocated	—	—		347		—		397		—		744
Other comprehensive loss	—	—		—		—		—		(558)		(558)
Balance at March 31, 2021	16,655,347	$	167	$	162,010	$	248,767	$	(5,951)	$	1,459	$	406,452

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders' Equity (continued)

(Dollars in thousands)

(Unaudited)
Three Months Ended December 31, 2019
Common Stock Additional
Paid In
Capital Retained
Earnings Unearned
ESOP
Shares Accumulated
Other
Comprehensive
Income (loss) Total
Stockholders'
Equity
Shares Amount
Balance at September 30, 2019 17,818,145 $ 178 $ 186,359 $ 232,315 $ (6,744) $ 960 $ 413,068
Net income — — — 9,191 — — 9,191
Cash dividends declared on common stock, $0.07/common share — — — (1,194) — — (1,194)
Stock repurchased (207,261) (2) (5,417) — — — (5,419)
Exercised stock options 53,500 1 768 — — — 769
Stock option expense — — 190 — — — 190
Restricted stock expense — — 250 — — — 250
ESOP shares allocated — — 216 — 132 — 348
Other comprehensive loss — — — — — (208) (208)
Balance at December 31, 2019 17,664,384 $ 177 $ 182,366 $ 240,312 $ (6,612) $ 752 $ 416,995
(Unaudited)
Six Months Ended December 31, 2019
Common Stock Additional
Paid In
Capital Retained
Earnings Unearned
ESOP
Shares Accumulated
Other
Comprehensive
Income (loss) Total
Stockholders'
Equity
Shares Amount
Balance at June 30, 2019 17,984,105 $ 180 $ 190,315 $ 224,545 $ (6,877) $ 733 $ 408,896
Net income — — — 17,995 — — 17,995
Cash dividends declared on common stock, $0.13/common share — — — (2,228) — — (2,228)
Stock repurchased (396,421) (4) (10,215) — — — (10,219)
Forfeited restricted stock (3,200) — — — — — —
Granted restricted stock 13,000 — — — — —
Exercised stock options 66,900 1 962 — — — 963
Stock option expense — — 388 — — — 388
Restricted stock expense — — 495 — — — 495
ESOP shares allocated — — 421 — 265 — 686
Other comprehensive income — — — — — 19 19
Balance at December 31, 2019 17,664,384 $ 177 $ 182,366 $ 240,312 $ (6,612) $ 752 $ 416,995


	(Unaudited)
	Three Months Ended March 31, 2020
	Common Stock			Additional Paid In Capital		Retained Earnings		Unearned ESOP Shares		Accumulated Other Comprehensive Income		Total Stockholders' Equity
	Shares	Amount
Balance at December 31, 2019	17,664,384	$	177	$	182,366	$	240,312	$	(6,612)	$	752	$	416,995
Net income	—	—		—		1,193		—		—		1,193

Cash dividends declared on common stock, $0.07/common share	—	—		—		(1,180)		—		—		(1,180)
Stock repurchased	(635,800)	(7)		(12,996)		—		—		—		(13,003)
Forfeited restricted stock		—		(215)		—		—		—		(215)
Retired stock	(7,950)	—		—		—		—		—		0

Granted restricted stock	41,306	—		—		—		—		—		0
Exercised stock options	40,014	1		577		—		—		—		578
Stock option expense	—	—		168		—		—		—		168
Restricted stock expense	—	—		290		—		—		—		290
ESOP shares allocated	—	—		178		—		132		—		310
Other comprehensive income	—	—		—		—		—		304		304
Balance at March 31, 2020	17,101,954	$	171	$	170,368	$	240,325	$	(6,480)	$	1,056	$	405,440


	(Unaudited)
	Nine Months Ended March 31, 2020
	Common Stock			Additional Paid In Capital		Retained Earnings		Unearned ESOP Shares		Accumulated Other Comprehensive Income		Total Stockholders' Equity
	Shares	Amount
Balance at June 30, 2019	17,984,105	$	180	$	190,315	$	224,545	$	(6,877)	$	733	$	408,896
Net income	—	—		—		19,188		—		—		19,188

Cash dividends declared on common stock, $0.20/common share	—	—		—		(3,408)		—		—		(3,408)
Stock repurchased	(1,032,221)	(11)		(23,211)		—		—		—		(23,222)
Forfeited restricted stock	(3,200)	—		—		—		—		—		0
Retired stock	(7,950)	—		(215)		—		—				(215)

Granted restricted stock	54,306	—		—		—		—				0
Exercised stock options	106,914	2		1,539		—		—		—		1,541
Stock option expense	—	—		556		—		—		—		556
Restricted stock expense	—	—		785		—		—		—		785
ESOP shares allocated	—	—		599		—		397		—		996
Other comprehensive income	—	—		—		—		—		323		323
Balance at March 31, 2020	17,101,954	$	171	$	170,368	$	240,325	$	(6,480)	$	1,056	$	405,440

The accompanying notes are an integral part of these consolidated financial statements.

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(Dollars in thousands)


		(Unaudited)					(Unaudited)
		Six Months Ended December 31,					Nine Months Ended March 31,
		2020		2019			2021		2020
Operating Activities:	Operating Activities:					Operating Activities:
Net income	Net income	$	15,214	$	17,995	Net income	$	23,083	$	19,188
Adjustments to reconcile net income to net cash used in operating activities:	Adjustments to reconcile net income to net cash used in operating activities:					Adjustments to reconcile net income to net cash used in operating activities:
Provision (benefit) for credit losses	Provision (benefit) for credit losses	(2,080)		400		Provision (benefit) for credit losses	(6,180)		5,800
Depreciation	Depreciation	3,885		2,564		Depreciation	7,042		4,137
Deferred income tax expense	Deferred income tax expense	1,671		4,451		Deferred income tax expense	3,600		4,677
Net amortization and accretion	Net amortization and accretion	(342)		(2,991)		Net amortization and accretion	(1,248)		(4,275)
Prepayment penalty paid on borrowings						Prepayment penalty paid on borrowings	3,656		0

Gain (loss) on sale and impairment of REO	Gain (loss) on sale and impairment of REO	(35)		103		Gain (loss) on sale and impairment of REO	(49)		88
Gain on sale of loans held for sale	Gain on sale of loans held for sale	(7,048)		(6,074)		Gain on sale of loans held for sale	(11,929)		(7,577)
Origination of loans held for sale	Origination of loans held for sale	(312,627)		(156,416)		Origination of loans held for sale	(464,173)		(226,834)
Proceeds from sales of loans held for sale	Proceeds from sales of loans held for sale	264,325		138,457		Proceeds from sales of loans held for sale	443,380		200,512

Increase in deferred loan costs, net	Increase in deferred loan costs, net	(316)		(1,082)		Increase in deferred loan costs, net	(541)		(1,017)
Decrease (increase) in accrued interest receivable and other assets	Decrease (increase) in accrued interest receivable and other assets	4,328		(670)		Decrease (increase) in accrued interest receivable and other assets	1,238		(571)
Amortization of core deposit intangibles	Amortization of core deposit intangibles	440		784		Amortization of core deposit intangibles	605		1,118
BOLI income	BOLI income	(1,043)		(1,206)		BOLI income	(1,551)		(1,724)
ESOP compensation expense	ESOP compensation expense	419		686		ESOP compensation expense	744		996
Restricted stock and stock option expense	Restricted stock and stock option expense	960		883		Restricted stock and stock option expense	1,449		1,341
Increase (decrease) in other liabilities	Increase (decrease) in other liabilities	717		(4,853)		Increase (decrease) in other liabilities	2,552		(12,515)
Net cash used in operating activities		(31,532)		(6,969)
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	1,678		(16,656)
Investing Activities:	Investing Activities:					Investing Activities:
Purchase of securities available for sale	Purchase of securities available for sale	(73,690)		(56,430)		Purchase of securities available for sale	(95,636)		(75,530)
Proceeds from maturities of securities available for sale	Proceeds from maturities of securities available for sale	38,720		24,860		Proceeds from maturities of securities available for sale	47,272		27,823

Net proceeds (purchases) of commercial paper	Net proceeds (purchases) of commercial paper	120,983		(9,187)		Net proceeds (purchases) of commercial paper	67,081		(35,949)
Purchase of certificates of deposit in other banks	Purchase of certificates of deposit in other banks	(1,245)		(8,616)		Purchase of certificates of deposit in other banks	(4,930)		(24,200)
Maturities of certificates of deposit in other banks	Maturities of certificates of deposit in other banks	8,297		12,993		Maturities of certificates of deposit in other banks	18,604		18,661
Principal repayments of mortgage-backed securities	Principal repayments of mortgage-backed securities	8,173		7,090		Principal repayments of mortgage-backed securities	11,749		10,902
Net redemptions (purchases) of other investments		(626)		8,480
Net redemptions of other investments						Net redemptions of other investments	10,047		4,177
Proceeds from sale of loans not originated for sale	Proceeds from sale of loans not originated for sale	0		154,870		Proceeds from sale of loans not originated for sale	0		154,870
Net decrease (increase) in loans	Net decrease (increase) in loans	105,181		(78,731)		Net decrease (increase) in loans	103,407		(99,116)
Purchase of BOLI	Purchase of BOLI	(96)		(65)		Purchase of BOLI	(139)		(111)
Proceeds from redemption of BOLI	Proceeds from redemption of BOLI	0		477		Proceeds from redemption of BOLI	0		477
Purchase of premises and equipment	Purchase of premises and equipment	(13,382)		(777)		Purchase of premises and equipment	(15,095)		(2,321)
Purchase of operating lease equipment	Purchase of operating lease equipment	(6,940)		(5,569)		Purchase of operating lease equipment	(7,812)		(11,047)

Proceeds from sale of REO	Proceeds from sale of REO	228		1,421		Proceeds from sale of REO	352		1,812

Net cash provided by investing activities		185,603		50,816
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	134,900		(29,552)
Financing Activities:	Financing Activities:					Financing Activities:
Net increase (decrease) in deposits		(42,487)		230,512
Net increase in other borrowings		0		(245,000)
Net increase in deposits						Net increase in deposits	122,722		227,530
Net decrease in borrowings						Net decrease in borrowings	(203,656)		(145,000)
Common stock repurchased	Common stock repurchased	(5,179)		(10,219)		Common stock repurchased	(11,723)		(23,222)
Cash dividends paid	Cash dividends paid	(2,450)		(2,228)		Cash dividends paid	(3,734)		(3,408)
Retired stock	Retired stock	(9)		0		Retired stock	(204)		(215)
Exercised stock options	Exercised stock options	776		963		Exercised stock options	2,490		1,541

Net cash used in financing activities		(49,349)		(25,972)
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	(94,105)		57,226
Net Increase in Cash and Cash Equivalents	Net Increase in Cash and Cash Equivalents	104,722		17,875		Net Increase in Cash and Cash Equivalents	42,473		11,018
Cash and Cash Equivalents at Beginning of Period	Cash and Cash Equivalents at Beginning of Period	121,622		71,043		Cash and Cash Equivalents at Beginning of Period	121,622		71,043
Cash and Cash Equivalents at End of Period	Cash and Cash Equivalents at End of Period	$	226,344	$	88,918	Cash and Cash Equivalents at End of Period	$	164,095	$	82,061

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows (continued)

(Dollars in thousands)


		(Unaudited)					(Unaudited)
Supplemental Disclosures:	Supplemental Disclosures:	Six Months Ended December 31,				Supplemental Disclosures:	Nine Months Ended March 31,
		2020		2019			2021		2020
Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest	Interest	$	5,404	$	18,771	Interest	$	13,302	$	26,708
Income taxes	Income taxes	1,686		1,300		Income taxes	472		1,300
Noncash transactions:	Noncash transactions:					Noncash transactions:
Unrealized gain in value of securities available for sale, net of income taxes	Unrealized gain in value of securities available for sale, net of income taxes	88		19		Unrealized gain in value of securities available for sale, net of income taxes	(558)		323
Transfer of loans to REO	Transfer of loans to REO	108		46		Transfer of loans to REO	108		46
Transfer of loans held for sale to total loans	Transfer of loans held for sale to total loans	10,496		9,736		Transfer of loans held for sale to total loans	14,702		96,962

Transfer of one-to-four family loans to held for sale	Transfer of one-to-four family loans to held for sale	0		240,453		Transfer of one-to-four family loans to held for sale	0		240,453
Transfer of land from property and equipment to other assets for new finance lease accounting	Transfer of land from property and equipment to other assets for new finance lease accounting	0		2,052		Transfer of land from property and equipment to other assets for new finance lease accounting	0		2,052
New ROU asset and lease liabilities for new operating lease accounting		597		5,296
ROU asset and lease liabilities for operating lease accounting						ROU asset and lease liabilities for operating lease accounting	599		5,296

The accompanying notes are an integral part of these consolidated financial statements.

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

1. Summary of Significant Accounting Policies

The consolidated financial statements presented in this report include the accounts of HomeTrust Bancshares, Inc., a Maryland corporation ("HomeTrust"), and its wholly-owned subsidiary, HomeTrust Bank (the "Bank"). As used throughout this report, the term the "Company" refers to HomeTrust and the Bank, its consolidated subsidiary, unless the context otherwise requires.

The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the SEC. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. It is recommended that these unaudited interim consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 2020 ("2020 Form 10-K") filed with the SEC on September 11, 2020. The results of operations for the ~~three~~nine months ended ~~December~~March 31, ~~2020~~2021 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2021.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements. Various elements of the Company's accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions, and other subjective assessments. In particular, management has identified ~~several~~two accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of the Company's financial statements. These policies relate to (i) the determination of the provision and the allowance for credit losses on loans and (ii) the valuation of goodwill and other intangible assets. These policies and judgments, estimates and assumptions are described in greater detail in notes to the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations (Critical Accounting Policies) in the Company's 2020 Form 10-K. Management believes that the judgments, estimates and assumptions used in the preparation of the financial statements are appropriate based on the factual circumstances at the time. However, given the sensitivity of the financial statements to these critical accounting policies, the use of other judgments, estimates and assumptions could result in material differences in the Company's results of operations or financial condition. Further, subsequent changes in economic or market conditions could have a material impact on these estimates and the Company's financial condition and operating results in future periods.

Operating, Accounting and Reporting Considerations related to COVID-19

The COVID-19 pandemic has negatively impacted the global economy. In response to this crisis, the CARES Act was passed by Congress and signed into law on March 27, 2020. The CARES Act provides an estimated $2.2 trillion to fight the COVID-19 pandemic and stimulate the economy by supporting individuals and businesses through loans, grants, tax changes, and other types of relief. Some of the provisions applicable to the Company include, but are not limited to:

• Accounting for Loan Modifications - The CARES Act provides that a financial institution may elect to suspend ~~(1)~~(i) the requirements under GAAP for certain loan modifications that would otherwise be categorized as a TDR and ~~(2)~~(ii) any determination that such loan modifications would be considered a TDR, including the related impairment for accounting purposes. The Bank has elected this as a policy change.

• PPP - The CARES Act established the PPP, an expansion of the SBA's 7(a) loan program and the Economic Injury Disaster Loan Program, administered directly by the SBA.

On December 27, 2020, the 2021 Consolidated Appropriations Act was signed into law ~~combining~~providing $900 billion in stimulus relief for the COVID-19 pandemic. The legislation extends certain relief provisions from the March CARES Act that were set to expire at the end of 2020. This new legislation extends the relief to financial institutions to suspend TDR assessment and reporting requirements under GAAP for loan modifications to the earlier of 60 days after the national emergency termination date or January 1, 2022. The legislation includes additional funding for businesses that did not receive PPP funds under the CARES Act, especially minority- and women-owned businesses. In addition, it allows businesses another opportunity to borrow PPP funds if they can show losses of 25% or more in 2020 based on their ~~2019~~2020 revenue. The Company expects a smaller number of applications to be made by its customers for these additional PPP funds.

Also in response to the COVID-19 pandemic, the Board of Governors of the Federal Reserve System, the FDIC, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau, in consultation with the state financial regulators (collectively, the “agencies”) issued a joint interagency statement (issued March 22, 2020; revised statement issued April 7, 2020). Some of the provisions applicable to the Company include, but are not limited to:

• Accounting for Loan Modifications - A loan modification that does not meet the conditions of the CARES Act may still qualify as a modification that does not need to be accounted for as a TDR. The agencies confirmed with FASB staff that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or insignificant delays in payment.

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

• Past Due Reporting - With regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral. A loan’s payment date is governed by the due date stipulated in the legal agreement. If a financial institution agrees to a payment deferral, these loans would not be considered past due during the period of the deferral.

• Nonaccrual Status and Charge-offs - While short-term COVID-19 modifications are in effect, these loans generally should not be reported as nonaccrual or as classified.

See ~~Note~~"Note 6 – Loans and Allowance for Credit Losses on Loans" for more information on COVID-19 specific loans that have been modified or in deferral.

Adoption of CECL standard

On July 1, 2020, the Company adopted ASU No. 2016-13, "Financial Instruments-Credit Losses ("Topic 326"): Measurement of Credit Losses on Financial Instruments", sometimes referred to herein as ASU 2016-13. Topic 326 was subsequently amended by ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses; ASU No. 2019-05, Codification Improvements to Topic 326, Financial Instruments-Credit Losses; and ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. This standard applies to all financial assets measured at amortized cost and off balance sheet credit exposures, including loans, investment securities and unfunded commitments. The Company applied the standard’s provisions using the modified retrospective method as a cumulative effect adjustment to retained earnings as of July 1, 2020. With this transition method, the Company did not have to restate comparative prior periods presented in the financial statements related to Topic 326, but will present comparative prior period disclosures using the previous accounting guidance for the allowance for loan losses. This adoption method is considered a change in accounting principle requiring additional disclosure regarding the nature of and reason for the change, which is solely a result of the adoption of the required standard.

ACL – Investment Securities

Management uses a systematic methodology to determine its ACL for investment securities held to maturity. 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 held-to-maturity portfolio. Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the portfolio. The Company’s estimate of its ACL involves a high degree of judgment; therefore, management’s process for determining expected credit losses may result in a range of expected credit losses. Management monitors the held-to-maturity portfolio to determine whether a valuation account would need to be recorded. The Company currently has no investment securities held to maturity.

Management excludes the accrued interest receivable balance from the amortized cost basis in measuring expected credit losses on investment securities and does not record an allowance for credit losses on accrued interest receivable. As of ~~December~~March 31, ~~2020,~~2021, the accrued interest receivable for investment securities available for sale was ~~$926.~~$588.

The Company’s estimate of expected credit losses includes a measure of the expected risk of credit loss even if that risk is remote. However, the Company does not measure expected credit losses on an investment security in which historical credit loss information adjusted for current conditions and reasonable and supportable forecast results in an expectation that nonpayment of the amortized cost basis is zero. Management does not expect nonpayment of the amortized cost basis to be zero solely on the basis of the current value of collateral securing the security but, instead, also considers the nature of the collateral, potential future changes in collateral values, default rates, delinquency rates, third-party guarantees, credit ratings, interest rate changes since purchase, volatility of the security’s fair value and historical loss information for financial assets secured with similar collateral. The Company performed an analysis that determined that the following securities have a zero expected credit loss: U.S. government agencies, residential MBS of U.S. government agencies and GSEs, and municipal bonds. All of the U.S. government agencies and U.S. government agency backed securities have the full faith and credit backing of the United States Government or one of its agencies. Municipal bonds that do not have a zero expected credit loss will be evaluated quarterly to determine whether there is a credit loss associated with a decline in fair value.

Management no longer evaluates securities for OTTI, as ASC Subtopic 326-30, "Financial Instruments—Credit Losses—Available-for-Sale Debt Securities," changes the accounting for recognizing impairment on available-for-sale debt securities. Each quarter management evaluates 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. Management considers the nature of the collateral, potential future changes in collateral values, default rates, delinquency rates, third-party guarantees, credit ratings, interest rate changes since purchase, volatility of the security’s fair value and historical loss information for financial assets secured with similar collateral among other factors. Credit losses are calculated individually, rather than collectively, using a DCF method, whereby management compares the present value of expected cash flows with the amortized cost basis of the security. The credit loss component would be recognized through the provision for credit losses in the Consolidated Statements of Income.

ACL - Loans and leases

The ACL reflects management’s estimate of losses that will result from the inability of its borrowers to make required loan payments. The Company established the incremental increase in the ACL at adoption of the CECL standard through the cumulative effect adjustment to equity and subsequent adjustments will be made through a provision for credit losses charged against earnings. Management records loans charged off against the ACL and subsequent recoveries, if any, increase the ACL when they are recognized.

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

Management uses a systematic methodology to determine its 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. Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. The Company’s estimate of its ACL involves a high degree of judgment; therefore, management’s process for determining expected credit losses may result in a range of expected credit losses. The Company’s ACL recorded in the balance sheet reflects management’s best estimate within the range of expected credit losses. The Company recognizes in net income the amount needed to adjust the ACL for management’s current estimate of expected credit losses. The Company’s ACL is calculated using collectively evaluated and individually evaluated loans.

The Company collectively evaluates loans that share similar risk characteristics. In general, management has segmented loans by regulatory call code category and collectively evaluates loans within the retail and commercial categories. Loans within the retail consumer category include: ~~1-4~~one-to-four family, HELOCs - originated, HELOCs - purchased, construction and land/lots, indirect auto finance, and consumer. Loans within the commercial category include: commercial real estate, construction and development, commercial and industrial, equipment finance, and municipal leases.

For collectively evaluated loans, the Company uses a DCF method for each loan in a pool, and the results are aggregated at the pool level. A periodic tendency to default and absolute loss given default are applied to a projective model of the loan’s cash flow while considering prepayment and principal curtailment effects. The analysis produces expected cash flows for each instrument in the pool by pairing loan-level term information (maturity date, payment amount, interest rate, etc.) with top-down pool assumptions (default rates, prepayment speeds). The Company has identified the following portfolio segments for the current calculation: ~~1-4~~one-to-four family construction, ~~1-4~~one-to-four family mortgage – jr. lien, ~~1-4~~one-to-four family mortgage – sr. lien, commercial and industrial, commercial leases, construction – multi-family, construction – non-owner occupied, construction – owner occupied, consumer – auto, consumer – other, consumer – revolving, farmland, land and lot, multifamily, municipal leases, non-owner occupied CRE, owner occupied CRE, and HELOCs. PPP loans are fully guaranteed by the SBA; therefore, management estimates a zero reserve for PPP loans within its allowance for credit losses.

Management has determined that the peer loss experience provides the best basis for its assessment of expected credit losses to determine the ACL. The Company utilized peer call report data to measure historical credit loss experience with similar risk characteristics within the segments over an economic cycle. Management reviewed the historical loss information to appropriately adjust for differences in current asset specific risk characteristics. Management also considered further adjustments to historical loss information for current conditions and reasonable and supportable forecasts that differ from the conditions that existed for the period over which historical information was evaluated. For all segment models for collectively evaluated loans (except for HELOCs), the Company incorporated one macroeconomic driver using a statistical regression modeling methodology. The HELOC segment incorporated two macroeconomic drivers. Due to the low loss rates of municipal leases and the expectation of them remaining low, management has elected to separately pool these loans. Management has elected to use readily available municipal default rates and loss given defaults in order to calculate expected credit losses.

Management considers forward-looking information in estimating expected credit losses. The Company uses the Fannie Mae quarterly economic forecast which is a baseline outlook for the United States economy. Management has evaluated the appropriateness of the reasonable and supportable forecast for the current period along with the inputs used in the estimation of expected credit losses. For the contractual term that extends beyond the reasonable and supportable forecast period, the Company reverts to historical loss information within four quarters using a straight-line approach. Management may apply different reversion techniques depending on the economic environment for the financial asset portfolio and as of the current period has utilized a linear reversion technique. Management has evaluated the appropriateness of a reversion period for the current period and noted that it was reasonable.

Included in its systematic methodology to determine its ACL for loans held for investment and certain off-balance-sheet credit exposures, management considers the need to qualitatively adjust expected credit losses for information not already captured in the loss estimation process. These qualitative adjustments can either increase or decrease the quantitative model estimation (i.e. formulaic model results). Each period the Company considers qualitative factors that are relevant within the qualitative framework that include the following: 1) lending policies and procedures, 2) credit review function, 3) experience and depth of management and staff, 4) external factors, and 5) actual and expected changes in economic and business conditions.

When a loan no longer shares similar risk characteristics with its segment, the asset is assessed to determine whether it should be included in another pool or should be individually evaluated. For these individually evaluated loans, the Company maintains specific book balance thresholds for retail or consumer loans, commercial loans, municipal and equipment leases, and unsecured commercial loans. Management would adjust these thresholds if future analysis suggests a change is needed based on the credit environment at that time. Generally, individually evaluated loans other than TDRs are on nonaccrual status. Based on the thresholds above, financial assets will generally remain in pools unless they meet the dollar threshold or foreclosure is probable. The expected credit losses on individually evaluated loans will be estimated based on DCF analysis unless the loan meets the criteria for use of the fair value of collateral, either by virtue of an expected foreclosure or through meeting the definition of collateral dependent. Financial assets that have been individually evaluated can be returned to a pool for purposes of estimating the expected credit loss insofar as their credit profile improves and that the repayment terms are not considered to be unique to the asset.

Management measures expected credit losses over the contractual term of the loans. When determining the contractual term, the Company considers expected prepayments but is precluded from considering expected extensions, renewals, or modifications, unless the Company reasonably expects it will execute a TDR with a borrower. In the event of a reasonably-expected TDR, the Company factors the reasonably-expected TDR into the current expected credit losses estimate. The effects of a TDR are recorded when an individual asset is specifically

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

identified as a reasonably-expected TDR. The Company identifies the point at which it offers the modification to the borrower as the point at which the TDR is reasonably expected for both commercial and consumer loans. The Company uses a DCF methodology to calculate the effect of the concession provided to the borrower in TDR within the ACL.

PCD assets are defined as acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by the Company’s assessment. The Company records acquired PCD loans by adding the expected credit losses (i.e., ACL) to the purchase price of the financial assets rather than recording through the provision for credit losses in the income statement. The expected credit loss, as of the acquisition day, of a PCD loan is added to the ACL. The non-credit discount or premium is the difference between the unpaid principal balance and the amortized cost basis as of the acquisition date. Subsequent to the acquisition date, the change in the ACL on PCD loans is recognized through the provision for credit losses. The non-credit discount or premium is accreted or amortized, respectively, into interest income over the remaining life of the PCD loan on a level-yield basis. In accordance with the transition requirements within the standard, the Company’s PCI loans were treated as PCD loans.

The Company follows its nonaccrual policy by reversing contractual interest income in the income statement when the Company places a loan on nonaccrual status. Therefore, management excludes the accrued interest receivable balance from the amortized cost basis in measuring expected credit losses on the portfolio and does not record an ACL on accrued interest receivable. ~~As of December 31, 2020, the accrued interest receivable for loans was $8,612.~~

The Company has a variety of assets that have a component that qualifies as an off-balance sheet exposure. These primarily include undrawn portions of revolving lines of credit and standby letters of credit. The expected losses associated with these exposures within the unfunded portion of the expected credit loss will be recorded as a liability on the balance sheet with an offset to the provision for credit losses. Management has determined that a majority of the Company’s off-balance-sheet credit exposures are not unconditionally cancellable. See "Note 6 -– Loans and Allowance for Credit Losses on Loans" for additional details related to the Company's off-balance-sheet credit exposure. The current adjustment to the ACL for unfunded commitments would be recognized through the provision for credit losses in the Statement of Income.

2. Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The ASU significantly changes the impairment model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model to an expected loss model. The Company adopted this ASU on July 1, 2020, applying the modified-retrospective method. Related to the implementation of this ASU, the Company recorded additional ACL on financial instruments of $15,059, additional deferred tax assets of $3,989, additional reserve for unfunded commitments of $2,288, and a reduction to retained earnings of $13,358. The adoption of this ASU did not have an effect on AFS debt securities. See "Note 1 -– Summary of Significant Accounting Policies" and "Note 6 -– Loans and Allowance for Credit Losses on Loans" for additional details related to the adoption of this ASU.

See table below for impact of this ASU on the Company's consolidated balance sheet:


	July 1, 2020
	As Reported Under ASC 326		Pre-ASC 326 Adoption		Impact of ASC 326 Adoption
Assets:
ACL on commercial paper	$	(250)	$	0	$	(250)


ACL on loans:
Retail consumer loans	$	(17,692)	$	(6,956)	$	(10,736)
Commercial loans	(25,189)		(21,116)		(4,073)
Total ACL on loans	$	(42,881)	$	(28,072)	$	(14,809)

Deferred income taxes	$	20,323	$	16,334	$	3,989

Liabilities:
Liability for credit losses on off-balance sheet credit exposures	$	2,288	$	0	$	2,288

Equity:
Retained earnings	$	229,418	$	242,776	$	(13,358)

In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement." The amendments in this ASU remove, modify, and add certain disclosure requirements related to fair value measurements in ASC 820. The Company adopted this ASU on July 1, 2020. The adoption did not have a material effect on the Company's Consolidated Financial Statements.

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

In November 2018, the FASB issued ASU 2018-19, "Codification Improvements to Topic 326, Financial Instruments—Credit Losses." This update clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The Company adopted this ASU on July 1, 2020. The adoption did not have a material effect on the Company's Consolidated Financial Statements.

In April 2019, the FASB issued ASU 2019-04, "Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments." The amendments in this update are part of the FASB's ongoing project to improve codification and correcting unintended application. The items within this ASU are not expected to have a significant effect on current accounting practice. The Company adopted the amendments to Financial Instruments (ASU 2016-01) on July 1, 2020. The Company adopted the amendments to Financial Instruments-Credit Losses (ASU 2016-13) on July 1, 2020. The Company adopted the amendments to Derivatives and Hedging (ASU 2017-12) on July 1, 2019. The adoption did not have a material effect on the Company's Consolidated Financial Statements.

In May 2019, the FASB issued ASU 2019-05, "Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief." The amendments in this update allow companies to irrevocably elect, upon the adoption of ASU 2016-13, the fair value option for financial instruments that i) were previously recorded at amortized cost and ii) are within the scope of the credit losses guidance in ASC 326-20, iii) are eligible for the fair value option under ASC 825-10, and iv) are not held-to-maturity debt securities. The Company adopted this ASU on July 1, 2020. The adoption did not have a material effect on the Company's Consolidated Financial Statements.

In November 2019, the FASB issued ASU 2019-11, "Codification Improvements to Topic 326, Financial Instruments-Credit Losses." This ASU clarifies certain aspects of the amendments in ASU 2016-13 and is part of the FASB's ongoing project to improve codification and correcting unintended application. The items within this ASU are not expected to have a significant effect on current accounting practice. The Company adopted this ASU on July 1, 2020. The adoption did not have a material effect on the Company's Consolidated Financial Statements.

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." This ASU is part of the FASB's simplification initiative to reduce complexity in accounting standards. The items within this ASU are not expected to have a significant effect on current accounting practice. The effective date and transition requirements for the first and second items of this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2020 and early adoption is permitted. The adoption of ASU No. 2019-12 is not expected to have a material impact on the Company's Consolidated Financial Statements.

In January 2020, the FASB issued ASU 2020-01, "Investment—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815." This ASU clarified the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2021 and early adoption is permitted. The adoption of this ASU is not expected to have a material impact on the Company's Consolidated Financial Statements.

In March 2020, the FASB issued ASU 2020-03, "Codification Improvements to Financial Instruments." This ASU makes certain narrow-scope amendments to the following: i) clarified that all entities are required to provide fair value option disclosures; ii) clarified the applicability of the portfolio exception in ASC 820 to nonfinancial items; iii) aligned disclosures for depository and lending institutions (Topic 942) with guidance in Topic 320; iv) added cross-references to guidance in ASC 470-50 on line-of-credit or revolving-debt arrangements; v) added cross-references to net asset value practical expedient in ASC 820-10; vi) clarified the interaction between ASC 842 and ASC 326; and vii) clarified the interaction between ASC 326 and ASC 860-20. The amendments for issues i, ii, iv, and v became effective upon issuance and did not have a material effect on the Company's Consolidated Financial Statements. The Company adopted the amendments related to issue iii, vi, and vii on July 1, 2020. The adoption did not have a material effect on the Company's Consolidated Financial Statements.

In September 2020, the FASB issued ASU 2020-06, "Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40)." This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. Specifically the ASU removes: i) major separation models required under GAAP and ii) certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contract to qualify for the exception. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2021 and early adoption is permitted.The adoption of this ASU is not expected to have a material impact on the Company's Consolidated Financial Statements.

In October 2020, the FASB issued ASU 2020-08, "Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs." This ASU clarified that entities should reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2020. The adoption of this ASU is not expected to have a material impact on the Company's Consolidated Financial Statements.

In October 2020, the FASB issued ASU 2020-09, "Debt (Topic 470): Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762." This ASU updates financial disclosure requirements for subsidiary issuers and guarantors of registered debt securities and

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

affinities whose securities are pledged as collateral for registered securities. The amendments in this ASU are effective January 4, 2021.The adoption did not have an effect on the Company's Consolidated Financial Statements.

In October 2020, the FASB issued ASU 2020-10, "Codification Improvements." The amendments in this update are part of the FASB's ongoing project to improve codification and correcting unintended application. This ASU, i) removes references to various FASB Concepts Statements, ii) situates all disclosure guidance in the appropriate disclosure section of the Codification, and iii) makes other improvements and technical corrections to the Codification. The items within this ASU are not expected to have a significant effect on current accounting practice. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2020 and early adoption is permitted. The adoption of this ASU is not expected to have a material impact on the Company's Consolidated Financial Statements.

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

3. Debt Securities

Securities available for sale consist of the following at the dates indicated:


		December 31, 2020									March 31, 2021
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. government agencies	U.S. government agencies	$	18,966	$	176	$	(4)	$	19,138	U.S. government agencies	$	18,970	$	159	$	(21)	$	19,108
Residential MBS of U.S. government agencies and GSEs	Residential MBS of U.S. government agencies and GSEs	39,357		1,693		(37)		41,013		Residential MBS of U.S. government agencies and GSEs	41,053		1,300		(116)		42,237
Municipal bonds	Municipal bonds	10,333		566		0		10,899		Municipal bonds	9,112		488		0		9,600
Corporate bonds	Corporate bonds	82,151		342		(3)		82,490		Corporate bonds	91,386		232		(146)		91,472

Total	Total	$	150,807	$	2,777	$	(44)	$	153,540	Total	$	160,521	$	2,179	$	(283)	$	162,417


	June 30, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. government agencies	$	3,957	$	216	$	0	$	4,173
Residential MBS of U.S. government agencies and GSEs	46,629		1,776		(50)		48,355
Municipal bonds	16,090		541		0		16,631
Corporate bonds	58,242		270		(134)		58,378

Total	$	124,918	$	2,803	$	(184)	$	127,537

Debt securities available for sale by contractual maturity at ~~December~~March 31, ~~2020~~2021 are shown below. MBS are not included in the maturity categories because the borrowers in the underlying pools may prepay without penalty; therefore, it is unlikely that the securities will pay at their stated maturity schedule.


		December 31, 2020					March 31, 2021
		Amortized Cost		Estimated Fair Value			Amortized Cost		Estimated Fair Value
Due within one year	Due within one year	$	29,178	$	29,250	Due within one year	$	36,400	$	36,466
Due after one year through five years	Due after one year through five years	80,252		81,016		Due after one year through five years	81,053		81,489
Due after five years through ten years	Due after five years through ten years	2,020		2,261		Due after five years through ten years	2,015		2,225
Due after ten years	Due after ten years	0		0		Due after ten years	0		0
Mortgage-backed securities	Mortgage-backed securities	39,357		41,013		Mortgage-backed securities	41,053		42,237
Total	Total	$	150,807	$	153,540	Total	$	160,521	$	162,417

The Company had 0 sales of securities available for sale during the three and ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 and ~~2019.~~2020. There were 0 gross realized gains or losses for the three and ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 and ~~2019.~~2020.

Securities available for sale with costs totaling ~~$53,433~~$92,815 and $82,888 and market values of ~~$54,780~~$94,031 and $84,456 at ~~December~~March 31, ~~2020~~2021 and June 30, 2020, respectively, were pledged as collateral to secure various public deposits and other borrowings.

The gross unrealized losses and the fair value for securities available for sale aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of ~~December~~March 31, ~~2020~~2021 and June 30, 2020 were as follows:


		December 31, 2020													March 31, 2021
		Less than 12 Months				12 Months or More				Total					Less than 12 Months				12 Months or More				Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. government agencies	U.S. government agencies	$	14,996	$	(4)	$	0	$	0	$	14,996	$	(4)	U.S. government agencies	$	14,979	$	(21)	$	0	$	0	$	14,979	$	(21)
Residential MBS of U.S. government agencies and GSEs	Residential MBS of U.S. government agencies and GSEs	115		(7)		1,922		(30)		2,037		(37)		Residential MBS of U.S. government agencies and GSEs	4,674		(85)		1,516		(31)		6,190		(116)

Corporate bonds	Corporate bonds	16,941		(3)		0		0		16,941		(3)		Corporate bonds	48,823		(146)		0		0		48,823		(146)
Total	Total	$	32,052	$	(14)	$	1,922	$	(30)	$	33,974	$	(44)	Total	$	68,476	$	(252)	$	1,516	$	(31)	$	69,992	$	(283)

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)


	June 30, 2020
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

Residential MBS of U.S. government agencies and GSEs	$	227	$	(10)	$	2,435	$	(40)	$	2,662	$	(50)

Corporate bonds	11,779		(134)		0		0		11,779		(134)
Total	$	12,006	$	(144)	$	2,435	$	(40)	$	14,441	$	(184)

The total number of securities with unrealized losses at ~~December~~March 31, ~~2020,~~2021, and June 30, 2020 were 2114 and 24, respectively.

Management 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 basis, and more frequently when economic or market concerns warrant such evaluation. All debt securities available for sale in an unrealized loss position as of ~~December~~March 31, ~~2020~~2021 continue to perform as scheduled and management does not believe that there is a credit loss or that a provision for credit losses is necessary. Also, as part of management's evaluation of its intent and ability to hold investments for a period of time sufficient to allow for any anticipated recovery in the market, management considers its investment strategy, cash flow needs, liquidity position, capital adequacy and interest rate risk position. Management does not currently intend to sell the securities within the portfolio and it is not more-likely-than-not that securities will be required to be sold. See ~~Note~~"Note 1 – Summary of Significant Account ~~Policies~~Policies" for further discussion.

Management continues to monitor all of its securities with a high degree of scrutiny. There can be no assurance that management will not conclude in future periods that conditions existing at that time indicate some or all of its securities may be sold or would require a charge to earnings as a provision for credit losses in such periods.

4. Other Investments

Other investments, at cost consist of the following at the dates indicated:


		December 31, 2020		June 30, 2020			March 31, 2021		June 30, 2020
FHLB of Atlanta stock	FHLB of Atlanta stock	$	23,309	$	23,309	FHLB of Atlanta stock	$	12,152	$	23,309
FRB stock	FRB stock	7,374		7,368		FRB stock	7,379		7,368
SBIC investments	SBIC investments	8,889		8,269		SBIC investments	9,368		8,269

Total	Total	$	39,572	$	38,946	Total	$	28,899	$	38,946

As a requirement for membership, the Bank invests in the stock of both the FHLB of Atlanta and the FRB. No ready market exists for these securities so carrying value, or cost, approximates their fair value based on the redemption provisions of the FHLB of Atlanta and the FRB, respectively. SBIC investments are equity securities without a readily determinable fair ~~value.~~value and are recorded at cost.

5. Loans Held For Sale

Loans held for sale as of the dates indicated consist of the following:


		December 31, 2020		June 30, 2020			March 31, 2021		June 30, 2020
One-to-four family	One-to-four family	$	45,998	$	28,152	One-to-four family	$	45,182	$	28,152
SBA	SBA	8,319		1,240		SBA	7,090		1,240
HELOCs	HELOCs	64,122		47,785		HELOCs	34,436		47,785

Total	Total	$	118,439	$	77,177	Total	$	86,708	$	77,177

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

6. Loans and Allowance for Credit Losses on Loans

Loans consist of the following at the dates indicated:


		December 31, 2020		June 30, 2020 (1)			March 31, 2021		June 30, 2020 (1)
Commercial loans:	Commercial loans:					Commercial loans:
Commercial real estate	Commercial real estate	$	1,056,971	$	1,052,906	Commercial real estate	$	1,088,178	$	1,052,906
Construction and development	Construction and development	172,892		215,934		Construction and development	162,820		215,934
Commercial and industrial	Commercial and industrial	138,761		154,825		Commercial and industrial	140,579		154,825
Equipment finance	Equipment finance	272,761		229,239		Equipment finance	291,950		229,239
Municipal finance	Municipal finance	128,549		127,987		Municipal finance	129,141		127,987
PPP	PPP	64,845		80,697		PPP	73,090		80,697
Total commercial loans	Total commercial loans	1,834,779		1,861,588		Total commercial loans	1,885,758		1,861,588
Retail consumer loans:	Retail consumer loans:					Retail consumer loans:
One-to-four family	One-to-four family	452,421		473,693		One-to-four family	430,001		473,693
HELOCs - originated	HELOCs - originated	125,397		137,447		HELOCs - originated	131,867		137,447
HELOCs - purchased	HELOCs - purchased	58,640		71,781		HELOCs - purchased	46,086		71,781
Construction and land/lots	Construction and land/lots	75,108		81,859		Construction and land/lots	68,118		81,859
Indirect auto finance	Indirect auto finance	122,947		132,303		Indirect auto finance	119,656		132,303
Consumer	Consumer	9,332		10,259		Consumer	8,667		10,259
Total retail consumer loans	Total retail consumer loans	843,845		907,342		Total retail consumer loans	804,395		907,342
Total loans	Total loans	2,678,624		2,768,930		Total loans	2,690,153		2,768,930
Deferred loan costs, net (2)	Deferred loan costs, net (2)	0		189		Deferred loan costs, net (2)	0		189
Total loans, net of deferred loan costs	Total loans, net of deferred loan costs	2,678,624		2,769,119		Total loans, net of deferred loan costs	2,690,153		2,769,119
Allowance for credit losses	Allowance for credit losses	(39,844)		(28,072)		Allowance for credit losses	(36,059)		(28,072)
Loans, net	Loans, net	$	2,638,780	$	2,741,047	Loans, net	$	2,654,094	$	2,741,047

___________

(1) The June 30, 2020 information in the above table reflects the loan portfolio prior to the adoption of ASU 2016-13. This information was reported as shown in the below tables under "Loans and Allowance for Loan Losses - Pre ASU 2016-13", with the acquired loans being net of earned income and related discounts, which includes the credit discount on the acquired credit impaired loans.

(2) In accordance with the adoption of ASU 2016-13, the loan portfolio is shown at the amortized cost basis as of ~~December~~March 31, ~~2020,~~2021, to include net deferred cost of ~~$1,941~~$1,420 and unamortized discount total related to loans acquired of ~~$5,126.~~$4,998. Accrued interest receivable at ~~December~~March 31, ~~2020~~2021 of ~~$8,612~~$7,688 is accounted for separately from the amortized cost basis. The ACL at June 30, 2020 includes the valuation allowance on PCI loans of $182.

All qualifying one-to-four family first mortgage loans, HELOCs, commercial real estate loans, and FHLB of Atlanta stock are pledged as collateral by a blanket pledge to secure any outstanding FHLB advances.

Loans are monitored for credit quality on a recurring basis and the composition of the loans outstanding by credit quality indicator is provided below. Loan credit quality indicators are developed through review of individual borrowers on an ongoing basis. Generally, loans are monitored for performance on a quarterly basis with the credit quality indicators adjusted as needed. The indicators represent the rating for loans as of the date presented based on the most recent assessment performed. These credit quality indicators are defined as follows:

Pass—A pass rated asset is not adversely classified because it does not display any of the characteristics for adverse classification.

Special Mention—A special mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention assets are not adversely classified and do not warrant adverse classification.

Substandard—A substandard asset is inadequately protected by the current net worth and paying capacity of the obligor, or of the collateral pledged, if any. Assets classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These assets are characterized by the distinct possibility of loss if the deficiencies are not corrected.

Doubtful—An asset classified doubtful has all the weaknesses inherent in an asset classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions, and values.

Loss—Assets classified loss are considered uncollectible and of such little value that their continuing to be carried as an asset is not warranted. This classification is not necessarily equivalent to no potential for recovery or salvage value, but rather that it is not appropriate to defer a full write-off even though partial recovery may be effected in the future.

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 Year																	Term Loans By Origination Fiscal Year
December 31, 2020		2021		2020		2019		2018		2017		Prior		Revolving		Total
March 31, 2021																		March 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving		Total
Commercial real estate	Commercial real estate																	Commercial real estate
Risk rating:	Risk rating:																	Risk rating:
Pass	Pass	$	84,992	$	180,257	$	146,108	$	175,521	$	166,606	$	241,865	$	32,112	$	1,027,461	Pass	$	134,202	$	181,796	$	142,372	$	171,079	$	161,912	$	233,191	$	33,651	$	1,058,203
Special mention	Special mention	0		0		0		14,407		1,281		3,245		295		19,228		Special mention	0		0		0		15,197		1,268		3,182		143		19,790
Substandard	Substandard	0		0		0		653		5,412		4,206		0		10,271		Substandard	0		0		148		628		5,416		3,987		0		10,179
Doubtful	Doubtful	0		0		0		0		0		0		0		0		Doubtful	0		0		0		0		0		0		0		0
Loss	Loss	0		11		0		0		0		0		0		11		Loss	0		6		0		0		0		0		0		6
Total commercial real estate	Total commercial real estate	$	84,992	$	180,268	$	146,108	$	190,581	$	173,299	$	249,316	$	32,407	$	1,056,971	Total commercial real estate	$	134,202	$	181,802	$	142,520	$	186,904	$	168,596	$	240,360	$	33,794	$	1,088,178

Construction and development	Construction and development																	Construction and development
Risk rating:	Risk rating:																	Risk rating:
Pass	Pass	$	8,366	$	17,695	$	10,527	$	8,345	$	1,621	$	8,164	$	114,970	$	169,688	Pass	$	9,493	$	9,101	$	6,849	$	5,415	$	1,594	$	7,331	$	119,362	$	159,145
Special mention	Special mention	0		0		0		0		0		534		2,133		2,667		Special mention	0		0		0		0		0		319		2,858		3,177
Substandard	Substandard	0		0		0		0		0		537		0		537		Substandard	0		0		0		0		0		498		0		498
Doubtful	Doubtful	0		0		0		0		0		0		0		0		Doubtful	0		0		0		0		0		0		0		0
Loss	Loss	0		0		0		0		0		0		0		0		Loss	0		0		0		0		0		0		0		0
Total construction and development	Total construction and development	$	8,366	$	17,695	$	10,527	$	8,345	$	1,621	$	9,235	$	117,103	$	172,892	Total construction and development	$	9,493	$	9,101	$	6,849	$	5,415	$	1,594	$	8,148	$	122,220	$	162,820

Commercial and industrial	Commercial and industrial																	Commercial and industrial
Risk rating:	Risk rating:																	Risk rating:
Pass	Pass	$	12,949	$	14,603	$	22,120	$	17,797	$	17,448	$	12,347	$	33,356	$	130,620	Pass	$	25,006	$	16,553	$	19,337	$	11,806	$	16,399	$	11,302	$	30,287	$	130,690
Special mention	Special mention	0		0		794		0		952		171		5,656		7,573		Special mention	0		0		1,194		0		53		123		3,261		4,631
Substandard	Substandard	0		0		299		117		64		86		0		566		Substandard	33		0		300		4,824		0		99		0		5,256
Doubtful	Doubtful	0		0		0		0		0		0		0		0		Doubtful	0		0		0		0		0		0		0		0
Loss	Loss	0		1		0		0		0		1		0		2		Loss	0		0		0		0		0		2		0		2
Total commercial and industrial	Total commercial and industrial	$	12,949	$	14,604	$	23,213	$	17,914	$	18,464	$	12,605	$	39,012	$	138,761	Total commercial and industrial	$	25,039	$	16,553	$	20,831	$	16,630	$	16,452	$	11,526	$	33,548	$	140,579

Equipment finance	Equipment finance																	Equipment finance
Risk rating:	Risk rating:																	Risk rating:
Pass	Pass	$	73,835	$	121,829	$	69,830	$	6,407	$	0	$	0	$	0	$	271,901	Pass	$	110,595	$	113,114	$	62,000	$	5,460	$	0	$	0	$	0	$	291,169
Special mention	Special mention	0		440		78		0		0		0		0		518		Special mention	0		304		176		0		0		0		0		480
Substandard	Substandard	0		0		46		0		0		0		0		46		Substandard	0		0		0		0		0		0		0		0
Doubtful	Doubtful	0		0		296		0		0		0		0		296		Doubtful	0		0		301		0		0		0		0		301
Loss	Loss	0		0		0		0		0		0		0		0		Loss	0		0		0		0		0		0		0		0
Total equipment finance	Total equipment finance	$	73,835	$	122,269	$	70,250	$	6,407	$	0	$	0	$	0	$	272,761	Total equipment finance	$	110,595	$	113,418	$	62,477	$	5,460	$	0	$	0	$	0	$	291,950

Municipal leases	Municipal leases																	Municipal leases
Risk rating:	Risk rating:																	Risk rating:
Pass	Pass	$	1,178	$	21,158	$	14,812	$	19,662	$	10,411	$	54,947	$	5,762	$	127,930	Pass	$	6,697	$	19,030	$	14,251	$	18,977	$	10,241	$	51,242	$	8,430	$	128,868
Special mention	Special mention	0		0		0		0		0		271		0		271		Special mention	0		0		0		0		0		273		0		273
Substandard	Substandard	0		0		0		0		0		348		0		348		Substandard	0		0		0		0		0		0		0		0
Doubtful	Doubtful	0		0		0		0		0		0		0		0		Doubtful	0		0		0		0		0		0		0		0
Loss	Loss	0		0		0		0		0		0		0		0		Loss	0		0		0		0		0		0		0		0
Total municipal leases	Total municipal leases	$	1,178	$	21,158	$	14,812	$	19,662	$	10,411	$	55,566	$	5,762	$	128,549	Total municipal leases	$	6,697	$	19,030	$	14,251	$	18,977	$	10,241	$	51,515	$	8,430	$	129,141

PPP	PPP																	PPP
Risk rating:	Risk rating:																	Risk rating:
Pass	Pass	$	0	$	64,845	$	0	$	0	$	0	$	0	$	0	$	64,845	Pass	$	29,667	$	43,423	$	0	$	0	$	0	$	0	$	0	$	73,090
Special mention	Special mention	0		0		0		0		0		0		0		0		Special mention	0		0		0		0		0		0		0		0
Substandard	Substandard	0		0		0		0		0		0		0		0		Substandard	0		0		0		0		0		0		0		0
Doubtful	Doubtful	0		0		0		0		0		0		0		0		Doubtful	0		0		0		0		0		0		0		0
Loss	Loss	0		0		0		0		0		0		0		0		Loss	0		0		0		0		0		0		0		0
Total PPP	Total PPP	$	0	$	64,845	$	0	$	0	$	0	$	0	$	0	$	64,845	Total PPP	$	29,667	$	43,423	$	0	$	0	$	0	$	0	$	0	$	73,090

Total commercial loans	Total commercial loans																	Total commercial loans
Risk rating:	Risk rating:																	Risk rating:
Pass	Pass	$	181,320	$	420,387	$	263,397	$	227,732	$	196,086	$	317,323	$	186,200	$	1,792,445	Pass	$	315,660	$	383,017	$	244,809	$	212,737	$	190,146	$	303,066	$	191,730	$	1,841,165
Special mention	Special mention	0		440		872		14,407		2,233		4,221		8,084		30,257		Special mention	0		304		1,370		15,197		1,321		3,897		6,262		28,351
Substandard	Substandard	0		0		345		770		5,476		5,177		0		11,768		Substandard	33		0		448		5,452		5,416		4,584		0		15,933
Doubtful	Doubtful	0		0		296		0		0		0		0		296		Doubtful	0		0		301		0		0		0		0		301
Loss	Loss	0		12		0		0		0		1		0		13		Loss	0		6		0		0		0		2		0		8
Total commercial loans	Total commercial loans	$	181,320	$	420,839	$	264,910	$	242,909	$	203,795	$	326,722	$	194,284	$	1,834,779	Total commercial loans	$	315,693	$	383,327	$	246,928	$	233,386	$	196,883	$	311,549	$	197,992	$	1,885,758

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 consumer loans by origination year:


		Term Loans By Origination Year																	Term Loans By Origination Fiscal Year
December 31, 2020		2021		2020		2019		2018		2017		Prior		Revolving		Total
March 31, 2021																		March 31, 2021	2021			2020		2019		2018		2017		Prior		Revolving		Total
One-to-four family	One-to-four family																	One-to-four family
Risk rating:	Risk rating:																	Risk rating:
Pass	Pass	$	43,718	$	55,592	$	61,576	$	55,305	$	46,841	$	175,540	$	2,464	$	441,036	Pass	$	60,542		$	58,360	$	56,263	$	45,972	$	40,624	$	156,075	$	2,495	$	420,331
Special mention	Special mention	0		0		0		0		29		1,523		0		1,552		Special mention	0			0		0		0		28		1,402		0		1,430
Substandard	Substandard	0		999		0		218		201		8,217		0		9,635		Substandard	248			988		0		218		89		6,177		0		7,720
Doubtful	Doubtful	0		0		0		0		0		197		0		197		Doubtful	0			0		0		0		0		195		0		195
Loss	Loss	0		0		0		1		0		0		0		1		Loss	0			0		0		0		0		325		0		325
Total one-to-four family	Total one-to-four family	$	43,718	$	56,591	$	61,576	$	55,524	$	47,071	$	185,477	$	2,464	$	452,421	Total one-to-four family	$	60,790		$	59,348	$	56,263	$	46,190	$	40,741	$	164,174	$	2,495	$	430,001

HELOCs - originated	HELOCs - originated																	HELOCs - originated
Risk rating:	Risk rating:																	Risk rating:
Pass	Pass	$	1,654	$	1,066	$	1,495	$	455	$	671	$	8,619	$	108,828	$	122,788	Pass	$	2,386		$	978	$	1,440	$	192	$	768	$	9,686	$	114,870	$	130,320
Special mention	Special mention	0		0		0		0		0		769		0		769		Special mention	0			0		0		0		0		273		0		273
Substandard	Substandard	0		0		0		0		38		1,603		199		1,840		Substandard	0			0		0		0		38		1,112		124		1,274
Doubtful	Doubtful	0		0		0		0		0		0		0		0		Doubtful	0			0		0		0		0		0		0		0
Loss	Loss	0		0		0		0		0		0		0		0		Loss	0			0		0		0		0		0		0		0
Total HELOCs - originated	Total HELOCs - originated	$	1,654	$	1,066	$	1,495	$	455	$	709	$	10,991	$	109,027	$	125,397	Total HELOCs - originated	$	2,386		$	978	$	1,440	$	192	$	806	$	11,071	$	114,994	$	131,867

HELOCs - purchased	HELOCs - purchased																	HELOCs - purchased
Risk rating:	Risk rating:																	Risk rating:
Pass	Pass	$	0	$	0	$	0	$	0	$	0	$	0	$	57,799	$	57,799	Pass	$	0		$	0	$	0	$	0	$	0	$	0	$	46,086	$	46,086
Special mention	Special mention	0		0		0		0		0		0		0		0		Special mention	0			0		0		0		0		0		0		0
Substandard	Substandard	0		0		0		0		0		0		841		841		Substandard	0			0		0		0		0		0		0		0
Doubtful	Doubtful	0		0		0		0		0		0		0		0		Doubtful	0			0		0		0		0		0		0		0
Loss	Loss	0		0		0		0		0		0		0		0		Loss	0			0		0		0		0		0		0		0
Total HELOCs - purchased	Total HELOCs - purchased	$	0	$	0	$	0	$	0	$	0	$	0	$	58,640	$	58,640	Total HELOCs - purchased	$	0		$	0	$	0	$	0	$	0	$	0	$	46,086	$	46,086

Construction and land/lots	Construction and land/lots																	Construction and land/lots
Risk rating:	Risk rating:																	Risk rating:
Pass	Pass	$	428	$	23,130	$	8,311	$	1,270	$	0	$	4,948	$	36,414	$	74,501	Pass	$	3,122		$	13,305	$	4,212	$	527	$	0	$	4,438	$	41,995	$	67,599
Special mention	Special mention	0		0		0		0		0		0		0		0		Special mention	0			0		0		0		0		0		0		0
Substandard	Substandard	0		0		0		102		0		505		0		607		Substandard	0			0		0		98		0		421		0		519
Doubtful	Doubtful	0		0		0		0		0		0		0		0		Doubtful	0			0		0		0		0		0		0		0
Loss	Loss	0		0		0		0		0		0		0		0		Loss	0			0		0		0		0		0		0		0
Total construction and land/lots	Total construction and land/lots	$	428	$	23,130	$	8,311	$	1,372	$	0	$	5,453	$	36,414	$	75,108	Total construction and land/lots	$	3,122		$	13,305	$	4,212	$	625	$	0	$	4,859	$	41,995	$	68,118

Indirect auto finance	Indirect auto finance																	Indirect auto finance
Risk rating:	Risk rating:																	Risk rating:
Pass	Pass	$	22,171	$	34,993	$	21,944	$	26,196	$	11,684	$	4,554	$	0	$	121,542	Pass	$	33,168		$	31,016	$	18,993	$	22,467	$	9,539	$	3,087	$	0	$	118,270
Special mention	Special mention	0		0		0		0		0		0		0		0		Special mention	0		0	0		0		0		0		0		0		0
Substandard	Substandard	8		208		386		436		217		147		0		1,402		Substandard	56			371		249		376		207		123		0		1,382
Doubtful	Doubtful	0		0		0		0		0		0		0		0		Doubtful	0			0		0		0		0		0		0		0
Loss	Loss	0		2		1		0		0		0		0		3		Loss	2			1		1		0		0		0		0		4
Total indirect auto finance	Total indirect auto finance	$	22,179	$	35,203	$	22,331	$	26,632	$	11,901	$	4,701	$	0	$	122,947	Total indirect auto finance	$	33,226		$	31,388	$	19,243	$	22,843	$	9,746	$	3,210	$	0	$	119,656

Total consumer loans	Total consumer loans																	Total consumer loans
Risk rating:	Risk rating:																	Risk rating:
Pass	Pass	$	740	$	1,213	$	5,952	$	363	$	157	$	159	$	429	$	9,013	Pass	$	1,049		$	1,079	$	5,583	$	321	$	109	$	95	$	370	$	8,606
Special mention	Special mention	0		0		0		4		0		0		0		4		Special mention	0			0		0		0		0		0		0		0
Substandard	Substandard	243		16		11		7		0		18		20		315		Substandard	0			16		4		7		0		4		29		60
Doubtful	Doubtful	0		0		0		0		0		0		0		0		Doubtful	0			0		0		0		0		0		0		0
Loss	Loss	0		0		0		0		0		0		0		0		Loss	0			1		0		0		0		0		0		1
Total consumer loans	Total consumer loans	$	983	$	1,229	$	5,963	$	374	$	157	$	177	$	449	$	9,332	Total consumer loans	$	1,049		$	1,096	$	5,587	$	328	$	109	$	99	$	399	$	8,667

Total retail consumer loans	Total retail consumer loans																	Total retail consumer loans
Risk rating:	Risk rating:																	Risk rating:
Pass	Pass	$	68,711	$	115,994	$	99,278	$	83,589	$	59,353	$	193,820	$	205,934	$	826,679	Pass	$	100,267		$	104,738	$	86,491	$	69,479	$	51,040	$	173,381	$	205,816	$	791,212
Special mention	Special mention	0		0		0		4		29		2,292		0		2,325		Special mention	0			0		0		0		28		1,675		0		1,703
Substandard	Substandard	251		1,223		397		763		456		10,490		1,060		14,640		Substandard	304			1,375		253		699		334		7,837		153		10,955
Doubtful	Doubtful	0		0		0		0		0		197		0		197		Doubtful	0			0		0		0		0		195		0		195
Loss	Loss	0		2		1		1		0		0		0		4		Loss	2			2		1		0		0		325		0		330
Total retail consumer loans	Total retail consumer loans	$	68,962	$	117,219	$	99,676	$	84,357	$	59,838	$	206,799	$	206,994	$	843,845	Total retail consumer loans	$	100,573		$	106,115	$	86,745	$	70,178	$	51,402	$	183,413	$	205,969	$	804,395

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 total non-purchased and purchased performing consumer and commercial loans, prior to the adoption of ASU 2016-13:


	Pass		Special Mention		Substandard		Doubtful		Loss		Total
June 30, 2020
Commercial loans:
Commercial real estate	$	1,028,709	$	7,580	$	10,779	$	0	$	16	$	1,047,084
Construction and development	212,370		2,723		250		1		0		215,344
Commercial and industrial	130,202		20,439		2,622		0		0		153,263
Equipment finance	228,288		150		801		0		0		229,239
Municipal finance	127,706		281		0		0		0		127,987
PPP	80,697		0		0		0		0		80,697
Retail consumer loans:
One-to-four family	458,248		1,724		9,042		206		0		469,220
HELOCs - originated	134,697		902		1,848		0		0		137,447
HELOCs - purchased	71,119		0		662		0		0		71,781
Construction and land/lots	81,112		0		402		0		0		81,514
Indirect auto finance	130,975		0		1,328		0		0		132,303
Consumer	9,894		4		361		0		0		10,259
Total loans	$	2,694,017	$	33,803	$	28,095	$	207	$	16	$	2,756,138

The following table presents the credit risk profile by risk grade for PCI consumer and commercial loans, prior to the adoption of ASU 2016-13:


	Pass		Special Mention		Substandard		Doubtful		Loss		Total
June 30, 2020
Commercial loans:
Commercial real estate	$	3,181	$	1,742	$	899	$	0	$	0	$	5,822
Construction and development	271		0		319		0		0		590
Commercial and industrial	1,556		0		3		0		3		1,562
Retail consumer loans:
One-to-four family	2,994		465		1,014		0		0		4,473


Construction and land/lots	108		0		237		0		0		345



Total loans	$	8,110	$	2,207	$	2,472	$	0	$	3	$	12,792

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The following table presents an aging analysis of past due loans (includes nonaccrual loans) by segment and class:


		Past Due								Total			Past Due								Total
		30-89 Days		90 Days+		Total		Current		Loans			30-89 Days		90 Days+		Total		Current		Loans
December 31, 2020
March 31, 2021												March 31, 2021
Commercial loans:	Commercial loans:											Commercial loans:
Commercial real estate	Commercial real estate	$	45	$	2,060	$	2,105	$	1,054,866	$	1,056,971	Commercial real estate	$	0	$	1,863	$	1,863	$	1,086,315	$	1,088,178
Construction and development	Construction and development	0		361		361		172,531		172,892		Construction and development	0		37		37		162,783		162,820
Commercial and industrial	Commercial and industrial	0		91		91		138,670		138,761		Commercial and industrial	12		22		34		140,545		140,579
Equipment finance	Equipment finance	286		68		354		272,407		272,761		Equipment finance	0		328		328		291,622		291,950
Municipal finance	Municipal finance	0		352		352		128,197		128,549		Municipal finance	0		0		0		129,141		129,141
PPP	PPP	0		0		0		64,845		64,845		PPP	0		0		0		73,090		73,090
Retail consumer loans:	Retail consumer loans:											Retail consumer loans:
One-to-four family	One-to-four family	1,431		2,874		4,305		448,116		452,421		One-to-four family	824		2,046		2,870		427,131		430,001
HELOCs - originated	HELOCs - originated	98		248		346		125,051		125,397		HELOCs - originated	32		78		110		131,757		131,867
HELOCs - purchased	HELOCs - purchased	147		145		292		58,348		58,640		HELOCs - purchased	50		97		147		45,939		46,086
Construction and land/lots	Construction and land/lots	0		22		22		75,086		75,108		Construction and land/lots	0		0		0		68,118		68,118
Indirect auto finance	Indirect auto finance	395		405		800		122,147		122,947		Indirect auto finance	385		362		747		118,909		119,656
Consumer	Consumer	256		17		273		9,059		9,332		Consumer	271		27		298		8,369		8,667
Total loans	Total loans	$	2,658	$	6,643	$	9,301	$	2,669,323	$	2,678,624	Total loans	$	1,574	$	4,860	$	6,434	$	2,683,719	$	2,690,153

The following table presents an aging analysis of past due loans by segment and class, prior to the adoption of ASU 2016-13:


	Past Due								Total
	30-89 Days		90 Days+		Total		Current		Loans
June 30, 2020
Commercial loans:
Commercial real estate	$	4,528	$	2,892	$	7,420	$	1,045,486	$	1,052,906
Construction and development	293		341		634		215,300		215,934
Commercial and industrial	0		91		91		154,734		154,825
Equipment finance	303		498		801		228,438		229,239
Municipal finance	0		0		0		127,987		127,987
PPP	0		0		0		80,697		80,697
Retail consumer loans:
One-to-four family	1,679		3,147		4,826		468,867		473,693
HELOCs - originated	442		310		752		136,695		137,447
HELOCs - purchased	214		47		261		71,520		71,781
Construction and land/lots	0		252		252		81,607		81,859
Indirect auto finance	756		285		1,041		131,262		132,303
Consumer	30		25		55		10,204		10,259
Total loans	$	8,245	$	7,888	$	16,133	$	2,752,797	$	2,768,930

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The following table presents recorded investment in loans on nonaccrual status, by segment and class, including restructured loans. It also includes interest income recognized on nonaccrual loans for the ~~six~~nine months ended ~~December~~March 31, ~~2020.~~2021.


		December 31, 2020		June 30, 2020		90 Days + & still accruing as of December 31, 2020		Nonaccrual with no allowance as of December 31, 2020		Interest income recognized			March 31, 2021		June 30, 2020		90 Days + & still accruing as of March 31, 2021		Nonaccrual with no allowance as of March 31, 2021		Interest income recognized
Commercial loans:	Commercial loans:											Commercial loans:
Commercial real estate	Commercial real estate	$	7,751	$	8,869	$	0	$	4,576	$	290	Commercial real estate	$	7,764	$	8,869	$	0	$	4,369	$	371
Construction and development	Construction and development	537		465		0		80		39		Construction and development	498		465		0		80		53
Commercial and industrial	Commercial and industrial	234		259		0		92		62		Commercial and industrial	59		259		0		22		68
Equipment finance	Equipment finance	354		801		0		293		14		Equipment finance	310		801		0		291		104
Municipal finance	Municipal finance	352		0		0		352		0		Municipal finance	0		0		0		0		0
Retail consumer loans:	Retail consumer loans:											Retail consumer loans:
One-to-four family	One-to-four family	3,425		3,582		0		1,085		129		One-to-four family	3,132		3,582		0		812		161
HELOCs - originated	HELOCs - originated	344		531		0		0		34		HELOCs - originated	253		531		0		0		36
HELOCs - purchased	HELOCs - purchased	841		662		0		0		12		HELOCs - purchased	245		662		0		0		39
Construction and land/lots	Construction and land/lots	22		37		0		0		0		Construction and land/lots	22		37		0		0		0
Indirect auto finance	Indirect auto finance	661		668		0		0		56		Indirect auto finance	642		668		0		0		66
Consumer	Consumer	18		49		0		0		6		Consumer	300		49		0		0		7

Total loans	Total loans	$	14,539	$	15,923	$	0	$	6,478	$	642	Total loans	$	13,225	$	15,923	$	0	$	5,574	$	905

The decrease in the nonaccrual balance in the above schedule, compared to June 30, 2020, is mainly due to one large commercial nonaccrual loan paying off partially offset by the addition to nonaccrual loans of $486 of PCI loans, formerly accounted for as credit impaired loans, prior to the adoption of ASU 2016-13. These loans were previously excluded from nonaccrual loans. The adoption of CECL resulted in the discontinuation of ~~the~~ pool-level accounting for acquired credit impaired loans which was replaced with a loan-level evaluation for nonaccrual status.

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.

The Company’s loans that were performing under the payment terms of TDRs that were excluded from nonaccruing loans above at the dates

indicated follows:


	March 31, 2021		June 30, 2020
Performing TDRs	$	11,941	$	13,153

The following table presents a breakdown of the provision (benefit) for credit losses included in our Consolidated Statements of Income:


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		December 31,				December 31,					March 31,				March 31,
		2020		2019		2020		2019			2021		2020		2021		2020
Provision (benefit) for credit losses:	Provision (benefit) for credit losses:									Provision (benefit) for credit losses:
Loans	Loans	$	(3,350)	$	400	$	(2,400)	$	400	Loans	$	(3,970)	$	5,400	$	(6,370)	$	5,800
Off-balance-sheet credit exposure	Off-balance-sheet credit exposure	140		0		140		0		Off-balance-sheet credit exposure	(130)		0		10		0
Commercial paper	Commercial paper	180		0		180		0		Commercial paper	0		0		180		0
Total provision (benefit) for credit losses	Total provision (benefit) for credit losses	$	(3,030)	$	400	$	(2,080)	$	400	Total provision (benefit) for credit losses	$	(4,100)	$	5,400	$	(6,180)	$	5,800

~~The following table presents an analysis of the ACL on loans by segment:~~

Three Months Ended Six Months Ended
December 31, 2020 December 31, 2020
Commercial Retail
Consumer Total Commercial Retail
Consumer Total
Balance at beginning of period $ 25,199 $ 17,933 $ 43,132 $ 21,116 $ 6,956 $ 28,072
Impact of adoption ASU 2016-13 0 0 0 4,073 10,736 14,809
Provision (benefit) for credit losses (292) (3,058) (3,350) 0 (2,400) (2,400)
Charge-offs (308) (253) (561) (1,403) (935) (2,338)
Recoveries 300 323 623 1,113 588 1,701
Net charge-offs (8) 70 62 (290) (347) (637)
Balance at end of period $ 24,899 $ 14,945 $ 39,844 $ 24,899 $ 14,945 $ 39,844

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The following table presents an analysis of the ACL on loans by segment:


	Three Months Ended						Nine Months Ended
	March 31, 2021						March 31, 2021
	Commercial		Retail Consumer		Total		Commercial		Retail Consumer		Total
Balance at beginning of period	$	24,899	$	14,945	$	39,844	$	21,116	$	6,956	$	28,072
Impact of adoption ASU 2016-13	0		0		0		4,073		10,736		14,809
Provision (benefit) for credit losses	(1,750)		(2,220)		(3,970)		(1,750)		(4,620)		(6,370)
Charge-offs	(107)		(318)		(425)		(1,510)		(1,253)		(2,763)
Recoveries	356		254		610		1,469		842		2,311
Net recoveries (charge-offs)	249		(64)		185		(41)		(411)		(452)
Balance at end of period	$	23,398	$	12,661	$	36,059	$	23,398	$	12,661	$	36,059

The following table presents an analysis of the allowance for loan losses by segment, prior to the adoption of ASU 2016-13:


		Three Months Ended								Six Months Ended									Three Months Ended								Nine Months Ended
		December 31, 2019								December 31, 2019									March 31, 2020								March 31, 2020
		PCI		Commercial		Retail Consumer		Total		PCI		Commercial		Retail Consumer		Total			PCI		Commercial		Retail Consumer		Total		PCI		Commercial		Retail Consumer		Total
Balance at beginning of period	Balance at beginning of period	$	194	$	15,392	$	5,728	$	21,314	$	201	$	14,809	$	6,419	$	21,429	Balance at beginning of period	$	152	$	16,479	$	5,400	$	22,031	$	201	$	14,809	$	6,419	$	21,429
Provision for (recovery of) loan losses	Provision for (recovery of) loan losses	(42)		1,485		(1,043)		400		(49)		2,048		(1,599)		400		Provision for (recovery of) loan losses	30		3,851		1,519		5,400		(19)		5,899		(80)		5,800
Charge-offs	Charge-offs	0		(599)		(96)		(695)		0		(742)		(383)		(1,125)		Charge-offs	0		(706)		(295)		(1,001)		0		(1,448)		(678)		(2,126)
Recoveries	Recoveries	0		201		811		1,012		0		364		963		1,327		Recoveries	0		61		359		420		0		425		1,322		1,747
Balance at end of period	Balance at end of period	$	152	$	16,479	$	5,400	$	22,031	$	152	$	16,479	$	5,400	$	22,031	Balance at end of period	$	182	$	19,685	$	6,983	$	26,850	$	182	$	19,685	$	6,983	$	26,850

The following table presents ending balances of loans and the related ACL, by segment and class:


		Allowance for Credit Losses						Total Loans Receivable							Allowance for Credit Losses						Total Loans Receivable
		Loans individually evaluated		Loans collectively evaluated		Total		Loans individually evaluated		Loans collectively evaluated		Total			Loans individually evaluated		Loans collectively evaluated		Total		Loans individually evaluated		Loans collectively evaluated		Total
December 31, 2020
March 31, 2021														March 31, 2021
Commercial loans:	Commercial loans:													Commercial loans:
Commercial real estate	Commercial real estate	$	86	$	12,841	$	12,927	$	6,463	$	1,050,508	$	1,056,971	Commercial real estate	$	83	$	12,184	$	12,267	$	6,252	$	1,081,926	$	1,088,178
Construction and development	Construction and development	0		2,385		2,385		80		172,812		172,892		Construction and development	0		1,837		1,837		8		162,812		162,820
Commercial and industrial	Commercial and industrial	16		2,874		2,890		887		137,874		138,761		Commercial and industrial	0		2,645		2,645		780		139,799		140,579
Equipment finance	Equipment finance	76		6,179		6,255		373		272,388		272,761		Equipment finance	7		6,196		6,203		364		291,586		291,950
Municipal finance	Municipal finance	0		442		442		352		128,197		128,549		Municipal finance	0		446		446		0		129,141		129,141
PPP	PPP	0		0		0		0		64,845		64,845		PPP	0		0		0		0		73,090		73,090
Retail consumer loans:	Retail consumer loans:													Retail consumer loans:
One-to-four family	One-to-four family	11		7,800		7,811		3,266		449,155		452,421		One-to-four family	6		6,550		6,556		2,323		427,678		430,001
HELOCs - originated	HELOCs - originated	0		1,680		1,680		0		125,397		125,397		HELOCs - originated	0		1,591		1,591		0		131,867		131,867
HELOCs - purchased	HELOCs - purchased	0		784		784		0		58,640		58,640		HELOCs - purchased	0		556		556		0		46,086		46,086
Construction and land/lots	Construction and land/lots	0		1,456		1,456		0		75,108		75,108		Construction and land/lots	0		1,006		1,006		0		68,118		68,118
Indirect auto finance	Indirect auto finance	0		2,978		2,978		0		122,947		122,947		Indirect auto finance	0		2,745		2,745		0		119,656		119,656
Consumer	Consumer	0		236		236		0		9,332		9,332		Consumer	0		207		207		0		8,667		8,667
Total	Total	$	189	$	39,655	$	39,844	$	11,421	$	2,667,203	$	2,678,624	Total	$	96	$	35,963	$	36,059	$	9,727	$	2,680,426	$	2,690,153

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The following table presents ending balances of loans and the related allowance, by segment and class, prior to the adoption of ASU 2016-13:


	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
June 30, 2020
Commercial loans:
Commercial real estate	$	113	$	961	$	10,731	$	11,805	$	5,822	$	7,924	$	1,039,160	$	1,052,906
Construction and development	4		5		3,599		3,608		590		299		215,045		215,934
Commercial and industrial	15		31		2,153		2,199		1,562		852		152,411		154,825
Equipment finance	0		209		2,598		2,807		0		801		228,438		229,239
Municipal finance	0		0		697		697		0		0		127,987		127,987
PPP	0		0		0		0		0		0		80,697		80,697
Retail consumer loans:
One-to-four family	17		52		2,400		2,469		4,473		4,304		464,916		473,693
HELOCs - originated	0		0		1,344		1,344		0		0		137,447		137,447
HELOCs - purchased	0		0		430		430		0		0		71,781		71,781
Construction and land/lots	33		0		1,409		1,442		345		296		81,218		81,859
Indirect auto finance	0		0		1,136		1,136		0		10		132,293		132,303
Consumer	0		0		135		135		0		0		10,259		10,259
Total	$	182	$	1,258	$	26,632	$	28,072	$	12,792	$	14,486	$	2,741,652	$	2,768,930

Prior to the adoption of ASU 2016-13, loans acquired through acquisitions were initially excluded from the allowance for loan losses in accordance with the acquisition method of accounting for business combinations. The Company recorded these loans at fair value, which includes a credit discount; therefore, no allowance for loan losses was established for these acquired loans at acquisition. A provision for loan losses was recorded for any further deterioration in these acquired loans subsequent to the acquisition.

The following table presents impaired loans and the related allowance, by segment and class, excluding PCI loans, prior to the adoption of ASU 2016-13:


	Total Impaired Loans
	Unpaid Principal Balance		Recorded Investment With a Recorded Allowance		Recorded Investment With No Recorded Allowance		Total		Related Recorded Allowance















June 30, 2020
Commercial loans:
Commercial real estate	$	10,401	$	8,062	$	1,068	$	9,130	$	976
Construction and development	1,785		818		80		898		11
Commercial and industrial	9,782		1,058		26		1,084		34
Equipment finance	2,631		303		498		801		209
Retail consumer loans:
One-to-four family	16,560		10,805		3,374		14,179		412
HELOCs - originated	2,087		1,585		53		1,638		43
HELOCs - purchased	662		662		0		662		3
Construction and land/lots	1,585		749		296		1,045		13
Indirect auto finance	1,075		486		241		727		5
Consumer	297		38		27		65		2

Total impaired loans	$	46,865	$	24,566	$	5,663	$	30,229	$	1,708

The table above includes $15,743, of impaired loans that were not individually evaluated because these loans did not meet the Company's threshold for individual impairment evaluation. The recorded allowance above includes $450 related to these loans that were not individually evaluated.

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The following table presents average recorded investments in impaired loans and interest income recognized on impaired loans, prior to the adoption of ASU 2016-13:


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		December 31, 2019				December 31, 2019					March 31, 2020				March 31, 2020
		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized			Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial loans:	Commercial loans:									Commercial loans:
Commercial real estate	Commercial real estate	$	8,665	$	76	$	8,419	$	144	Commercial real estate	$	8,728	$	59	$	8,496	$	237
Construction and development	Construction and development	1,181		11		1,527		26		Construction and development	712		10		1,323		36
Commercial and industrial	Commercial and industrial	742		14		710		90		Commercial and industrial	1,119		11		812		103
Equipment finance	Equipment finance	1,032		0		643		3		Equipment finance	727		3		664		6
Retail consumer loans:	Retail consumer loans:									Retail consumer loans:
One-to-four family	One-to-four family	14,276		192		15,085		378		One-to-four family	14,189		175		14,861		560
HELOCs - originated	HELOCs - originated	1,862		26		1,700		53		HELOCs - originated	1,724		23		1,706		76
HELOCs - purchased	HELOCs - purchased	476		3		540		6		HELOCs - purchased	474		30		524		37
Construction and land/lots	Construction and land/lots	1,117		20		1,201		44		Construction and land/lots	1,091		19		1,174		63
Indirect auto finance	Indirect auto finance	483		6		467		15		Indirect auto finance	625		8		506		42
Consumer	Consumer	53		3		288		6		Consumer	53		3		229		9

Total loans	Total loans	$	29,887	$	351	$	30,580	$	765	Total loans	$	29,442	$	341	$	30,295	$	1,169

The following table presents a summary of changes in the accretable yield for PCI loans, prior to the adoption of ASU 2016-13:


		Three Months Ended		Six Months Ended			Three Months Ended		Nine Months Ended
		December 31, 2019		December 31, 2019			March 31, 2020		March 31, 2020
Accretable yield, beginning of period	Accretable yield, beginning of period	$	4,916	$	5,259	Accretable yield, beginning of period	$	4,355	$	5,259
Reclass from nonaccretable yield (1)	Reclass from nonaccretable yield (1)	135		250		Reclass from nonaccretable yield (1)	171		421
Other changes, net (2)	Other changes, net (2)	(295)		(309)		Other changes, net (2)	(23)		(332)
Interest income	Interest income	(401)		(845)		Interest income	(378)		(1,223)
Accretable yield, end of period	Accretable yield, end of period	$	4,355	$	4,355	Accretable yield, end of period	$	4,125	$	4,125

______________________________________

(1) Represents changes attributable to expected loss 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.

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

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 following table provides a breakdown between loans identified as CDAs and non-CDAs, by segment and class, and securing collateral, as well as collateral coverage for those loans at ~~December~~March 31, ~~2020:~~2021:


		Type of Collateral and Extent to Which Collateral Secures Financial Assets										Type of Collateral and Extent to Which Collateral Secures Financial Assets
		Residential Property		Investment Property		Commercial Property		Business Assets		Financial Assets Not Considered Collateral Dependent			Total			Residential Property		Investment Property		Commercial Property		Business Assets		Financial Assets Not Considered Collateral Dependent		Total

Commercial loans:	Commercial loans:														Commercial loans:
Commercial real estate	Commercial real estate	$	0	$	3,800	$	2,460	$	0	$	1,050,711		$	1,056,971	Commercial real estate	$	0	$	3,800	$	2,452	$	0	$	1,081,926	$	1,088,178
Construction and development	Construction and development	0		80		0		0		172,812			172,892		Construction and development	0		80		0		0		162,740		162,820
Commercial and industrial	Commercial and industrial	0		0		0		90		138,671			138,761		Commercial and industrial	0		0		0		25		140,554		140,579
Equipment finance	Equipment finance	0		0		0		87		272,674			272,761		Equipment finance	0		0		0		79		291,871		291,950
Municipal finance	Municipal finance	0		0		0		352		128,197			128,549		Municipal finance	0		0		0		0		129,141		129,141
PPP	PPP	0		0		0		0		64,845			64,845		PPP	0		0		0		0		73,090		73,090
Retail consumer loans:	Retail consumer loans:														Retail consumer loans:
One-to-four family	One-to-four family	1,085		0		0		0		451,336			452,421		One-to-four family	812		0		0		0		429,189		430,001
HELOCs - originated	HELOCs - originated	0		0		0		0		125,397			125,397		HELOCs - originated	0		0		0		0		131,867		131,867
HELOCs - purchased	HELOCs - purchased	0		0		0		0		58,640			58,640		HELOCs - purchased	0		0		0		0		46,086		46,086
Construction and land/lots	Construction and land/lots	0		0		0		0		75,108			75,108		Construction and land/lots	0		0		0		0		68,118		68,118
Indirect auto finance	Indirect auto finance	0		0		0		0		122,947			122,947		Indirect auto finance	0		0		0		0		119,656		119,656
Consumer	Consumer	0		0		0		0		9,332			9,332		Consumer	0		0		0		0		8,667		8,667
Total	Total	$	1,085	$	3,880	$	2,460	$	529	$	2,670,670		$	2,678,624	Total	$	812	$	3,880	$	2,452	$	104	$	2,682,905	$	2,690,153
Total Collateral Value	Total Collateral Value	$	1,257	$	3,924	$	2,732	$	2,506						Total Collateral Value	$	1,034	$	3,924	$	2,506	$	180

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

For the three and ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 and ~~2019,~~2020, the following table presents a breakdown of the types of concessions made on TDRs by loan class:

Three Months Ended December 31, 2020 Three Months Ended December 31, 2019
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
Below market interest rate:
Commercial:
Commercial real estate 0 $ 0 $ 0 1 $ 88 $ 88
Extended payment terms:
Commercial:
Commercial and industrial 0 0 0 1 826 826
Retail consumer:
One-to-four family 0 0 0 1 56 53
Other TDRs:
Commercial:
Construction and development 0 0 0 1 182 79
Retail consumer:
One-to-four family 1 19 16 2 11 10
Construction and land/lots 1 225 223 0 0 0
Indirect auto finance 3 45 43 0 0 0
Total 5 $ 289 $ 282 6 $ 1,163 $ 1,056
Six Months Ended December 31, 2020 Six Months Ended December 31, 2019
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
Below market interest rate:
Commercial:
Commercial real estate 0 $ 0 $ 0 1 $ 88 $ 88
Extended payment terms:
Commercial:
Commercial and industrial 0 0 0 1 826 826
Retail consumer:
One-to-four family 0 0 0 2 70 67
Other TDRs:
Commercial:
Commercial real estate 1 4,408 3,800 0 0 0
Construction and development 0 0 0 1 182 79
Retail consumer:
One-to-four family 1 19 16 3 45 43
Construction and land/lots 1 225 223 0 0 0
Indirect auto finance 9 141 109 4 68 61
Total 12 $ 4,793 $ 4,148 12 $ 1,279 $ 1,164



	Three Months Ended March 31, 2021					Three Months Ended March 31, 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



















Commercial:
Commercial real estate	0	$	0	$	0	1	$	30	$	30



Retail consumer:
One-to-four family	2	212		212		2	319		317
HELOCs - originated	2	53		74		0	0		0

Indirect auto finance	3	28		32		0	0		0
Consumer	0	0		0		0	0		0
Total	7	$	293	$	318	3	$	349	$	347


	Nine Months Ended March 31, 2021					Nine Months Ended March 31, 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
Below market interest rate:
Commercial:
Commercial real estate	0	$	0	$	0	1	$	88	$	87




Total	0	0		0		1	88		87
Extended payment terms:
Commercial:

Commercial and industrial	0	0		0		1	826		826
Retail consumer:
One-to-four family	0	0		0		2	70		67



Total	0	0		0		3	896		893
Other TDRs:
Commercial:
Commercial real estate	0	0		0		1	30		30
Construction and development	0	0		0		1	182		79
Commercial and industrial	1	4,408		4,407		0	0		0
Retail consumer:
One-to-four family	4	269		261		4	353		348
HELOCs - originated	2	53		74		0	0		0
Construction and land/lots	1	225		219		0	0		0
Indirect auto finance	11	150		110		4	68		57

Total	19	$	5,105	$	5,071	10	$	633	$	514
Total	19	$	5,105	$	5,071	14	$	1,617	$	1,494

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.

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 within the previous 12 months and for which there was a payment default during the three and ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended December 31, 2020			Three Months Ended December 31, 2019				Three Months Ended March 31, 2021			Three Months Ended March 31, 2020
		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment			Number of Loans	Recorded Investment		Number of Loans	Recorded Investment

Other TDRs:	Other TDRs:							Other TDRs:
Retail consumer:	Retail consumer:							Retail consumer:

Indirect auto finance	Indirect auto finance	1	$	1	0	$	0	Indirect auto finance	1	$	1	0	$	0

Total	Total	1	$	1	0	$	0	Total	1	$	1	0	$	0


		Six Months Ended December 31, 2020			Six Months Ended December 31, 2019				Nine Months Ended March 31, 2021			Nine Months Ended March 31, 2020
		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment			Number of Loans	Recorded Investment		Number of Loans	Recorded Investment

Other TDRs:	Other TDRs:							Other TDRs:
Retail consumer:	Retail consumer:							Retail consumer:
One-to-four family	One-to-four family	0	$	0	2	$	50	One-to-four family	0	$	0	2	$	49

Indirect auto finance	Indirect auto finance	2	12		0	0		Indirect auto finance	2	26		0	0

Total	Total	2	$	12	2	$	50	Total	2	$	26	2	$	49

In ~~the determination of~~determining the ACL, management considers TDRs for all loan classes, and the subsequent nonperformance in accordance with their modified terms, by measuring a 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 ~~from~~on off-balance-sheet credit exposures, including unfunded loan commitments, which is included in other liabilities on the consolidated balance ~~sheets.~~sheet. The reserve for credit losses on off-balance-sheet credit exposures is adjusted as a provision for credit losses in the consolidated ~~statements~~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 ~~December~~March 31, ~~2020,~~2021, the liability for credit losses on off-balance-sheet credit exposures included in other liabilities was ~~$2,428.~~$2,298.

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 TDRs. Accordingly, the Company does not account for such loan modifications as TDRs. As of ~~December~~March 31, ~~2020,~~2021, the Company had outstanding modifications totaling ~~$1,654~~$1,182 and ~~$82,035 had been granted~~$81,328 in retail consumer loans and commercial loans, respectively.

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. The breakout of loans deferred by loan type as of the dates indicated is as follows:

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)


Principal and Interest Payment Deferrals by Loan Types (1) (2)	Principal and Interest Payment Deferrals by Loan Types (1) (2)											Principal and Interest Payment Deferrals by Loan Types (1) (2)

		December 31, 2020				June 30, 2020					March 31, 2021				June 30, 2020
		Deferral		Percent of Total Loan Portfolio			Deferral		Percent of Total Loan Portfolio				Deferral		Percent of Total Loan Portfolio		Deferral		Percent of Total Loan Portfolio
Lodging	Lodging	$	0	0	%		$	108,171	4.0	%		Lodging	$	0	0	%	$	108,171	4.0	%
Other commercial real estate, construction and development, and commercial and industrial	Other commercial real estate, construction and development, and commercial and industrial	4,018		0.2			367,443		13.7			Other commercial real estate, construction and development, and commercial and industrial	2,193		0.1		367,443		13.7
Equipment finance	Equipment finance	2,196		0.1			33,693		1.3			Equipment finance	2,382		0.1		33,693		1.3
One-to-four family	One-to-four family	822		0			36,821		1.4			One-to-four family	0		0		36,821		1.4
Other consumer loans	Other consumer loans	832		0			5,203		0.2			Other consumer loans	1,182		0		5,203		0.2
Total	Total	$	7,868	0.3	%		$	551,331	20.6	%		Total	$	5,757	0.2	%	$	551,331	20.6	%

__________________________

(1) Modified loans are not included in classified assets or nonperforming assets.

(2) Principal and interest is being deferred

A majority of loans placed on principal and interest payment deferral during the pandemic ~~came~~had come out of deferral ~~as of December~~by March 31, ~~2020.~~2021. However, the Company has allowed for continued relief to borrowers in the form of interest-only payments for certain loans recently coming out of full deferral. At ~~December~~March 31, ~~2020,~~2021, the Company had ~~$75,821~~$76,753 in commercial loans on interest-only payments for a period of time no greater than 12 months before ~~being required to~~requiring that they return to their original contractual payments.

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

7. Real Estate Owned

The activity within REO for the periods shown is as follows:


		Three Months Ended December 31,				Six Months Ended December 31,					Three Months Ended March 31,				Nine Months Ended March 31,
		2020		2019		2020		2019			2021		2020		2021		2020
Balance at beginning of period	Balance at beginning of period	$	144	$	2,582	$	337	$	2,929	Balance at beginning of period	$	252	$	1,451	$	337	$	2,929
Transfers from loans	Transfers from loans	108		0		108		46		Transfers from loans	0		0		108		46

Sales, net of gain or loss	Sales, net of gain or loss	0		(965)		(193)		(1,346)		Sales, net of gain or loss	(109)		(376)		(302)		(1,722)
Writedowns	Writedowns	0		(166)		0		(178)		Writedowns	0		0		0		(178)

Balance at end of period	Balance at end of period	$	252	$	1,451	$	252	$	1,451	Balance at end of period	$	143	$	1,075	$	143	$	1,075

At ~~December~~March 31, ~~2020~~2021 and June 30, 2020, the Bank had $0 and $97, 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 ~~$447~~$0 and $1,318 at ~~December~~March 31, ~~2020~~2021 and June 30, 2020, respectively.

8. Net Income per Share

The following is a reconciliation of the numerator and denominator of basic and diluted net income per share of common stock as of the dates indicated:


		Three Months Ended December 31,				Six Months Ended December 31,					Three Months Ended March 31,				Nine Months Ended March 31,
		2020		2019		2020		2019			2021		2020		2021		2020
Numerator:	Numerator:									Numerator:
Net income	Net income	$	9,461	$	9,191	$	15,214	$	17,995	Net income	$	7,869	$	1,193	$	23,083	$	19,188
Allocation of earnings to participating securities	Allocation of earnings to participating securities	(77)		(72)		(124)		(140)		Allocation of earnings to participating securities	(72)		(11)		(209)		(167)
Numerator for basic EPS - Net income available to common stockholders	Numerator for basic EPS - Net income available to common stockholders	$	9,384	$	9,119	$	15,090	$	17,855	Numerator for basic EPS - Net income available to common stockholders	$	7,797	$	1,182	$	22,874	$	19,021
Effect of dilutive securities:	Effect of dilutive securities:									Effect of dilutive securities:
Dilutive effect to participating securities	Dilutive effect to participating securities	1		8		2		5		Dilutive effect to participating securities	2		2		2		6
Numerator for diluted EPS	Numerator for diluted EPS	$	9,385	$	9,127	$	15,092	$	17,860	Numerator for diluted EPS	$	7,799	$	1,184	$	22,876	$	19,027
Denominator:	Denominator:									Denominator:
Weighted-average common shares outstanding - basic	Weighted-average common shares outstanding - basic	16,202,844		16,906,457		16,216,917		17,002,052		Weighted-average common shares outstanding - basic	15,979,590		16,688,646		16,139,059		16,898,391
Effect of dilutive shares	Effect of dilutive shares	360,515		661,223		297,914		658,635		Effect of dilutive shares	506,128		569,782		200,071		625,861
Weighted-average common shares outstanding - diluted	Weighted-average common shares outstanding - diluted	16,563,359		17,567,680		16,514,831		17,660,687		Weighted-average common shares outstanding - diluted	16,485,718		17,258,428		16,339,130		17,524,252
Net income per share - basic	Net income per share - basic	$	0.58	$	0.54	$	0.93	$	1.05	Net income per share - basic	$	0.49	$	0.07	$	1.42	$	1.12
Net income per share - diluted	Net income per share - diluted	$	0.57	$	0.52	$	0.92	$	1.01	Net income per share - diluted	$	0.48	$	0.07	$	1.40	$	1.08

Potential dilutive shares are excluded from the computation of earnings per share if their effect is anti-dilutive. There were ~~512,200 and 547,200~~524,850 stock options that were anti-dilutive for the three and ~~six~~nine months ended ~~December~~March 31, ~~2020,~~2021, respectively. There were ~~459,400 and 470,800~~506,800 stock options that were anti-dilutive for the three and ~~six~~nine months ended ~~December~~March 31, ~~2019,~~2020, respectively.

9. 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, 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. 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 plan ~~may~~would be issued out of authorized but unissued shares, some or all of which may be repurchased shares.

~~The table below presents share-based compensation expense and~~ As of June 30, 2013, the ~~estimated related tax benefit~~Company had repurchased all 846,400 shares on the open market for ~~stock options and restricted stock~~issuance under the 2013 Omnibus Incentive Plan, for ~~the three and six months ended December 31, 2020 and 2019, respectively:~~

Three Months Ended December 31, Six Months Ended December 31,
2020 2019 2020 2019
Share-based compensation expense $ 454 $ 440 $ 960 $ 883
Tax benefit $ 107 $ 103 $ 226 $ 208
$13,297, at an average cost of $15.71 per share.

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The table below presents share-based compensation expense and the estimated related tax benefit for stock options and restricted stock for the three and nine months ended March 31, 2021 and 2020, respectively:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2021		2020		2021		2020
Share-based compensation expense	$	489	$	458	$	1,449	$	1,341
Tax benefit	$	115	$	108	$	341	$	315

The table below presents stock option activity for the ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 and ~~2019:~~2020:


		Options	Weighted- average exercise price		Remaining contractual life (years)	Aggregate Intrinsic Value			Options	Weighted- average exercise price		Remaining contractual life (years)	Aggregate Intrinsic Value
Options outstanding at June 30, 2019	Options outstanding at June 30, 2019	1,657,214	$	17.59	5.0	$	12,909	Options outstanding at June 30, 2019	1,657,214	$	17.59	5.0	$	12,909
Granted	Granted	25,000	25.37		—	—		Granted	61,000	26.40		—	—

Exercised	Exercised	66,900	14.40		—	—		Exercised	106,914	14.41		—	—
Forfeited	Forfeited	800	17.35		—	—		Forfeited	800	17.35		—	—

Options outstanding at December 31, 2019		1,614,514	$	17.84	4.7	$	14,538
Exercisable at December 31, 2019		1,212,714	$	15.45	3.5	$	13,805
Non-vested at December 31, 2019		401,800	$	25.07	7.9	$	733
Options outstanding at March 31, 2020								Options outstanding at March 31, 2020	1,610,500	$	18.13	4.6	$	1,617
Exercisable at March 31, 2020								Exercisable at March 31, 2020	1,298,000	$	15.45	3.7	$	1,617
Non-vested at March 31, 2020								Non-vested at March 31, 2020	312,500	$	25.86	8.2	$	0

Options outstanding at June 30, 2020	Options outstanding at June 30, 2020	1,615,500	$	18.12	4.4	$	1,711	Options outstanding at June 30, 2020	1,615,500	$	18.12	4.4	$	1,711

Granted								Granted	44,750	22.92		—	—

Exercised	Exercised	54,000	14.37		—	—		Exercised	172,866	14.40		—	—
Forfeited	Forfeited	26,900	25.77		—	—		Forfeited	26,900	25.77		—	—

Options outstanding at December 31, 2020		1,534,600	$	18.12	3.8	$	5,070
Exercisable at December 31, 2020		1,243,700	$	16.35	3.0	$	5,027
Non-vested at December 31, 2020		290,900	$	25.67	7.3	$	42
Options outstanding at March 31, 2021								Options outstanding at March 31, 2021	1,460,484	$	18.57	3.9	$	9,268
Exercisable at March 31, 2021								Exercisable at March 31, 2021	1,220,734	$	17.24	3.2	$	9,152
Non-vested at March 31, 2021								Non-vested at March 31, 2021	239,750	$	25.31	7.7	$	116

~~There were no options granted during the six months ended December 31, 2020.~~ Assumptions used in estimating the fair value of options granted during the ~~six~~nine months ended ~~December~~March 31, ~~2019~~2021 and March 31, 2020 are presented below:

~~December 31,~~

~~2019~~

~~Weighted-average volatility~~

~~17.84~~

~~Expected dividend yield~~

~~0.95~~

~~Risk-free interest rate~~

~~1.55~~

~~Expected life (years)~~

~~6.5~~

~~Weighted-average fair value of options granted~~

~~4.67~~


	March 31, 2021			March 31, 2020

Weighted-average volatility	28.30		%	17.77		%
Expected dividend yield	1.35		%	0.98		%
Risk-free interest rate	0.72		%	1.50		%
Expected life (years)	6.5			6.5
Weighted-average fair value of options granted	$	5.61		$	4.79

At ~~December~~March 31, ~~2020,~~2021, the Company had ~~$1,297~~$1,460 of unrecognized compensation expense related to ~~290,900~~239,750 stock options scheduled to vest over a five-year vesting period. The weighted average period over which compensation cost related to non-vested awards expected to be recognized was ~~1.3~~2.0 years at ~~December~~March 31, ~~2020.~~2021. At ~~December~~March 31, ~~2019,~~2020, the Company had ~~$1,854~~$1,853 of unrecognized compensation expense related to ~~401,800~~312,500 stock options originally scheduled to vest over ~~five- and seven-year~~five-year vesting ~~periods.~~period. The weighted average period over which compensation cost related to non-vested awards expected to be recognized was ~~1.4~~2.0 years at ~~December~~March 31, ~~2019.~~

~~The table below presents restricted stock award activity for the six months ended December 31, 2020 and 2019:~~

Restricted
stock awards Weighted-
average grant
date fair value Aggregate
Intrinsic
Value
Non-vested at June 30, 2019 123,800 $ 24.65 $ 2,258
Granted 13,000 25.37 —
Vested 400 19.02 —
Forfeited 3,200 20.62 —
Non-vested at December 31, 2019 133,200 $ 24.83 $ 3,574
Non-vested at June 30, 2020 144,046 $ 25.89 $ 2,305
Vested 2,600 25.37 —
Forfeited 7,650 25.65 —
Non-vested at December 31, 2020 133,796 $ 25.91 $ 2,584

The table above includes non-vested performance-based restrictive stock units totaling 15,565 and 10,375 at December 31, 2020 and 2019, respectively. Each issuance of these stock units is scheduled to vest over 3.0 years assuming certain performance metrics are met.2020.

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The table below presents restricted stock award activity for the nine months ended March 31, 2021 and 2020:


	Restricted stock awards	Weighted- average grant date fair value		Aggregate Intrinsic Value
Non-vested at June 30, 2019	123,800	$	24.65	$	3,322
Granted	65,556	26.76		—
Vested	37,425	22.90		—
Forfeited	3,200	20.62		—
Non-vested at March 31, 2020	148,731	$	26.11	$	2,638

Non-vested at June 30, 2020	144,046	$	25.89	$	2,305
Granted	56,547	22.92		—
Vested	45,296	25.17		—
Forfeited	7,650	25.65		—
Non-vested at March 31, 2021	147,647	$	24.98	$	2,118,734

The table above includes non-vested performance-based restrictive stock units totaling 28,852 and 21,625 at March 31, 2021 and 2020, respectively. Each issuance of these stock units is scheduled to vest over 3.0 years assuming certain performance metrics are met.

At ~~December~~March 31, ~~2020,~~2021, unrecognized compensation expense was ~~$2,250~~$3,196 related to ~~133,796~~147,647 shares of restricted stock scheduled to vest over three- and five-year vesting periods. The weighted average period over which compensation cost related to non-vested awards is expected to be recognized was ~~1.4~~1.9 years at ~~December~~March 31, ~~2020.~~2021. At ~~December~~March 31, ~~2019,~~2020, unrecognized compensation expense was ~~$2,325~~$3,736 related to ~~133,200~~148,731 shares of restricted stock originally scheduled to vest over three-, ~~five~~-, and ~~seven-year~~five-year vesting periods. The weighted average period over which compensation cost related to non-vested awards is expected to be recognized was ~~1.5~~2.0 years at ~~December~~March 31, ~~2019.~~2020.

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~~March 31, ~~2020~~2021 and June 30, 2020, respectively, loan commitments (excluding ~~$146,181~~$217,142 and $141,557 of undisbursed portions of construction loans) totaled ~~$86,648~~$146,578 and $57,798 of which ~~$17,468~~$24,883 and $10,678 were variable rate commitments and ~~$69,180~~$121,695 and $47,120 were fixed rate commitments. The fixed rate loans had interest rates ranging from ~~1.09%~~1.08% to ~~8.28%~~8.78% at ~~December~~March 31, ~~2020~~2021 and 1.74% to 8.54% at June 30, 2020, 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 ~~$465,200~~$556,501 and $398,781 at ~~December~~March 31, ~~2020~~2021 and June 30, 2020, 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, the 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~~March 31, ~~2020~~2021 or June 30, 2020.

The Company grants construction and permanent loans collateralized primarily by residential and commercial real estate to customers throughout its primary market areas. In addition, the Company grants equipment financing throughout the United States and municipal financing to customers throughout North and South Carolina. The Company’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 – In response to COVID-19, the FRB reduced the reserve requirements to zero on March 15, 2020. Prior to this change the Bank was required by regulation to maintain a varying cash reserve balance with 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~~March 31, ~~2020~~2021 and June 30, 2020 were ~~$7,936~~$9,213 and $7,766, respectively. There was no liability recorded for these letters of credit at ~~December~~March 31, ~~2020~~2021 or June 30, 2020, respectively.

Litigation – From time to time, the Company is involved in 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.

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

11. 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. 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 fair value of financial instruments presented in this note are based on the same methodology as presented in ~~Note~~"Note 21 – Fair Value of Financial Instruments" of the Notes to Consolidated Financial Statements contained in the Company’s 2020 Form 10-K.

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.

~~HOMETRUST BANCSHARES, INC. AND SUBSIDIARY~~

~~Notes to Consolidated Financial Statements~~

~~(Dollars in thousands, except per share data)~~

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.

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.

Investment Securities Available for Sale

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 securities and debentures issued by government sponsored enterprises, municipal bonds, and corporate debt securities. The Company has no Level 3 securities.

Loans Held for Sale

Loans 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.

Individually Evaluated Loans

The Company does not record loans at fair value on a recurring basis. From time to time, however, a loan is individually evaluated and an allowance for credit loss is established. Loans for which it is probable that payment of principal and interest will not be made in accordance with the contractual terms of the loan agreement are individually evaluated. Once a loan is identified, the fair value is estimated using one of two ways, which include collateral value and discounted cash flows. The Company reviews all individually evaluated loans each quarter to determine if an allowance is necessary. Those individually 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.

Loans are considered collateral dependent if repayment is expected solely from the collateral. For these collateral dependent 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 individually 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. Individually 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 loans as a nonrecurring Level 3 in the fair value hierarchy.

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.

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

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:


		December 31, 2020									March 31, 2021
Description	Description	Total		Level 1		Level 2		Level 3		Description	Total		Level 1		Level 2		Level 3
U.S government agencies	U.S government agencies	$	19,138	$	0	$	19,138	$	0	U.S government agencies	$	19,108	$	0	$	19,108	$	0
Residential MBS of U.S. government agencies and GSEs	Residential MBS of U.S. government agencies and GSEs	41,013		0		41,013		0		Residential MBS of U.S. government agencies and GSEs	42,237		0		42,237		0
Municipal bonds	Municipal bonds	10,899		0		10,899		0		Municipal bonds	9,600		0		9,600		0
Corporate bonds	Corporate bonds	82,490		0		82,490		0		Corporate bonds	91,472		0		91,472		0

Total	Total	$	153,540	$	0	$	153,540	$	0	Total	$	162,417	$	0	$	162,417	$	0


	June 30, 2020
Description	Total		Level 1		Level 2		Level 3
U.S government agencies	$	4,173	$	0	$	4,173	$	0
Residential MBS of U.S. government agencies and GSEs	48,355		0		48,355		0
Municipal bonds	16,631		0		16,631		0
Corporate bonds	58,378		0		58,378		0

Total	$	127,537	$	0	$	127,537	$	0

There were no transfers between levels during the ~~six~~nine months ended ~~December~~March 31, ~~2020.~~2021.

The following table presents financial assets measured at fair value on a non-recurring basis at the dates indicated:


		December 31, 2020									March 31, 2021
Description	Description	Total		Level 1		Level 2		Level 3		Description	Total		Level 1		Level 2		Level 3
Individually evaluated loans	Individually evaluated loans	$	5,230	$	0	$	0	$	5,230	Individually evaluated loans	$	10,188	$	0	$	0	$	10,188


	June 30, 2020
Description	Total		Level 1		Level 2		Level 3
Individually evaluated loans	$	9,168	$	0	$	0	$	9,168
REO	97		0		0		97
Total	$	9,265	$	0	$	0	$	9,265

Quantitative information about Level 3 fair value measurements during the period ended ~~December~~March 31, ~~2020~~2021 is shown in the table below:

Nonrecurring measurements:

Fair Value at December 31, 2020

Valuation
Techniques

Unobservable
Input

Range

Weighted
Average

Nonrecurring measurements:

Fair Value at March 31, 2021

Valuation
Techniques

Unobservable
Input

Range

Weighted
Average

Individually evaluated loans

5,230

Discounted appraisals and discounted cash flows

Collateral discounts
and discount spread

0% - 53%

2% - 3%

13%

Individually evaluated loans

10,188

Discounted appraisals and discounted cash flows

Collateral discounts
and discount spread

0% - 52%

0% - 2%

17%

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The stated carrying value and estimated fair value amounts of financial instruments as of ~~December~~March 31, ~~2020~~2021 and June 30, 2020, are summarized below:


		December 31, 2020											March 31, 2021
		Carrying Value		Fair Value		Level 1		Level 2		Level 3			Carrying Value		Fair Value		Level 1		Level 2		Level 3
Assets:	Assets:											Assets:
Cash and interest-bearing deposits	Cash and interest-bearing deposits	$	226,344	$	226,344	$	226,344	$	0	$	0	Cash and interest-bearing deposits	$	164,095	$	164,095	$	164,095	$	0	$	0
Commercial paper	Commercial paper	183,778		183,778		183,778		0		0		Commercial paper	238,445		238,445		238,445		0		0
Certificates of deposit in other banks	Certificates of deposit in other banks	48,637		48,637		0		48,637		0		Certificates of deposit in other banks	42,015		42,015		0		42,015		0
Securities available for sale	Securities available for sale	153,540		153,540		0		153,540		0		Securities available for sale	162,417		162,417		0		162,417		0
Loans, net	Loans, net	2,638,780		2,608,848		0		0		2,608,848		Loans, net	2,654,094		2,633,221		0		0		2,633,221
Loans held for sale	Loans held for sale	118,439		120,254		0		0		120,254		Loans held for sale	86,708		88,292		0		0		88,292
FHLB stock	FHLB stock	23,309		23,309		23,309		0		0		FHLB stock	12,152		12,152		12,152		0		0
FRB stock	FRB stock	7,374		7,374		7,374		0		0		FRB stock	7,379		7,379		7,379		0		0
SBIC investments	SBIC investments	8,889		8,889		0		0		8,889		SBIC investments	9,368		9,368		0		0		9,368
Accrued interest receivable	Accrued interest receivable	9,796		9,796		0		1,184		8,612		Accrued interest receivable	8,271		8,271		0		582		7,689
Liabilities:	Liabilities:											Liabilities:
Noninterest-bearing and NOW deposits	Noninterest-bearing and NOW deposits	1,124,958		1,124,958		0		1,124,958		0		Noninterest-bearing and NOW deposits	1,255,951		1,255,951		0		1,255,951		0
Money market accounts	Money market accounts	882,366		882,366		0		882,366		0		Money market accounts	927,519		927,519		0		927,519		0
Savings accounts	Savings accounts	209,699		209,699		0		209,699		0		Savings accounts	221,537		221,537		0		221,537		0
Certificates of deposit	Certificates of deposit	526,246		529,661		0		529,661		0		Certificates of deposit	503,471		505,865		0		505,865		0
Borrowings	Borrowings	475,000		504,734		0		504,734		0		Borrowings	275,000		291,259		0		291,259		0
Accrued interest payable	Accrued interest payable	623		623		0		623		0		Accrued interest payable	388		388		0		388		0


	June 30, 2020
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Assets:
Cash and interest-bearing deposits	$	121,622	$	121,622	$	121,622	$	0	$	0
Commercial paper	304,967		304,967		304,967		0		0
Certificates of deposit in other banks	55,689		55,689		0		55,689		0
Securities available for sale	127,537		127,537		0		127,537		0
Loans, net	2,741,047		2,692,265		0		0		2,692,265
Loans held for sale	77,177		78,129		0		0		78,129
FHLB stock	23,309		23,309		23,309		0		0
FRB stock	7,368		7,368		7,368		0		0
SBIC investments	8,269		8,269		0		0		8,269
Accrued interest receivable	12,312		12,312		208		744		11,360
Liabilities:
Noninterest-bearing and NOW deposits	1,012,200		1,012,200		0		1,012,200		0
Money market accounts	836,738		836,738		0		836,738		0
Savings accounts	197,676		197,676		0		197,676		0
Certificates of deposit	739,142		745,078		0		745,078		0
Borrowings	475,000		511,529		0		511,529		0
Accrued interest payable	1,087		1,087		0		1,087		0

The Company had off-balance sheet financial commitments, which included approximately ~~$698,029~~$920,221 and $598,136 of commitments to originate loans, undisbursed portions of interim construction loans, and unused lines of credit at ~~December~~March 31, ~~2020~~2021 and June 30, 2020, respectively (see ~~Note 10)~~"Note 10 – 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.~~

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

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.

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. A liquidity premium assumption is used as an estimate for the additional return required by an investor of assets that are 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 securities 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. 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.

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 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.

12. 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 ~~December~~March 31, ~~2020,~~2021, the Company ~~did not have any leases~~had 1 lease that had not yet commenced for which it had created a ROU asset and a lease liability. 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.

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

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:	Supplemental Balance Sheet Information:	December 31, 2020			June 30, 2020			Supplemental Balance Sheet Information:	March 31, 2021			June 30, 2020
ROU assets	ROU assets	$	4,546		$	4,601		ROU assets	$	6,208		$	4,601

Lease liabilities	Lease liabilities	4,561			4,590			Lease liabilities	6,227			4,590

Weighted-average remaining lease terms		4.56			5.02
Weighted-average remaining lease terms (years)								Weighted-average remaining lease terms (years)	4.39			5.02
Weighted-average discount rate	Weighted-average discount rate	2.81		%	2.97		%	Weighted-average discount rate	2.82		%	2.97		%

The following schedule summarizes aggregate future minimum lease payments under these operating leases at ~~December~~March 31, ~~2020:~~2021:


Fiscal year ending June 30:	Fiscal year ending June 30:			Fiscal year ending June 30:
Remaining 2021	Remaining 2021	$	663	Remaining 2021	$	351
2022	2022	1,248		2022	1,399
2023	2023	1,200		2023	1,347
2024	2024	735		2024	876
2025	2025	349		2025	492
Thereafter	Thereafter	676		Thereafter	2,746
Total of future minimum payments	Total of future minimum payments	$	4,871	Total of future minimum payments	$	7,211

The following table presents components of operating lease expense for the three and ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended December 31,				Six Months Ended December 31,					Three Months Ended March 31,				Nine Months Ended March 31,
		2020		2019		2020		2019			2021		2020		2021		2020
Operating lease cost (included in occupancy expense)	Operating lease cost (included in occupancy expense)	$	452	$	459	$	891	$	932	Operating lease cost (included in occupancy expense)	$	444	$	436	$	1,335	$	1,368
Sublease income (included in other, net noninterest income)	Sublease income (included in other, net noninterest income)	(61)		(56)		(122)		(120)		Sublease income (included in other, net noninterest income)	(47)		(61)		(169)		(181)
Total operating lease expense, net	Total operating lease expense, net	$	391	$	403	$	769	$	812	Total operating lease expense, net	$	397	$	375	$	1,166	$	1,187

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 ~~December~~March 31, ~~2020~~2021 and June 30, 2020 and is included in other assets. The corresponding lease liability totaled ~~$1,823~~$1,813 and $1,843 at ~~December~~March 31, ~~2020~~2021 and June 30, 2020, respectively, and is included in other liabilities. For the three and ~~six~~nine months ended ~~December~~March 31, 2021, interest expense on the lease liability totaled $24 and $71, respectively. For the three and nine months ended March 31, 2020, interest expense on the lease liability totaled $24 and ~~$48, respectively. For the three and six months ended December 31, 2019, interest expense on the lease liability totaled $24 and $48,~~$73, respectively.The finance lease has a maturity date of July 2028 and a discount rate of 5.18%.

The following schedule summarizes aggregate future minimum lease payments under this finance lease obligation at ~~December~~March 31, ~~2020:~~2021:


Fiscal year ending June 30:	Fiscal year ending June 30:			Fiscal year ending June 30:
Remaining 2021	Remaining 2021	$	66	Remaining 2021	$	33
2022	2022	134		2022	134
2023	2023	134		2023	134
2024	2024	145		2024	145
2025	2025	146		2025	146
Thereafter	Thereafter	1,848		Thereafter	1,848
Total minimum lease payments	Total minimum lease payments	2,473		Total minimum lease payments	2,440
Less: amount representing interest	Less: amount representing interest	(650)		Less: amount representing interest	(627)
Present value of net minimum lease payments	Present value of net minimum lease payments	$	1,823	Present value of net minimum lease payments	$	1,813

Supplemental lease cash flow information for the ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 and ~~2019:~~2020:


		2020		2019			2021		2020
ROU assets - noncash additions (operating leases)	ROU assets - noncash additions (operating leases)	$	597	$	5,296	ROU assets - noncash additions (operating leases)	$	599	$	5,296
ROU assets - noncash addition (finance lease)	ROU assets - noncash addition (finance lease)	0		2,052		ROU assets - noncash addition (finance lease)	0		2,052
Cash paid for amounts included in the measurement of lease liabilities (operating leases)	Cash paid for amounts included in the measurement of lease liabilities (operating leases)	1,055		1,091		Cash paid for amounts included in the measurement of lease liabilities (operating leases)	1,632		1,609
Cash paid for amounts included in the measurement of lease liabilities (finance leases)	Cash paid for amounts included in the measurement of lease liabilities (finance leases)	67		67		Cash paid for amounts included in the measurement of lease liabilities (finance leases)	100		67

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

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 transportation, medical, and agricultural 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 ~~$25,293~~$24,917 and $21,595 with a residual value of ~~$15,364~~$15,596 and $12,370 as of ~~December~~March 31, ~~2020~~2021 and June 30, 2020, respectively.

The following table presents total equipment finance operating lease income and depreciation expense for the three and ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended December 31,				Six Months Ended December 31,					Three Months Ended March 31,				Nine Months Ended March 31,
		2020		2019		2020		2019			2021		2020		2021		2020
Operating lease income	Operating lease income	$	1,349	$	658	$	2,675	$	1,226	Operating lease income	$	1,432	$	989	$	4,107	$	2,215
Depreciation expense	Depreciation expense	1,413		459		2,954		808		Depreciation expense	1,417		746		4,371		1,554

The following schedule summarizes aggregate future minimum operating lease payments to be received at ~~December~~March 31, ~~2020:~~2021:


Fiscal year ending June 30:	Fiscal year ending June 30:			Fiscal year ending June 30:
Remaining 2021	Remaining 2021	$	2,902	Remaining 2021	$	1,494
2022	2022	5,038		2022	5,224
2023	2023	3,192		2023	3,378
2024	2024	1,123		2024	1,286
2025	2025	320		2025	434
Thereafter	Thereafter	48		Thereafter	131
Total of future minimum payments	Total of future minimum payments	$	12,623	Total of future minimum payments	$	11,947

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 ~~December~~March 31, ~~2020~~2021 and ~~2019,~~2020, total interest income on equipment finance leases totaled ~~$570~~$638 and ~~$459,~~$420, respectively. For the ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 and ~~2019,~~2020, total interest income on equipment finance leases totaled ~~$1,099~~$1,736 and ~~$808,~~$1,121, respectively.

The following table presents components of finance lease net investment included within equipment finance class of financing receivables:

December 31, 2020 June 30, 2020
Lease receivables $ 54,024 $ 44,927


	March 31, 2021		June 30, 2020
Lease receivables	$	56,720	$	44,927

The following schedule summarizes aggregate future minimum finance lease payments to be received at ~~December~~March 31, ~~2020:~~2021:


Fiscal year ending June 30:	Fiscal year ending June 30:			Fiscal year ending June 30:
Remaining 2021	Remaining 2021	$	6,452	Remaining 2021	$	2,917
2022	2022	14,628		2022	16,038
2023	2023	14,205		2023	15,504
2024	2024	12,073		2024	13,342
2025	2025	8,358		2025	9,359
Thereafter	Thereafter	3,813		Thereafter	4,875
Total minimum payments	Total minimum payments	59,529		Total minimum payments	62,035
Less: amount representing interest	Less: amount representing interest	(5,505)		Less: amount representing interest	(5,315)
Total	Total	$	54,024	Total	$	56,720

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 ~~the Company’~~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 credit losses and provision for credit 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 ~~the Company originates;~~we originate; results of examinations of us by the Board of Governors of the Federal Reserve System (“Federal Reserve”), the NCCOB, or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit 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, 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 credit 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; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on 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 ~~the Company~~we may in the future acquire into ~~its~~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; 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 including the CARES Act; and the other risks detailed from time to time in our filings with the SEC, including our 2020 Form 10-K.

Many of the forward-looking statements are based upon management's beliefs and assumptions at the time they are made. ~~The Company undertakes~~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 subsidiary, ~~including~~ 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 ~~HomeTrust~~the 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. is~~we are regulated by the Federal Reserve. As a North Carolina state-chartered bank, and member of the 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 FDIC. The Bank is a member of the FHLB of Atlanta, which is one of the 12 regional banks in the FHLB 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 ~~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, SBA loans, equipment finance leases, indirect automobile loans, ~~and~~ municipal finance ~~agreements. The Company~~agreements, loans secured by first and second mortgages on one-to-four family residences, including home equity loans and construction and land/lot loans. We also ~~works~~work with a third party to originate HELOCs which are pooled and sold. In addition, ~~the Company purchases~~we purchase investment securities consisting primarily of securities issued by United States Government agencies and GSEs, as well as corporate bonds, commercial paper, and FDIC insured certificates of deposit.

~~The Company offers~~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.

~~The Company is~~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 ~~the Company earns~~we earn on ~~its~~our loans and investments, and interest expense, which is the interest that is 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 being 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, ~~the Company expects its~~expect our net interest income and net interest margin ~~will~~to be adversely affected throughout fiscal 2021 and possibly longer.

A secondary source of income is noninterest income, which includes revenue we receive from providing products and services, including service charges on deposit accounts, loan income and fees, lease income, gain on sale of loans, and gains and losses from sales of securities.

An offset to net interest income is the provision for credit losses which is required to establish and maintain the ACL. Under the new CECL standard all financial assets measured at amortized cost and off balance sheet credit exposures, including loans, investment securities and unfunded commitments are evaluated for credit losses. See ~~Note~~"Note 1 – Summary of Significant Accounting ~~Policies~~Policies" in this Quarterly Report on Form 10-Q for further discussion.

Our noninterest expenses consist primarily of salaries and employee benefits, expenses for occupancy, marketing and computer services, and FDIC deposit insurance premiums. 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.

Our geographic footprint includes seven markets obtained through numerous strategic acquisitions as well as two de novo commercial loan offices. Looking forward, ~~the Company believes~~we believe opportunities currently exist within our market areas to grow our franchise. While COVID-19 has dampened our growth activities, ~~the Company believes~~we believe as the local and global economy returns to normalcy it remains in a position to create organic growth through marketing efforts. ~~The Company~~We may also seek to expand ~~its~~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. ~~The Company~~We will continue to be disciplined as it pertains to future expansion focusing primarily on organic growth in our current market areas.

At ~~December~~March 31, ~~2020, the Company~~2021, we had 41 locations in North Carolina (including the Asheville metropolitan area, the "Piedmont" region, Charlotte, and Raleigh/Cary), Upstate South Carolina (Greenville), East Tennessee (including Kingsport/Johnson City/Bristol, Knoxville, and Morristown) and Southwest Virginia (including the Roanoke Valley).

Critical Accounting Policies and Estimates

~~Certain of our~~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 to (i) the determination of the provision for credit losses and the ACL, and (ii) the valuation of goodwill and other intangible assets. The ACL reflects management’s estimate of losses that will result from the inability of our borrowers to make required loan payments. Management uses a systematic methodology to determine ~~its~~our ACL for loans held for investment and certain off-balance-sheet credit exposures. Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. ~~The Company’s~~Our ACL estimate ~~of its ACL~~ involves a high degree of judgment; therefore, management’s process for determining expected credit losses may result in a range of expected credit losses. It is possible that others, given the same information, may at any point in time reach a different reasonable conclusion. ~~The Company’s~~Our recorded ACL ~~recorded~~ in the balance sheet reflects management’s best estimate within the range of expected credit losses. ~~The Company recognizes in~~In net income, we recognize the amount needed to adjust the ACL for management’s estimate of current expected credit losses. See ~~Note~~"Note 1 —– Summary of Significant Accounting ~~Policies~~Policies" and ~~Note~~"Note 6 —– Loans and Allowance for Credit Losses on ~~Loans~~Loans" in this Quarterly Report on Form 10-Q for further detailed descriptions of our estimation process and methodology related to the ACL. The valuation of goodwill and other intangible assets policy is described in further detail in Part II, Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations and ~~Note~~"Note 1 – Summary of Significant Accounting ~~Policies~~Policies" in ~~the Company's~~our 2020 Form 10-K.

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, ~~shareholders’~~stockholders’ equity, or cash flows as previously reported.

Recent Accounting Pronouncements. See ~~Note~~"Note 2 ~~of Notes to Consolidated Financial Statements under Item 1 of~~– Recent Accounting Pronouncements" in this ~~report~~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, tangible equity to tangible assets ratio; and the ratio of the ACL to total loans excluding PPP loans. Management has presented the non-GAAP financial measures in this discussion and analysis because it believes including 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’s~~our earnings over time and in comparison to ~~its~~our 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, ~~the Company has~~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 Months and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2020~~2021 and ~~2019”~~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,		September 30,		December 31,			As of
(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	2020		2020		2019		(Dollars in thousands, except per share data)	March 31,		June 30,		March 31,
									2021		2020		2020
Total stockholders' equity	Total stockholders' equity	$	404,724	$	400,351	$	416,995	Total stockholders' equity	$	406,452	$	408,263	$	405,440
Less: goodwill, core deposit intangibles, net of taxes	Less: goodwill, core deposit intangibles, net of taxes	26,130		26,285		26,959		Less: goodwill, core deposit intangibles, net of taxes	26,002		26,468		26,701
Tangible book value (1)	Tangible book value (1)	$	378,594	$	374,066	$	390,036	Tangible book value (1)	$	380,450	$	381,795	$	378,739
Common shares outstanding	Common shares outstanding	16,791,027		17,020,724		17,664,384		Common shares outstanding	16,655,347		17,021,357		17,101,954
Tangible book value per share	Tangible book value per share	$	22.55	$	21.98	$	22.08	Tangible book value per share	$	22.84	$	22.43	$	22.15
Book value per share	Book value per share	$	24.10	$	23.52	$	23.61	Book value per share	$	24.40	$	23.99	$	23.71

(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,			September 30,			December 31,				As of
(Dollars in thousands)	(Dollars in thousands)	2020			2020			2019			(Dollars in thousands)	March 31,			June 30,			March 31,
Tangible book value (1)		$	378,594		$	374,066		$	390,036
												2021			2020			2020
Tangible equity (1)											Tangible equity (1)	$	380,450		$	381,795		$	378,739
Total assets	Total assets	3,679,971			3,674,034			3,470,232			Total assets	3,648,613			3,722,852			3,548,033
Less: goodwill, core deposit intangibles, net of taxes	Less: goodwill, core deposit intangibles, net of taxes	26,130			26,285			26,959			Less: goodwill, core deposit intangibles, net of taxes	26,002			26,468			26,701
Total tangible assets(2)	Total tangible assets(2)	$	3,653,841		$	3,647,749		$	3,443,273		Total tangible assets(2)	$	3,622,611		$	3,696,384		$	3,521,332
Tangible equity to tangible assets	Tangible equity to tangible assets	10.36		%	10.25		%	11.33		%	Tangible equity to tangible assets	10.50		%	10.33		%	10.76		%

(1) Tangible equity (or tangible book ~~value~~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 the ACL to total loans (excluding net deferred loan costs) and the allowance for credit losses as adjusted to exclude PPP loans:


		As of			As of
(Dollars in thousands)	(Dollars in thousands)	December 31,				September 30,			December 31,			(Dollars in thousands)	March 31,			June 30,			March 31,
		2020				2020			2019				2021			2020			2020
Total gross loans receivable (GAAP)	Total gross loans receivable (GAAP)	$	2,678,624			$	2,769,396		$	2,553,455		Total gross loans receivable (GAAP)	$	2,690,153		$	2,768,930		$	2,662,503
Less: PPP loans (1)	Less: PPP loans (1)	64,845				80,816			—			Less: PPP loans (1)	73,090			80,697			—
Adjusted gross loans (non-GAAP)	Adjusted gross loans (non-GAAP)	$	2,613,779			$	2,688,580		$	2,553,455		Adjusted gross loans (non-GAAP)	$	2,617,063		$	2,688,233		$	2,662,503

ACL		$	39,844			$	43,132		$	22,031
ACL (GAAP)												ACL (GAAP)	$	36,059		$	28,072		$	26,850
ACL / Adjusted gross loans (non-GAAP)	ACL / Adjusted gross loans (non-GAAP)	1.52		%		1.60		%	0.86		%	ACL / Adjusted gross loans (non-GAAP)	1.38		%	1.04		%	1.01		%

(1) PPP loans are fully guaranteed loans by the U.S, ~~government and became available with the CARES Act.~~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 has resulted in business closures across the country, significant job ~~loss,~~losses, 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 was signed into law on March 27, 2020 as a $2.2 trillion legislative package. The goal of the CARES Act is 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 includes extensive emergency funding for hospitals and healthcare providers. In addition to the general impact of COVID-19, certain provisions of the CARES Act as well as other recent legislative and regulatory relief efforts are expected to have a material impact on our operations. While it is not possible to know the full extent of these impacts as of the date of this filing, ~~the Company is~~we are disclosing potentially material items of which ~~it is~~we are aware.

On December 27, 2020, the 2021 Consolidated Appropriations Act was signed into law including $900 billion in stimulus relief for the COVID-19 pandemic. The legislation extends certain relief provisions from the ~~March~~ CARES Act that were set to expire at the end of 2020. This new legislation extends the relief to financial institutions to suspend TDR assessment and reporting requirements under GAAP for loan modifications to the earlier of 60 days after the national emergency termination date or January 1, 2022. The legislation includes additional funding for businesses that did not receive PPP funds under the CARES Act, especially minority- and women-owned businesses. In addition, it allows businesses another opportunity to borrow PPP funds if they can show losses of 25% or more in 2020 based on their ~~2019~~2020 revenue. ~~The Company expects~~We expect a smaller number of applications to be made by ~~its~~our customers for these additional PPP funds.

On March 11, 2021, the American Rescue Plan Act of 2021 was signed into law, a $1.9 trillion COVID-19 relief package. The legislation expanded unemployment benefits through September 2021, approved a third round of stimulus checks for individuals, will send $250 billion to state and local governments, provide aid to schools, special aid for restaurants and bars especially hurt by the pandemic, additional funding for the PPP, as well as numerous provisions aimed at the healthcare industry.

In response to the COVID-19 pandemic, ~~the Company is~~we are offering a variety of relief options designed to support our customers and communities served.

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, ~~the Company was~~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~~five-year loan term to maturity; and (c) principal and interest payments deferred for ~~six~~ten 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.

We continue to offer certain relief options designed to support our customers and communities, including participating in the additional SBA PPP funds recently approved. We originated $29.7 million in second round PPP loans during the three months ended March 31, 2021. As of ~~December~~March 31, ~~2020, the Company had originated $80.8 million of~~2021, PPP loans ~~for 290 customers. Total net origination fees deferred on these loans were approximately $2.1~~outstanding totaled $73.1 million which ~~are being~~included $1.4 million in net deferred fees that will be accreted into interest income over the remaining life of the ~~loans.~~ loans unless the loans are forgiven, at which point these fees would be accelerated into income. For the three and nine months ended ~~December~~March 31, ~~2020, the Company~~2021, we earned ~~$488,000~~$614,000 and $1.4 million, respectively, in fees through accretion including some accelerated accretion resulting from loan forgiveness. ~~At December 31, 2020~~We have worked with the ~~Company had $1.1~~SBA and assisted our customers throughout our participation in the PPP leading to a total of $38.9 million ~~of deferred PPP loan fees remaining which are expected to be recognized over the next several quarters as loan forgiveness accelerates. Additional~~in PPP loans were processed and funded through a third party provider due to demand exceeding the Bank's capacity, which, as of December 31, 2020 totaled $32.1 million for almost 1,000 customers. The Company also continues to work with its clients to assist them with accessing other borrowing options, including other government sponsored lending programs, as appropriate. The Bank originated $12.5 million under the Main Street Lending Program before the program ended on January 8, 2021.forgiven.

Loan Modifications. ~~The Company continues~~We continue to closely monitor the effects of COVID-19 on ~~its~~our loan portfolio and all the associated risks to minimize any potential losses. HomeTrust 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, waived late fees, and suspension of foreclosure proceedings and repossessions.

~~For the quarter ended December 31, 2020, the~~

The Bank ~~experienced~~has continued to experience a ~~significant~~ decline in requests by borrowers for payment and financial relief programs; however, itwe will continue to work with individual borrowers in order to minimize the impact to both the Bank and ~~its~~our customers.

The breakout of loans deferred by loan type as of the dates indicated is as follows:


Principal and Interest Payment Deferrals by Loan Types (1) (2)	Principal and Interest Payment Deferrals by Loan Types (1) (2)														Principal and Interest Payment Deferrals by Loan Types (1) (2)

		December 31, 2020				September 30, 2020				June 30, 2020				March 31, 2021				December 31, 2020				June 30, 2020
		Deferral		Percent of Total Loan Portfolio		Deferral		Percent of Total Loan Portfolio		Deferral		Percent of Total Loan Portfolio
(Dollars in thousands)															(Dollars in thousands)	Deferral		Percent of Total Loan Portfolio		Deferral		Percent of Total Loan Portfolio		Deferral		Percent of Total Loan Portfolio
Lodging	Lodging	$	—	—	%	$	60,782	2.2	%	$	108,171	4.0	%		Lodging	$	—	—	%	$	—	—	%	$	108,171	4.0	%
Other commercial real estate, construction and development, and commercial and industrial	Other commercial real estate, construction and development, and commercial and industrial	4,018		0.2		27,169		1.0		367,443		13.7			Other commercial real estate, construction and development, and commercial and industrial	2,193		0.1		4,018		0.1		367,443		13.7
Equipment finance	Equipment finance	2,196		0.1		2,187		0.1		33,693		1.3			Equipment finance	2,382		0.1		2,196		0.2		33,693		1.3
One-to-four family	One-to-four family	822		—		684		—		36,821		1.4			One-to-four family	—		—		822		—		36,821		1.4
Other consumer loans	Other consumer loans	832		—		422		—		5,203		0.2			Other consumer loans	1,182		—		832		—		5,203		0.2
Total	Total	$	7,868	0.3	%	$	91,244	3.3	%	$	551,331	20.6	%		Total	$	5,757	0.2	%	$	7,868	0.3	%	$	551,331	20.6	%

__________________________

(1) Modified loans are not included in classified assets or nonperforming assets.

(2) Principal and interest is being ~~deferred~~deferred.

A majority of loans placed on payment deferral during 2020 have come out of deferral and borrowers are either making regular loan payments or interest-only payments until the later part of 2021 as a form of continued relief to the borrower. As of March 31, 2021, the Company had $76.8 million in commercial loan deferrals on interest-only payments. As of March 31, 2021, the Company had $5.8 million in loans with full principal and interest payment ~~deferral during the pandemic came out of deferral as of December 31,~~deferrals compared to $551.3 million at June 30, 2020. However, the Company has allowed for continued relief to borrowers in the form of interest-only payments for certain loans recently coming out of full deferral. At December 31, 2020, the Company had $75.8 million in commercial loans on interest-only payments for a period of time no greater than 12 months before being required to return to their original contractual payments.

All loans modified due to COVID-19 are separately monitored and any request for continuation of relief beyond the initial modification will be reassessed at that time to determine if a further modification should be granted and if a downgrade in risk rating is appropriate. The deferrals are short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current as of ~~December~~March 31, ~~2019~~2021 and are not considered TDRs.

~~The Company believes~~We believe the steps ~~it has~~we have taken and ~~is taking~~continue to take are necessary to effectively manage the loan portfolio and assist customers through the ongoing uncertainty surrounding the duration, impact and government response to the COVID-19 pandemic. In addition, ~~the Company~~we will continue to work with ~~its~~our customers to determine the best option for repayment of accrued interest on the deferred payments.

Branch Operations. Since the beginning of the pandemic, ~~the Company has~~we have taken various steps to ensure the safety of our customers and our team members by limiting branch activities to appointment only and use of our drive-up facilities, and by encouraging the use of our digital and electronic banking channels, all the while adjusting for evolving State and Federal guidelines. On October 13, 2020, ~~the Company~~we reopened the lobbies of all ~~its~~our branches across ~~its~~our four state footprint with appropriate protective measures to help ensure the safety of ~~its~~our customers and retail banking employees.

Comparison of Financial Condition at ~~December~~March 31, ~~2020~~2021 and June 30, 2020

General. Total assets and liabilities ~~remained at $3.7~~decreased by $74.2 million and $72.4 million down to $3.6 billion and ~~$3.3~~$3.2 billion, respectively, at ~~December~~March 31, ~~2020~~2021 as compared to June 30, 2020. The cumulative increase of ~~$130.7~~$77.4 million, or ~~52.5%~~31.0% in cash and cash equivalents and securities held for sale was more than offset by the cumulative decrease of ~~$128.2~~$80.2 million, or ~~35.6%~~22.2% in commercial paper and deposits in other banks as ~~the Company~~we repositioned ~~its~~our liquidity due to maturities and lower short-term rates during the period. The ~~$41.3~~$9.5 million, or ~~53.5%~~12.3% increase in loans held for sale primarily relates to additional ~~1-4~~one-to-four family and home equity loans originated for sale during the period.

On July 1, 2020, ~~the Company~~we adopted the CECL accounting standard in accordance with ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The cumulative effect adjustment from this change in accounting standard resulted in an increase in our ACL for loans of $14.8 million, additional deferred tax assets of $3.9 million, additional reserve for unfunded loan commitments of $2.3 million, and a reduction to retained earnings of $13.2 million. In addition, an ACL for commercial paper was established for $250,000 with a deferred tax asset of $58,000. The adoption of this ASU did not have an effect on available for sale debt securities for the ~~six~~nine months ended ~~December~~March 31, ~~2020.~~2021.

Cash, cash equivalents, and commercial paper. Total cash and cash equivalents increased ~~$104.7~~$42.5 million, or ~~86.1%,~~34.9% to ~~$226.3~~$164.1 million at ~~December~~March 31, ~~2020~~2021 from $121.6 million at June 30, 2020. Commercial paper decreased ~~$121.2~~$66.5 million, or ~~39.7%~~21.8% to ~~$183.8~~$238.4 million at ~~December~~March 31, ~~2020~~2021 from $305.0 million at June 30, 2020 as a result of the lower interest rate environment. Our investments in commercial paper have short-term maturities and limited exposure of $15.0 million or less per each highly-rated company.

Investments. Debt securities available for sale increased ~~$26.0~~$34.9 million, or ~~20.4%~~27.3%, to ~~$153.5~~$162.4 million at ~~December~~March 31, ~~2020~~2021 from $127.5 million at June 30, 2020. During the ~~six~~nine months ended ~~December~~March 31, ~~2020, $73.7~~2021, $95.6 million of securities were purchased, ~~$38.7~~$47.3 million of securities

matured, and ~~$8.2~~$11.7 million of MBS principal payments were received. At ~~December~~March 31, ~~2020,~~2021, certificates of deposit in other banks decreased ~~$7.1~~$13.7 million, or ~~12.7%~~24.6% to ~~$48.6~~$42.0 million compared to $55.7 million at June 30, 2020. The decrease in certificates of deposit in other banks was due to ~~$8.3~~$18.6 million in maturities partially offset by ~~$1.2~~$4.9 million in purchases. All certificates of deposit in other banks are fully

insured by the FDIC. Management 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 basis, and more frequently when economic or market concerns warrant such evaluation. Management does not believe that there were any credit losses at ~~December~~March 31, ~~2020;~~2021; therefore, no impairment losses were recorded during the first ~~six~~nine months of fiscal 2021. Other investments at cost ~~increased $626,000,~~decreased $10.0 million, or ~~1.6%~~25.8%, to ~~$39.6~~$28.9 million at ~~December~~March 31, ~~2020~~2021 from $38.9 million at June 30, 2020. Other investments at cost included FHLB stock, FRB stock, and SBIC investments totaling ~~$23.3~~$12.2 million, $7.4 million, and ~~$8.9~~$9.4 million, respectively. The overall decrease was driven by a $11.2 million, or 47.9% reduction in FHLB stock as a result of $200.0 million in borrowings being paid down during the first nine months of fiscal 2021.

Loans held for sale. Loans held for sale increased $9.5 million, or 12.3% to ~~$118.4~~$86.7 million at ~~December~~March 31, ~~2020~~2021 from $77.2 million at June 30, 2020. The increase was primarily driven by a ~~$16.3~~$17.0 million, or ~~34.2% increase in HELOCs originated for sale, as well as a 63.4%~~60.5% increase in mortgage loans ~~originated~~held for sale ~~of $17.8~~and a $5.8 million, ~~and an~~or 471.7% increase in SBA loans held for sale, ~~of $7.1~~partially offset by a $13.3 million, or ~~570.8% increase.~~27.9% decrease in HELOCs originated for sale.

Loans. Total loans receivable decreased ~~$90.5~~$79.0 million, or ~~3.3%~~2.9% to $2.7 billion at ~~December~~March 31, ~~2020~~2021 from $2.8 billion at June 30, 2020. The decrease was driven by two large commercial relationship payoffs totaling $52.8 million, PPP loan forgiveness of ~~$15.9~~$38.9 million, and the continued payoff of purchased HELOCs of ~~$13.1~~$25.7 million.

Commercial and retail consumer 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)	(Dollars in thousands)	2020		2020		$		%		2020		2020		(Dollars in thousands)	March 31,		June 30,		Change				March 31,		June 30,
															2021		2020		$		%		2021		2020
Commercial loans:	Commercial loans:													Commercial loans:
Commercial real estate	Commercial real estate	$	1,056,971	$	1,052,906	$	4,065	0.4	%	39.5	%	38.0	%	Commercial real estate	$	1,088,178	$	1,052,906	$	35,272	3.3	%	40.5	%	38.0	%
Construction and development	Construction and development	172,892		215,934		(43,042)		(19.9)		6.5		7.8		Construction and development	162,820		215,934		(53,114)		(24.6)		6.1		7.8
Commercial and industrial	Commercial and industrial	138,761		154,825		(16,064)		(10.4)		5.2		5.6		Commercial and industrial	140,579		154,825		(14,246)		(9.2)		5.2		5.6
Equipment finance	Equipment finance	272,761		229,239		43,522		19.0		10.2		8.3		Equipment finance	291,950		229,239		62,711		27.4		10.9		8.3
Municipal leases	Municipal leases	128,549		127,987		562		0.4		4.8		4.6		Municipal leases	129,141		127,987		1,154		0.9		4.8		4.6
PPP loans	PPP loans	64,845		80,697		(15,852)		(19.6)		2.4		2.9		PPP loans	73,090		80,697		(7,607)		(9.4)		2.7		2.9
Total commercial loans	Total commercial loans	1,834,779		1,861,588		(26,809)		(1.4)		68.6		67.2		Total commercial loans	1,885,758		1,861,588		24,170		1.3		70.2		67.2

Retail consumer loans:	Retail consumer loans:													Retail consumer loans:
One-to-four family	One-to-four family	452,421		473,693		(21,272)		(4.5)		16.9		17.1		One-to-four family	430,001		473,693		(43,692)		(9.2)		16.0		17.1
HELOCs - originated	HELOCs - originated	125,397		137,447		(12,050)		(8.8)		4.7		5.0		HELOCs - originated	131,867		137,447		(5,580)		(4.1)		4.9		5.0
HELOCs - purchased	HELOCs - purchased	58,640		71,781		(13,141)		(18.3)		2.2		2.6		HELOCs - purchased	46,086		71,781		(25,695)		(35.8)		1.7		2.6
Construction and land/lots	Construction and land/lots	75,108		81,859		(6,751)		(8.2)		2.8		3.0		Construction and land/lots	68,118		81,859		(13,741)		(16.8)		2.5		3.0
Indirect auto finance	Indirect auto finance	122,947		132,303		(9,356)		(7.1)		4.6		4.8		Indirect auto finance	119,656		132,303		(12,647)		(9.6)		4.4		4.8
Consumer	Consumer	9,332		10,259		(927)		(9.0)		0.3		0.4		Consumer	8,667		10,259		(1,592)		(15.5)		0.3		0.4
Total retail consumer loans	Total retail consumer loans	843,845		907,342		(63,497)		(7.0)		31.4		32.8		Total retail consumer loans	804,395		907,342		(102,947)		(11.3)		29.8		32.8
Total loans	Total loans	$	2,678,624	$	2,768,930	$	(90,306)	(3.3)	%	100.0	%	100.0	%	Total loans	$	2,690,153	$	2,768,930	$	(78,777)	(2.8)	%	100.0	%	100.0	%

Asset Quality. Our overall asset quality metrics continue to demonstrate our commitment to growing and maintaining a loan portfolio with a moderate risk profile; however, ~~the Company~~we will remain diligent in ~~its~~our review of the portfolio and overall economy as ~~it continues~~we continue to maneuver through the uncertainty surrounding COVID-19. See "Recent Developments: COVID-19, the CARES Act, and Our Response" on page 4443 for additional information regarding our response to COVID-19.

Nonperforming assets decreased by ~~$1.5~~$2.9 million, or ~~9.2%~~17.8% to ~~$14.8~~$13.4 million, or ~~0.40%~~0.37% of total assets at ~~December~~March 31, ~~2020~~2021 from $16.3 million, or 0.44% of total assets at June 30, 2020. Nonperforming assets included ~~$14.5~~$13.2 million in nonaccruing loans and ~~$252,000~~$143,000 in REO at ~~December~~March 31, ~~2020,~~2021, compared to $15.9 million and $337,000 in nonaccruing loans and REO, respectively, at June 30, 2020. Included in nonperforming loans at ~~December~~March 31, ~~2020~~2021 are $5.9 million of TDR loans of which $4.1 million were current with respect to their modified payment terms. At ~~December~~March 31, ~~2020, $7.0~~2021, $7.3 million, or ~~48.3%~~55.4%, of nonaccruing loans were current on their loan payments. The ratio of nonperforming loans to total loans was ~~0.54%~~0.49% at ~~December~~March 31, ~~2020~~2021 and 0.58% at June 30, 2020. Performing TDRs that were excluded from nonaccruing loans totaled $11.9 million and $13.2 million at March 31, 2021 and June 30, 2020, respectively.

The ratio of classified assets to total assets decreased to ~~0.74%~~0.76% at ~~December~~March 31, ~~2020~~2021 from 0.84% at June 30, 2020. Classified assets decreased to ~~$27.2~~$27.8 million at ~~December~~March 31, ~~2020~~2021 compared to $31.1 million at June 30, 2020 primarily due to ~~$3.1~~$4.9 million in payoffs and $1.5 million in charge-offs during the ~~six month period~~nine months ended ~~December~~March 31, ~~2020.~~2021.

Our individually evaluated loans are comprised of loans meeting certain thresholds, on nonaccrual status, and all TDRs, whether performing or on nonaccrual status under their restructured terms. Individually evaluated loans may be evaluated for reserve purposes using either the cash flow or the collateral valuation method. As of ~~December~~March 31, ~~2020,~~2021, there were ~~$11.4~~$9.7 million in loans individually evaluated. For more information on these individually evaluated loans, see ~~Note~~"Note 6 ~~of the Notes to Consolidated Financial Statements under Item 1 of~~- Loans and Allowance for Credit Losses on Loans" in this ~~report.~~

Quarterly Report on Form 10-Q.

Allowance for credit losses. On July 1, 2020, ~~the Company~~we adopted the CECL accounting standard in accordance with ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." See "Note 1 -– Summary of Significant Accounting Policies" and "Note 6 -– Loans and Allowance for Credit Losses on Loans" in this Quarterly Report on Form 10-Q for additional details related to the adoption of CECL.

The ACL was ~~$39.8~~$36.1 million, or ~~1.49%~~1.34% of total loans at ~~December~~March 31, ~~2020~~2021 compared to $28.1 million, or 1.01% of total loans at June 30, 2020. The ACL to gross loans excluding PPP loans was ~~1.52%~~1.38% at ~~December~~March 31, ~~2020,~~2021, compared to 1.04% at June 30, 2020. The overall increase was driven by the additional allowance stemming from ~~the Company's~~our adoption of the new CECL accounting standard.

There was a net benefit of ~~$2.1~~$6.2 million for the provision for credit losses for the ~~six~~nine months ended ~~December~~March 31, ~~2020,~~2021, compared to a ~~$400,000~~$5.8 million provision for the corresponding period in fiscal year 2020. The net benefit of provision was primarily driven by changes in the economic forecast which improved in outlook since the adoption of the standard and a decline in the balance of total loans. Net loan charge-offs totaled ~~$637,000~~$452,000 for the ~~six~~nine months ended ~~December~~March 31, ~~2020,~~2021, compared to ~~net recoveries of $202,000~~$379,000 for the same period last year. Net charge-offs as a percentage of average loans ~~were 0.04%~~remained the same at 0.02% for each of the ~~six~~nine months ended ~~December~~March 31, ~~2020 compared to net recoveries of (0.01)% for the corresponding period in fiscal year~~2021 and 2020.

The allowance as a percentage of nonaccruing loans increased to ~~274.05%~~272.64% at ~~December~~March 31, ~~2020~~2021 from 176.30% at June 30, 2020.

Management believes the ACL as of ~~December~~March 31, ~~2020~~2021 was adequate to absorb the estimated losses in the loan portfolio at that date. While management 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 ACL 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, 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 ~~the Company’s~~our financial condition and results of operations.

Real estate owned. REO decreased ~~$85,000,~~$194,000, or ~~25.2%~~57.6% to ~~$252,000~~$143,000 at ~~December~~March 31, ~~2020~~2021 due to ~~$193,000~~$303,000 in REO sales partially offset by ~~$108,000~~$109,000 in transfers from loans during the ~~six~~nine months ended ~~December~~March 31, ~~2020.~~2021.

Deferred income taxes. Deferred income taxes increased ~~$2.3 million,~~$555,000, or ~~14.0%~~3.4%, to ~~$18.6~~$16.9 million at ~~December~~March 31, ~~2020~~2021 from $16.3 million at June 30, 2020. The increase was primarily driven by the the adoption of the CECL standard which resulted in an increase of $3.9 million, which was partially offset by the realization of net operating losses.

Premises and equipment, net. Premises and equipment, net increased ~~$11.6~~$12.4 million, or ~~19.9%~~21.3% to ~~$70.1~~$70.9 million at ~~December~~March 31, ~~2020~~2021 from $58.5 million at June 30, 2020. The increase was a result of the purchase of an office building in Charlotte, N.C. for use as a future branch location and other Bank office space.

Goodwill. Goodwill remained unchanged at $25.6 million at ~~both December~~March 31, ~~2020~~2021 and June 30, ~~2020.~~2020.

Other assets. Other assets increased ~~$3.0~~$6.2 million, or ~~6.0%~~12.6%, to ~~$52.5~~$55.8 million at ~~December~~March 31, ~~2020~~2021 from $49.5 million at June 30, 2020. The increase was primarily driven by operating leases from our equipment finance line of business.

Deposits. Deposits ~~decreased $42.5~~increased $122.7 million, or ~~1.5%~~4.4% during the ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 to ~~$2.7~~$2.9 billion from $2.8 billion at June 30, 2020 which was driven by a $358.4 million, or 17.5% increase in core deposits as a result of additional funds to customers from government stimulus and our focused effort to realign the deposit mix. As part of a managed runoff, certificates of deposit and brokered deposits decreased ~~$212.9~~$235.7 million, or ~~28.8%~~31.9% to ~~$526.2~~$503.5 million at ~~December~~March 31, ~~2020.~~2021. This decrease was partially offset by successful efforts to increase core deposits which increased ~~$170.4~~$358.4 million, ~~8.3%~~or 17.5%.

The following table sets forth our deposits by type of deposit account as of the dates indicated:

As of Percent of total
December 31, June 30, Change December 31, June 30,
(Dollars in thousands) 2020 2020 $ % 2020 2020
Core deposits:
     Noninterest-bearing accounts $ 469,998 $ 429,901 $ 40,097 9.3 % 17.1 % 15.4 %
     NOW accounts 654,960 582,299 72,661 12.5 % 23.9 % 20.9 %
     Money market accounts 882,366 836,738 45,628 5.5 % 32.2 % 30.0 %
     Savings accounts 209,699 197,676 12,023 6.1 % 7.7 % 7.1 %
Core deposits 2,217,023 2,046,614 170,409 8.3 % 80.8 % 73.5 %
Certificates of deposit 526,246 739,142 (212,896) (28.8) % 19.2 % 26.5 %
Total $ 2,743,269 $ 2,785,756 $ (42,487) (1.5) % 100.0 % 100.0 %


	As of								Percent of total
(Dollars in thousands)	March 31,		June 30,		Change				March 31,		June 30,
	2021		2020		$		%		2021		2020
Core deposits:
Noninterest-bearing accounts	$	528,711	$	429,901	$	98,810	23.0	%	18.2	%	15.4	%
NOW accounts	727,240		582,299		144,941		24.9	%	25.0	%	20.9	%
Money market accounts	927,519		836,738		90,781		10.8	%	31.9	%	30.0	%
Savings accounts	221,537		197,676		23,861		12.1	%	7.7	%	7.1	%
Core deposits	2,405,007		2,046,614		358,393		17.5	%	82.7	%	73.5	%
Certificates of deposit	503,471		739,142		(235,671)		(31.9)	%	17.3	%	26.5	%
Total	$	2,908,478	$	2,785,756	$	122,722	4.4	%	100.0	%	100.0	%

Borrowings. Borrowings ~~remained at $475.0~~decreased $200.0 million, or 42.1% to $275.0 million at ~~December~~March 31, ~~2020~~2021 compared to $475,000 at June 30, 2020. The decrease was related to the early retirement of borrowings completed in an effort to improve future profitability. At ~~December~~March 31, ~~2020~~2021 all FHLB advances had maturities of seven years or more (but ~~were~~are callable in less than ~~two years)~~one year) with a weighted average interest rate of ~~1.39%~~1.81%.

Equity. Stockholders' equity at ~~December~~March 31, ~~2020~~2021 decreased ~~$3.5~~$1.8 million, or ~~0.9%~~0.4% to ~~$404.7~~$406.5 million from $408.3 million at June 30, 2020. Changes within stockholders' equity included ~~$15.2~~$23.1 million in net income and ~~$2.2~~$4.7 million in stock-based compensation, ESOP shares allocated, and stock option exercises, offset by $13.4 million related to the adoption of the new CECL accounting standard, ~~277,122~~566,455 shares of common stock being repurchased at an average cost of ~~$18.69~~$20.69 per share, or approximately ~~$5.2~~$11.7 million in total, and ~~$2.5~~$3.7 million related to cash dividends declared. As of ~~December~~March 31, ~~2020,~~2021, the Bank and the Company were considered "well capitalized" in accordance with ~~their~~the 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 December 31,
		2020							2019								For the Three Months Ended March 31,
		Average Balance Outstanding			Interest Earned/ Paid(2)		Yield/ Rate(2)		Average Balance Outstanding			Interest Earned/ Paid(2)		Yield/ Rate(2)			2021							2020
(Dollars in thousands)	(Dollars in thousands)															(Dollars in thousands)	Average Balance Outstanding			Interest Earned/ Paid(2)		Yield/ Rate(2)		Average Balance Outstanding			Interest Earned/ Paid(2)		Yield/ Rate(2)

Assets:	Assets:															Assets:
Interest-earning assets:	Interest-earning assets:															Interest-earning assets:
Loans receivable(1)	Loans receivable(1)	$	2,826,133		$	28,648	4.05	%	$	2,782,412		$	32,409	4.66	%	Loans receivable(1)	$	2,779,094		$	27,955	4.08	%	$	2,669,796		$	30,086	4.51	%
Commercial paper and deposits in other banks	Commercial paper and deposits in other banks	417,401			614		0.59	%	346,376			1,912		2.21	%	Commercial paper and deposits in other banks	522,256			611		0.47	%	378,296			1,794		1.90	%
Securities available for sale	Securities available for sale	133,856			504		1.50	%	165,577			1,093		2.64	%	Securities available for sale	153,871			496		1.31	%	154,108			912		2.37	%
Other interest-earning assets(3)	Other interest-earning assets(3)	39,290			696		7.08	%	44,398			772		6.95	%	Other interest-earning assets(3)	39,184			585		6.05	%	37,877			550		5.81	%
Total interest-earning assets	Total interest-earning assets	3,416,680			30,462		3.57	%	3,338,763			36,186		4.34	%	Total interest-earning assets	3,494,405			29,647		3.44	%	3,240,077			33,342		4.12	%
Other assets	Other assets	257,572							269,679							Other assets	258,858							265,139
Total assets	Total assets	$	3,674,252						$	3,608,442						Total assets	$	3,753,263						$	3,505,216
Liabilities and equity:	Liabilities and equity:															Liabilities and equity:
Interest-bearing deposits:	Interest-bearing deposits:															Interest-bearing deposits:
Interest-bearing checking accounts	Interest-bearing checking accounts	$	584,530		$	353	0.24	%	$	455,747		$	375	0.33	%	Interest-bearing checking accounts	$	637,381		$	391	0.25	%	$	451,335		$	412	0.36	%
Money market accounts	Money market accounts	848,760			414		0.20	%	785,374			2,083		1.06	%	Money market accounts	907,228			373		0.17	%	792,313			1,916		0.97	%
Savings accounts	Savings accounts	206,205			38		0.07	%	168,022			50		0.12	%	Savings accounts	212,809			39		0.08	%	159,641			50		0.12	%
Certificate accounts	Certificate accounts	576,078			1,542		1.07	%	778,664			3,813		1.96	%	Certificate accounts	516,221			1,193		0.94	%	783,758			3,593		1.83	%
Total interest-bearing deposits	Total interest-bearing deposits	2,215,573			2,347		0.42	%	2,187,807			6,321		1.16	%	Total interest-bearing deposits	2,273,639			1,996		0.36	%	2,187,047			5,971		1.09	%
Borrowings	Borrowings	475,000			1,688		1.42	%	605,489			2,541		1.68	%	Borrowings	465,111			1,632		1.42	%	473,319			1,757		1.48	%
Total interest-bearing liabilities	Total interest-bearing liabilities	2,690,573			4,035		0.60	%	2,793,296			8,862		1.27	%	Total interest-bearing liabilities	2,738,750			3,628		0.54	%	2,660,366			7,728		1.16	%
Noninterest-bearing deposits	Noninterest-bearing deposits	523,488							334,732							Noninterest-bearing deposits	553,045							342,581
Other liabilities	Other liabilities	57,813							65,812							Other liabilities	56,655							88,725
Total liabilities	Total liabilities	3,271,874							3,193,840							Total liabilities	3,348,450							3,091,672
Stockholders' equity	Stockholders' equity	402,378							414,602							Stockholders' equity	404,813							413,544
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	3,674,252						$	3,608,442						Total liabilities and stockholders' equity	$	3,753,263						$	3,505,216

Net earning assets	Net earning assets	$	726,107						$	545,467						Net earning assets	$	755,655						$	579,711
Average interest-earning assets to	Average interest-earning assets to															Average interest-earning assets to
average interest-bearing liabilities	average interest-bearing liabilities	126.99		%					119.53		%					average interest-bearing liabilities	127.59		%					121.79		%
Tax-equivalent:	Tax-equivalent:															Tax-equivalent:
Net interest income	Net interest income				$	26,427						$	27,324			Net interest income				$	26,019						$	25,614
Interest rate spread	Interest rate spread						2.97	%						3.07	%	Interest rate spread						2.90	%						2.96	%
Net interest margin(4)	Net interest margin(4)						3.09	%						3.27	%	Net interest margin(4)						3.02	%						3.16	%
Non-tax-equivalent:	Non-tax-equivalent:															Non-tax-equivalent:
Net interest income	Net interest income				$	26,122						$	27,034			Net interest income				$	25,693						$	25,309
Interest rate spread	Interest rate spread						2.93	%						3.03	%	Interest rate spread						2.87	%						2.92	%
Net interest margin(4)	Net interest margin(4)						3.06	%						3.24	%	Net interest margin(4)						2.98	%						3.12	%

(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 ~~$305~~$326 and ~~$290~~$305 for the three months ended ~~December~~March 31, ~~2020~~2021

and ~~2019,~~2020, respectively, calculated based on a combined federal and state tax rate of 24%.

(3) The average other interest-earning assets consist of FRB stock, FHLB stock, and SBIC investments.

(4) Net interest income divided by average interest-earning assets.


		For the Six Months Ended December 31,
		2020							2019								For the Nine Months Ended March 31,
		Average Balance Outstanding			Interest Earned/ Paid(2)		Yield/ Rate(2)		Average Balance Outstanding			Interest Earned/ Paid(2)		Yield/ Rate(2)			2021							2020
(Dollars in thousands)	(Dollars in thousands)															(Dollars in thousands)	Average Balance Outstanding			Interest Earned/ Paid(2)		Yield/ Rate(2)		Average Balance Outstanding			Interest Earned/ Paid(2)		Yield/ Rate(2)

Assets:	Assets:															Assets:
Interest-earning assets:	Interest-earning assets:															Interest-earning assets:
Loans receivable(1)	Loans receivable(1)	$	2,850,783		$	57,550	4.04	%	$	2,766,022		$	64,960	4.70	%	Loans receivable(1)	$	2,826,886		$	85,505	4.03	%	$	2,734,249		$	95,045	4.63	%
Commercial paper and deposits in other banks	Commercial paper and deposits in other banks	420,785			1,495		0.71	%	354,750			4,165		2.35	%	Commercial paper and deposits in other banks	454,609			2,106		0.62	%	362,598			5,959		2.19	%
Securities available for sale	Securities available for sale	120,062			1,032		1.72	%	152,143			1,989		2.61	%	Securities available for sale	131,332			1,528		1.55	%	152,798			2,901		2.53	%
Other interest-earning assets(3)	Other interest-earning assets(3)	39,118			1,144		5.85	%	45,054			1,604		7.12	%	Other interest-earning assets(3)	39,140			1,729		5.88	%	42,662			2,154		6.73	%
Total interest-earning assets	Total interest-earning assets	3,430,748			61,221		3.57	%	3,317,969			72,718		4.38	%	Total interest-earning assets	3,451,967			90,868		3.51	%	3,292,307			106,059		4.30	%
Other assets	Other assets	254,610							267,028							Other assets	256,026							266,097
Total assets	Total assets	$	3,685,358						$	3,584,997						Total assets	$	3,707,993						$	3,558,404
Liabilities and equity:	Liabilities and equity:															Liabilities and equity:
Interest-bearing liabilities:	Interest-bearing liabilities:															Interest-bearing liabilities:
Interest-bearing checking accounts	Interest-bearing checking accounts	$	572,505		$	750	0.26	%	$	448,636		$	694	0.31	%	Interest-bearing checking accounts	$	593,815		$	1,142	0.26	%	$	449,560		$	1,105	0.33	%
Money market accounts	Money market accounts	837,153			964		0.23	%	752,178			3,844		1.02	%	Money market accounts	860,170			1,337		0.21	%	765,492			5,760		1.00	%
Savings accounts	Savings accounts	203,374			75		0.07	%	170,207			103		0.12	%	Savings accounts	206,478			114		0.07	%	166,711			153		0.12	%
Certificate accounts	Certificate accounts	632,894			3,811		1.20	%	761,810			7,533		1.98	%	Certificate accounts	594,565			5,003		1.12	%	769,073			11,127		1.93	%
Total interest-bearing deposits	Total interest-bearing deposits	2,245,926			5,600		0.50	%	2,132,831			12,174		1.14	%	Total interest-bearing deposits	2,255,028			7,596		0.45	%	2,150,836			18,145		1.12	%
Borrowings	Borrowings	475,000			3,375		1.42	%	644,451			5,862		1.82	%	Borrowings	471,716			5,007		1.41	%	587,822			7,619		1.73	%
Total interest-bearing liabilities	Total interest-bearing liabilities	2,720,926			8,975		0.66	%	2,777,282			18,036		1.30	%	Total interest-bearing liabilities	2,726,744			12,603		0.62	%	2,738,658			25,764		1.25	%
Noninterest-bearing deposits	Noninterest-bearing deposits	507,087							330,418							Noninterest-bearing deposits	522,406							336,496
Other liabilities	Other liabilities	55,699							64,456							Other liabilities	56,141							70,175
Total liabilities	Total liabilities	3,283,712							3,172,156							Total liabilities	3,305,291							3,145,329
Stockholders' equity	Stockholders' equity	401,646							412,841							Stockholders' equity	402,702							413,075
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	3,685,358						$	3,584,997						Total liabilities and stockholders' equity	$	3,707,993						$	3,558,404

Net earning assets	Net earning assets	$	709,822						$	540,687						Net earning assets	$	725,223						$	553,649
Average interest-earning assets to	Average interest-earning assets to															Average interest-earning assets to
average interest-bearing liabilities	average interest-bearing liabilities	126.09		%					119.47		%					average interest-bearing liabilities	126.60		%					120.22		%
Tax-equivalent:	Tax-equivalent:															Tax-equivalent:
Net interest income	Net interest income				$	52,246						$	54,682			Net interest income				$	78,265						$	80,295
Interest rate spread	Interest rate spread						2.91	%						3.08	%	Interest rate spread						2.89	%						3.05	%
Net interest margin(4)	Net interest margin(4)						3.05	%						3.30	%	Net interest margin(4)						3.02	%						3.25	%
Non-tax-equivalent:	Non-tax-equivalent:															Non-tax-equivalent:
Net interest income	Net interest income				$	51,631						$	54,107			Net interest income				$	77,324						$	79,416
Interest rate spread	Interest rate spread						2.87	%						3.05	%	Interest rate spread						2.85	%						3.01	%
Net interest margin(4)	Net interest margin(4)						3.01	%						3.26	%	Net interest margin(4)						2.99	%						3.22	%

(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 ~~$615~~$941 and ~~$575~~$879 for the ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021

and ~~2019,~~2020, respectively, calculated based on a combined federal and state tax rate of 24%.

(3) The average other interest-earning assets consist of FRB stock, FHLB stock, and SBIC investments.

(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 December 31, 2020
		Compared to							Three Months Ended March 31, 2021
		Three Months Ended December 31, 2019							Compared to
		Increase/ (decrease) due to				Total increase/(decrease)			Three Months Ended March 31, 2020
(Dollars in thousands)	(Dollars in thousands)	Volume		Rate				(Dollars in thousands)	Increase/ (decrease) due to				Total increase/(decrease)
									Volume		Rate
Interest-earning assets:	Interest-earning assets:							Interest-earning assets:
Loans receivable(1)	Loans receivable(1)	$	508	$	(4,269)	$	(3,761)	Loans receivable(1)	$	6,070	$	(8,201)	$	(2,131)
Commercial paper and deposits in other banks	Commercial paper and deposits in other banks	392		(1,690)		(1,298)		Commercial paper and deposits in other banks	3,203		(4,386)		(1,183)
Securities available for sale	Securities available for sale	(209)		(380)		(589)		Securities available for sale	(1)		(415)		(416)
Other interest-earning assets	Other interest-earning assets	(89)		13		(76)		Other interest-earning assets	15		20		35
Total interest-earning assets	Total interest-earning assets	$	602	$	(6,326)	$	(5,724)	Total interest-earning assets	$	9,287	$	(12,982)	$	(3,695)
Interest-bearing liabilities:	Interest-bearing liabilities:							Interest-bearing liabilities:
Interest-bearing checking accounts	Interest-bearing checking accounts	$	106	$	(128)	$	(22)	Interest-bearing checking accounts	$	572	$	(593)	$	(21)
Money market accounts	Money market accounts	168		(1,837)		(1,669)		Money market accounts	1,651		(3,194)		(1,543)
Savings accounts	Savings accounts	12		(24)		(12)		Savings accounts	67		(78)		(11)
Certificate accounts	Certificate accounts	(992)		(1,279)		(2,271)		Certificate accounts	(990)		(1,410)		(2,400)
Borrowings	Borrowings	(548)		(305)		(853)		Borrowings	(40)		(85)		(125)
Total interest-bearing liabilities	Total interest-bearing liabilities	(1,254)		(3,573)		(4,827)		Total interest-bearing liabilities	1,260		(5,360)		(4,100)
Net increase (decrease) in tax equivalent interest income	Net increase (decrease) in tax equivalent interest income	$	1,856	$	(2,753)	$	(897)	Net increase (decrease) in tax equivalent interest income	$	8,027	$	(7,622)	$	405


		Six Months Ended December 31, 2020
		Compared to							Nine Months Ended March 31, 2021
		Six Months Ended December 31, 2019							Compared to
		Increase/ (decrease) due to				Total increase/(decrease)			Nine Months Ended March 31, 2020
(Dollars in thousands)	(Dollars in thousands)	Volume		Rate				(Dollars in thousands)	Increase/ (decrease) due to				Total increase/(decrease)
									Volume		Rate
Interest-earning assets:	Interest-earning assets:							Interest-earning assets:
Loans receivable(1)	Loans receivable(1)	$	1,991	$	(9,401)	$	(7,410)	Loans receivable(1)	$	4,806	$	(14,346)	$	(9,540)
Commercial paper and deposits in other banks	Commercial paper and deposits in other banks	775		(3,445)		(2,670)		Commercial paper and deposits in other banks	1,968		(5,821)		(3,853)
Securities available for sale	Securities available for sale	(419)		(538)		(957)		Securities available for sale	(366)		(1,007)		(1,373)
Other interest-earning assets	Other interest-earning assets	(212)		(248)		(460)		Other interest-earning assets	(170)		(255)		(425)
Total interest-earning assets	Total interest-earning assets	$	2,135	$	(13,632)	$	(11,497)	Total interest-earning assets	$	6,238	$	(21,429)	$	(15,191)
Interest-bearing liabilities:	Interest-bearing liabilities:							Interest-bearing liabilities:
Interest-bearing checking accounts	Interest-bearing checking accounts	$	191	$	(135)	$	56	Interest-bearing checking accounts	$	403	$	(366)	$	37
Money market accounts	Money market accounts	434		(3,314)		(2,880)		Money market accounts	1,044		(5,467)		(4,423)
Savings accounts	Savings accounts	20		(48)		(28)		Savings accounts	46		(85)		(39)
Certificate accounts	Certificate accounts	(1,275)		(2,447)		(3,722)		Certificate accounts	(2,155)		(3,969)		(6,124)
Borrowings	Borrowings	(1,540)		(947)		(2,487)		Borrowings	(1,365)		(1,247)		(2,612)
Total interest-bearing liabilities	Total interest-bearing liabilities	(2,170)		(6,891)		(9,061)		Total interest-bearing liabilities	(2,027)		(11,134)		(13,161)
Net increase (decrease) in tax equivalent interest income	Net increase (decrease) in tax equivalent interest income	$	4,305	$	(6,741)	$	(2,436)	Net increase (decrease) in tax equivalent interest income	$	8,265	$	(10,295)	$	(2,030)

__________

(1) Interest income used in the average interest earned and yield calculation includes the tax equivalent adjustment of ~~$305~~$326 and ~~$290~~$305 for the three months ended ~~December~~March 31, ~~2020~~2021 and ~~2019,~~2020, respectively, calculated based on a combined federal and state income tax rate of 24%. Interest income used in the average interest earned and yield calculation includes the tax equivalent adjustment of ~~$615~~$941 and ~~$575~~$879 for the ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 and ~~2019,~~2020, respectively, calculated based on a combined federal and state income tax rate of 24%.

Comparison of Results of Operations for the Three Months Ended ~~December~~March 31, ~~2020~~2021 and ~~2019~~2020

General. During the three months ended ~~December~~March 31, ~~2020,~~2021, net income increased ~~2.9%~~$6.7 million, or 559.7% to ~~$9.5~~$7.9 million compared to ~~$9.2~~$1.2 million for the three months ended ~~December~~March 31, ~~2019. The Company's~~2020. Our diluted earnings per share increased to ~~$0.57~~$0.48 for the three months ended ~~December~~March 31, ~~2020~~2021 compared to ~~$0.52~~$0.07 for the same period in fiscal 2020. ~~First~~Third quarter earnings ~~continue to be negatively~~were positively impacted by ~~an economy weakened by COVID-19 as well as~~ a lower interest rate margin due to the decrease in interest rates over the past year. Despite the lower net interest income for the quarter, the increase in earnings for the three months ended December 31, 2020 as compared to the same period a year ago was driven by a$4.1 million net benefit in the provision for credit losses ~~due to improvement~~and a $3.4 million increase in the ~~economic forecast since adoption~~gain on sale of loans held for sale mainly driven by residential mortgage loans given the ~~new accounting standard~~continued low rate environment. Partially offsetting these was a $3.7 million prepayment penalty related to ~~measure current expected credit losses.~~the previously discussed early retirement of borrowings.

Net Interest Income. NetNet interest income ~~decreased~~increased $384,000, or 1.5% to ~~$26.1~~$25.7 million for the quarter ended ~~December~~March 31, ~~2020,~~2021, compared to ~~$27.0~~$25.3 million for the comparative quarter in fiscal 2020. ~~The $912,000, or 3.4% decrease was due to a $5.7 million decrease in interest~~Interest and dividend income decreased by $3.7 million, or 11.2%, primarily driven by lower ~~rates~~yields on loans and commercial paper as a result of lower federal funds and other market interest rates. This decrease was ~~partially~~more than offset by a ~~$4.8~~$4.1 million decrease in interest expense.

Average interest-earning assets increased ~~$77.9~~$254.3 million, or ~~2.3%~~7.9% to ~~$3.4~~$3.5 billion for the quarter ended ~~December~~March 31, ~~2020.~~2021. The average balance of total loans receivable increased by ~~$43.7~~$109.3 million, or ~~1.6%~~4.1% compared to the same quarter last year primarily due to PPP loan originations and to a lesser extent organic loan ~~growth and PPP loan originations.~~growth. The average balance of commercial paper and deposits in other banks increased ~~$71.0~~$144.0 million, or ~~20.5%~~38.1% driven by increases in commercial paper investments as a result of ~~the Company's~~our increased liquidity between the periods. ~~The Company's~~Our investments in commercial paper have short-term maturities and limited exposure of $15.0 million or less per each highly-rated company. The overall increase in interest-earning assets was primarily funded by a ~~$188.8~~$297.1 million, or ~~56.4%~~11.7% increase in average interest and noninterest-bearing deposits ~~partially offset by a $102.7 million, or 3.7% decrease in average interest-bearing liabilities~~ as compared to the same quarter last year. Net interest margin (on a fully taxable-equivalent basis) for the three months ended ~~December~~March 31, ~~2020~~2021 decreased to ~~3.09%~~3.02% from ~~3.27%~~3.16% for the same period a year ago.

Total interest and dividend income decreased ~~$5.7~~$3.7 million, or ~~16.0%~~11.2% for the three months ended ~~December~~March 31, ~~2020~~2021 as compared to the same period last year, which was primarily driven by a ~~$3.8~~$2.2 million, or ~~11.8%~~7.2% decrease in loan interest income, a ~~$1.3~~$1.2 million, or ~~67.9%~~65.9% decrease in interest income from commercial paper and deposits in other banks, and a ~~$589,000,~~$416,000, or ~~53.9%~~45.6% decrease in interest income on securities available for sale. The lower interest income in each category was driven by the decrease in yields caused by the significant reduction in current market rates compared to the same quarter last year. Average loan yields decreased 6143 basis points to ~~4.05%~~4.08% for the quarter ended ~~December~~March 31, ~~2020~~2021 from ~~4.66%~~4.51% in the corresponding quarter last year. Average yields on commercial paper and deposits in other banks decreased ~~162~~143 basis points to ~~0.59%~~0.47% for the quarter ended ~~December~~March 31, ~~2020~~2021 from ~~2.21%~~1.90% in the corresponding quarter last year. Average yields on securities available for sale decreased ~~114~~106 basis points to ~~1.50%~~1.31% for the quarter ended ~~December~~March 31, ~~2020~~2021 from ~~2.64%~~2.37% in the corresponding quarter last year. Average yields on total interest-earning assets decreased 68 basis points to 3.44% for the quarter ended March 31, 2021 from 4.12% in the corresponding quarter last year.

Total interest expense decreased ~~$4.8~~$4.1 million, or ~~54.5%~~53.1% for the quarter ended ~~December~~March 31, ~~2020~~2021 compared to the same period last year. The decrease was driven by a $4.0 million, or ~~62.9%~~66.6% decrease in interest expense on deposits and a ~~$853,000,~~$125,000, or ~~33.6%~~7.1% decrease in interest expense on borrowings. Average interest-bearing deposits for the quarter ended ~~December~~March 31, ~~2020~~2021 increased ~~$27.8~~$86.6 million, or ~~1.3%~~4.0%, but was more than offset by the 7473 basis point decrease in cost of deposits, down to ~~0.42%~~0.36% compared to ~~1.16%~~1.09% in the same period in fiscal 2020. Average borrowings for the quarter ended ~~December~~March 31, ~~2020~~2021 decreased ~~$130.5~~$8.2 million, or ~~21.6%~~1.7% along with a 26six basis point decrease in the average cost of borrowings compared to the same period 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 borrowing was driven by the lower federal funds rate during the current quarter compared to the prior year. The overall average cost of funds decreased 6762 basis points to ~~0.60%~~0.54% for the current quarter compared to ~~1.27%~~1.16% in the same quarter last year due primarily to the impact of ~~the~~ lower ~~amount of borrowings and~~ rates.

Provision (Benefit) for Credit Losses. During the three months ended ~~December~~March 31, ~~2020~~2021 there was a ~~$3.0~~$4.1 million net benefit of the provision for credit losses compared to a ~~$400,000~~$5.4 million provision for the corresponding quarter of fiscal ~~2020.~~2020. The net benefit of provision relates to the previously discussed changes in the economic forecast since ~~September 30,~~December 31, 2020 and the decline in the balance of total loans. Net loan recoveries totaled ~~$62,000~~$185,000 for the three months ended ~~December~~March 31, ~~2020,~~2021, compared to ~~$317,000~~net charge-offs of $581,000 for the same period last year. Net recoveries as a percentage of average loans were ~~0.01% and 0.05%~~(0.03)% for the quarter ended ~~December~~March 31, ~~2020 and 2019, respectively.~~2021 compared to net charge-offs as a percentage of average loans of 0.09% for the quarter ended March 31, 2020.

See "Comparison of Financial Condition - Asset Quality" for additional details.

Noninterest Income. Noninterest income increased ~~$270,000,~~$4.3 million, or ~~3.0%~~67.5% to ~~$9.3~~$10.7 million for the three months ended ~~December~~March 31, ~~2020~~2021 from ~~$9.1~~$6.4 million for the same period in the previous year primarily due to a ~~$830,000,~~$3.4 million, or ~~63.2%~~224.8% increase in gain on sale of loans held for sale, a $703,000, or 40.0% increase in other noninterest income, ~~partially offset by~~ a ~~$302,000,~~$342,000, or ~~34.7% decrease~~116.3% increase in loan income and fees, partially offset by a ~~$189,000,~~$110,000, or ~~7.3%~~4.8% decrease in service charges and fees on deposit ~~accounts, and a $71,000, or 1.9% decrease~~accounts. The increase in gain ofon the sale of loans held for sale was driven by an increase in gains from sales of mortgage, home equity, and SBA loans. During the quarter ended March 31, 2021, $20.2 million of the guaranteed portion of SBA commercial loans were sold with gains of $1.8 million compared to $6.8 million sold and gains of $469,000 in the corresponding quarter in the prior year. There were $106.5 million of residential mortgage loans originated for sale which were sold with gains of $2.7 million compared to $32.2 million sold and gains of $852,000 in the corresponding quarter in the prior year. In addition, $43.8 million of home equity loans were sold during the quarter ended March 31, 2021 for a gain of $301,000 compared to $18.0 million sold and gains of $183,000 in the corresponding quarter. The increase in other noninterest income primarily related to operating lease income from the continued growth in the equipment finance line of business. The ~~decrease~~increase in loan income and fees is primarily a result of ~~lower~~higher fees from ~~our~~ the

adjustable rate conversion program and other servicing fees. The decrease in service charges on deposit accounts was ~~a result of fewer transactions~~primarily related to lower nonsufficient fund fees as customers have decreased spending during the pandemic.

Noninterest Expense. Noninterest expense for the three months ended March 31, 2021 increased $5.6 million, or 22.5% to $30.5 million compared to $24.9 million for the three months ended March 31, 2020. The increase was primarily due to $3.7 million in prepayment penalties on borrowings; a $1.3 million, or 9.2% increase in salaries and employee benefits as a result of new positions, mortgage loan origination incentives, and annual salary increases; a $558,000, or 27.6% increase in computer services as a result of increased processing charges; a $396,000, or 10.2% increase in other expenses, mainly driven by depreciation from our equipment finance line of business; and a $210,000, or 9.3% increase in net occupancy expense from investments in infrastructure. Partially offsetting these increases was a cumulative decrease of $394,000, or 19.2% in telephone, postage, and supplies expense; marketing and advertising expense; deposit insurance premiums, and core deposit intangible amortization for the three months ended March 31, 2021 compared to the same period last year. In addition, there was a $152,000, or 60.8% decrease in REO related expenses as a result of fewer properties held and no post-foreclosure writedowns.

Income Taxes. Our income tax expense for the three months ended March 31, 2021 increased $1.9 million to $2.1 million from $188,000 for the three months ended March 31, 2020. Pretax income in the current period was positively impacted by the $4.1 million net benefit of the provision for credit losses compared to the $5.4 million provision for the corresponding quarter of fiscal 2020. As a result, tax-free income from our municipal lease portfolio was 10.7% of pretax income in the current period compared to 73.7% for the same period in the prior year resulting in effective tax rates of 21.0% and 13.6% for the three months ended March 31, 2021 and 2020, respectively.

Comparison of Results of Operations for the Nine Months Ended March 31, 2021 and 2020

General. During the nine months ended March 31, 2021, net income increased by $3.9 million, or 20.3% to $23.1 million from $19.2 million for the nine months ended March 31, 2020. Our diluted earnings per share increased to $1.40 for the nine months ended March 31, 2021 compared to $1.08 in the same period in fiscal 2021. For the nine months ended March 31, 2021 as compared to the prior comparable nine-month period, earnings were positively impacted by a $6.2 million net benefit in the provision for credit losses and a $4.4 million increase in the gain on sale of loans held for sale partially offset by the previously mentioned prepayment penalty on the early retirement of borrowings.

Net Interest Income. Net interest income decreased to $77.3 million for the nine months ended March 31, 2021, compared to $79.4 million for the comparative period in fiscal 2020. The $2.1 million, or 2.6% decrease was due to a $15.3 million decrease in interest and dividend income partially offset by a $13.2 million decrease in interest expense, both of which were driven by the lower rate environment in the current period.

Average interest-earning assets increased $159.7 million, or 4.8% to $3.5 billion for the nine months endedMarch 31, 2021 compared to $3.3 billion in the corresponding prior period. The average balance of total loans receivable increased by $92.6 million, or 3.4% compared to the same period last year. The average balance of commercial paper and deposits in other banks increased $92.0 million, or 25.4% between the periods. These increases were funded by a $21.5 million, or 14.1% decrease in securities available for sale, a $3.5 million, or 8.3% decrease in other interest-earning assets, and a $185.9 million, or 55.3% increase in average noninterest-bearing deposits partially offset by a $11.9 million, or 0.4% decrease in average interest-bearing liabilities as compared to the same period last year. Net interest margin (on a fully taxable-equivalent basis) for the nine months endedMarch 31, 2021 decreased to 3.02% from 3.25% for the same period a year ago.

Total interest and dividend income decreased $15.3 million, or 14.5% for the nine months endedMarch 31, 2021 as compared to the same period last year, which was primarily driven by a $9.6 million, or 10.2% decrease in loan interest income, a $3.8 million, or 64.7% decrease in interest income from commercial paper and deposits in other banks, a $1.4 million, or 47.3% decrease in interest income on securities available for sale, and a $425,000, or 19.7% decrease in interest income on other interest-earning assets. The lower interest income was driven by the decrease in market yields compared to the prior year period. Average loan yields decreased 60 basis points to 4.03% for the nine months endedMarch 31, 2021 from 4.63% in the corresponding period last year. Average yields on commercial paper and deposits in other banks decreased 157 basis points to 0.62% for the nine months ended March 31, 2021 from 2.19% in the corresponding period last year. Average yields on securities available for sale decreased 98 basis points to 1.55% for the nine months endedMarch 31, 2021 from 2.53% in the corresponding period last year. Average yields on total interest-earning assets decreased 79 basis points to 3.51% for the nine months endedMarch 31, 2021 from 4.30% in the corresponding period last year.

Total interest expense decreased $13.2 million, or 51.1% for the nine months endedMarch 31, 2021 compared to the same period last year. The decrease was driven by a $10.5 million, or 58.1% decrease in interest expense on deposits and a $2.6 million, or 34.3% decrease in interest expense on borrowings. The $104.2 million, or 4.8% increase in average interest-bearing deposits for the nine months ended March 31, 2021 was more than offset by the 67 basis point decrease down to 0.45% in the corresponding cost of funds compared to 1.12%. Average borrowings for the nine months endedMarch 31, 2021 decreased $116.1 million, or 19.8% along with a 32 basis point decrease in the average cost of borrowings compared to the same period last year. The overall average cost of funds decreased 63 basis points to 0.62% for the nine month period compared to 1.25% in the same period last year due primarily to the impact of the lower amount of borrowings and rates.

Provision (Benefit) for Loan Losses. During the nine months ended March 31, 2021 there was a $6.2 million net benefit of the provision for credit losses compared to a $5.8 million provision for the corresponding period of fiscal 2020. The net benefit of provision relates to the previously discussed changes in the economic forecast since the adoption of CECL and the decline in the balance of total loans. Net loan

charge-offs totaled $452,000 for the nine months ended March 31, 2021, compared to $379,000 for the same period last year. Net charge-offs as a percentage of average loans was 0.02% for each of the nine months endedMarch 31, 2021 and 2020.

See "Comparison of Financial Condition - Asset Quality" for additional details.

Noninterest Income. Noninterest income increased $5.6 million, or 24.0%, to $28.7 million for the nine months ended March 31, 2021 from $23.1 million for the nine months ended March 31, 2020, primarily due to a $4.4 million, or 57.4% increase in gain of sale of loans held for sale and a $2.4 million, or 54.1% increase in other noninterest income, partially offset by a $645,000, or 8.8% decrease in service charges and fees on deposit accounts, a $368,000, or 18.0% decrease in loan income and fees, and a $173,000, or 10.0% decrease in income from BOLI. The increase in gain on the sale of loans held for sale was driven ~~by a decrease in gains from the sale of SBA loans, partially offset~~ by an increase in sales of mortgage, ~~loans and~~ home equity, and SBA loans. During the quarter ended December 31, 2020, $9.3 million of the guaranteed portion of SBA commercial loans were sold with gains of $778,000 compared to $16.5 million sold and gains of $1.0 million in the corresponding quarter in the prior year. There were ~~$108.9~~$297.2 million of residential mortgage loans originated for sale which were sold with gains of ~~$2.8~~$7.7 million compared to ~~$57.8~~$135.4 million sold and gains of ~~$1.4~~

$3.6 million in the corresponding ~~quarter~~period in the prior year. Included in the prior year's gain on sale of loans was an additional $1.3 million non-recurring gain related to one-to-four family loans of $154.9 million that were sold during the ~~quarter.~~corresponding period last year. During the nine months ended March 31, 2021, $44.6 million of the guaranteed portion of SBA commercial loans were sold with gains of $3.7 million compared to $36.0 million sold and gains of $2.5 million in the corresponding period in the prior year. In addition, ~~$23.2~~$85.9 million of home equity loans were sold during the ~~quarter~~nine months ended ~~December~~March 31, ~~2020~~2021 for a gain of ~~$158,000.~~$559,000 compared to $18.0 million sold and gains of $183,000 in the corresponding period in the prior year. The increase in other noninterest income was primarily related to operating lease income from the equipment finance line of business. The decrease in service charges on deposit accounts was primarily related to lower nonsufficient fund fees as customers have decreased spending during the pandemic. The decrease in loan income and fees was primarily a result of lower fees from the our adjustable rate conversion program. The decrease in BOLI income was driven by lower interest rates.

Noninterest Expense. Noninterest expense for the ~~three~~nine months ended ~~December~~March 31, ~~2020~~2021 increased ~~$2.4~~$10.5 million, or ~~10.0%~~14.4%, to ~~$26.4~~$82.9 million compared to ~~$24.0~~$72.5 million for the ~~three~~nine months ended ~~December~~March 31, ~~2019.~~ 2020. The increase was primarily due to a ~~$1.5~~$4.2 million, or ~~10.8%~~9.8% increase in salaries and employee ~~benefits as~~benefits; the previously mentioned $3.7 million prepayment penalty; a ~~result of new positions, mortgage loan origination incentives, and annual salary increases; a $892,000,~~$2.4 million, or ~~26.9~~%23.3% increase in other expenses, ~~mainly~~ driven by depreciation from ~~our~~the Company's equipment finance line of business; a ~~$475,000~~$1.1 million, or 17.8% increase in computer services; and a $887,000 increase in deposit insurance premiums as a result of credits issued by the FDIC being utilized in the prior year ~~period, and a $235,000, or 11.8% increase in computer services.~~period. Partially offsetting these increases was a cumulative decrease of ~~$608,000,~~$1.4 million, or ~~17.9%~~26.0% in ~~net occupancy~~telephone, postage, and supplies expense; marketing and advertising expense; and core deposit intangible amortization for the ~~three~~nine months ended ~~December~~March 31, ~~2020~~2021 compared to the same period last year. In addition, there was a ~~$195,000, 54.2%~~$372,000, or 44.6% decrease in ~~REO-related~~REO related expenses as a result of fewer properties held, ~~and~~ no post-foreclosure ~~writedowns.~~

~~Income Taxes.~~ The Company's income tax expense for the three months ended December 31, 2020 increased $116,000, or 4.7% to $2.6 million from $2.5 million. The effective tax rate for the three months ended December 31, 2020 and 2019 was 21.5% and 21.2%, respectively.

~~Comparison of Results of Operations for the Six Months Ended December 31, 2020 and 2019~~

~~General.~~ During the six months ended December 31, 2020, net income decreased by $2.8 million, or 15.5% to $15.2 million from $18.0 million for the six months ended December 31, 2019. Diluted earnings per share decreased to $0.92 for the six months ended December 31, 2020 compared to $1.01 in the same period in fiscal 2020. Offsetting the decrease in net income for the six months ended December 31, 2020 as compared to the prior comparable six-month period was a net benefit in the provision for credit losses due to improvement in the economic forecast since adoption of the new accounting standard to measure current expected credit losses. The net benefit in the provision nearly offset the decline in net interest income for the period as compared to the same period ended December 31, 2019. The overall decline in net income resulted from an increase in total noninterest expense.

~~Net Interest Income.~~ Net interest income decreased to $51.6 million for the six months ended December 31, 2020, compared to $54.1 million for the comparative period in fiscal 2020. The $2.5 million, or 4.6% decrease was due to a $11.5 million decrease in interest and dividend income partially offset by a $9.1 million decrease in interest expense, both of which were driven by the lower rate environment in the current period.

Average interest-earning assets increased $112.8 million, or 3.4% to $3.4 billion for the six months ended December 31, 2020 compared to $3.3 billion in the corresponding prior period. The average balance of total loans receivable increased by $84.8 million, or 3.1% compared to the same period last year. The average balance of commercial paper and deposits in other banks increased $66.0 million, or 18.6% between the periods. These increases were funded by a $32.1 million, or 21.1% decrease in securities available for salewritedowns, and a $176.7 million, or 53.5% increase in average noninterest-bearing deposits partially offset by a $56.4 million, or 2.0% decrease in average interest-bearing liabilities as compared to the same period last year. Net interest margin (on a fully taxable-equivalent basis) for the six months ended December 31, 2020 decreased to 3.05% from 3.30% for the same period a year ago.

Total interest and dividend income decreased $11.5 million, or 16.0% for the six months ended December 31, 2020 as compared to the same period last year, which was primarily driven by a $7.5 million, or 11.6% decrease in loan interest income, a $2.7 million, or 64.1% decrease in interest income from commercial paper and deposits in other banks, a $957,000, or 48.1% decrease in interest incomegain on securities available for sale, and a $460,000, or 28.7% decrease in interest income on other interest-earning assets. The lower interest income was driven by the decrease in market yields compared to the prior year period. Average loan yields decreased 66 basis points to 4.04% for the six months ended December 31, 2020 from 4.70% in the corresponding period last year. Average yields on commercial paper and deposits in other banks decreased 164 basis points to 0.71% for the six months ended December 31, 2020 from 2.35% in the corresponding period last year. Average yields on securities available for sale decreased 89 basis points to 1.72% for the six months ended December 31, 2020 from 2.61% in the corresponding period last year.

Total interest expense decreased $9.1 million, or 50.2% for the six months ended December 31, 2020 compared to the same period last year. The decrease was driven by a $6.6 million, or 54.0% decrease in interest expense on deposits and a $2.5 million, or 42.4% decrease in interest expense on borrowings. The $113.1 million, or 5.3% increase in average interest-bearing deposits for the six months ended December 31, 2020 was more than offset by the 64 basis point decrease down to 0.50% in the corresponding cost of funds compared to 1.14%. Average borrowings for the six months ended December 31, 2020 decreased $169.5 million, or 26.3% along with a 40 basis point decrease in the average cost of borrowings compared to the same period last year. The overall average cost of funds decreased 64 basis points to 0.66% for the six month period compared to 1.30% in the same period last year due primarily to the impact of the lower amount of borrowings and rates.

~~Provision (Benefit) for Loan Losses.~~ ~~During the six months ended December 31, 2020 there was a $2.1 million net benefit of the provision for credit losses compared to a $400,000 provision for the corresponding period of fiscal 2020.~~ The net benefit of provision relates to the previously discussed changes in the economic forecast since the adoption of CECL and the decline in the balance of total loans. Net loan charge-offs totaled $637,000 for the six months ended December 31, 2020, compared to net recoveries of $202,000 for the same period last year. Net charge-offs as a percentage of average loans were 0.04% and (0.01%) for the six months ended December 31, 2020 and 2019, respectively.

~~See "Comparison of Financial Condition - Asset Quality" for additional details.~~

~~Noninterest Income.~~ Noninterest income increased $1.2 million, or 7.5%, to $18.0 million for the six months ended December 31, 2020 from $16.7 million for the six months ended December 31, 2019, primarily due to a $1.7 million, or 63.4% increase in other noninterest income and a $974,000, or 16.0% increase in gain of sale of loans, partially offset by a $710,000, or 40.5% decrease in loan income and fees and a $535,000, or 10.6% decrease in service charges and fees on deposit accounts. The increase in other noninterest income primarily related to an increase in operating lease income from the equipment finance line of business. The increase in gain on the sale of ~~loans was driven by an increase~~REO in ~~sales of mortgage loans and home equity loans, partially offset by a decrease in gains from~~ the ~~sale of SBA loans. There were $190.7 million of residential mortgage loans originated for sale which were sold with gains of $5.0 million~~current period compared to ~~$103.2 million sold and gains of $2.7 million~~a loss in the corresponding period in the prior year. As previously mentioned, the prior period's gain on sale of loans included an additional $1.3 million non-recurring gain related to one-to-four family loans. During the six months ended December 31, 2020, $39.7 million of the guaranteed portion of SBA commercial loans were sold with gains of $1.8 million compared to $29.2 million sold and gains of $2.1 million in the corresponding period in the prior year. In addition, $42.1 million of home equity loans were sold during the six months ended December 31, 2020 for a gain of $258,000. The decrease in loan income and fees is primarily a result of lower fees from our adjustable rate conversion program and other loan serv~~icing fees. The decrease in service charges on deposit accounts was a result of fewer transactions as customers have decreased spending during the pandemic.~~

~~Noninterest Expense.~~ ~~Noninterest expense for the six months ended December 31, 2020 increased $4.9 million, or 10.2%, to $52.4 million compared to $47.6 million for the six months ended December 31, 2019.~~ The increase was primarily due to a $2.8 million, or 10.1% increase in salaries and employee benefits; a $2.0 million, or 31.2% increase in other expenses, driven by depreciation from our equipment finance line of business; a $986,000 increase in deposit insurance premiums, and a $518,000, or 12.9% increase in computer services. Partially offsetting these increases was a cumulative decrease of $1.5 million, or 16.3% in net occupancy expense; marketing and advertising expense; telephone, postage and supplies, core deposit intangible amortization, and REO-related expenses for the six months ended December 31, 2020 compared to the samecomparative period last year.

Income Taxes. For the ~~six~~nine months ended ~~December~~March 31, ~~2020,~~2021, the Company's income tax expense ~~decreased $835,000,~~increased $1.1 million, or ~~17.1%~~21.2% to ~~$4.0~~$6.1 million from ~~$4.9~~$5.1 million as a result of ~~lower~~higher taxable income. The effective tax rate for the ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 and ~~2019~~2020 was 21.0% and ~~21.3%~~20.9%, respectively.

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. ~~The Company relies~~We rely on a number of different sources in order to meet ~~its~~our potential liquidity demands. The primary sources are increases in deposit accounts, 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~~March 31, ~~2020,~~2021, the Bank had an available borrowing capacity of ~~$66.1~~$232.3 million with the FHLB of Atlanta, a ~~$99.7~~$96.8 million line of credit with the FRB and a line of credit with each of three unaffiliated banks totaling $100.0 million. At ~~December~~March 31, ~~2020, the Company~~2021, we had ~~$475.0~~$275.0 million in FHLB advances outstanding and nothing outstanding under our other lines of credit. Additionally, ~~the Company classifies its~~we 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, ~~the Company has~~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 ~~the Company~~we also ~~utilizes~~utilize brokered time deposits to supplement ~~its~~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. ~~The Company~~We also ~~utilizes~~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~~March 31, ~~2020~~2021 brokered deposits totaled $4.6 million, or 0.2% of total deposits compared to $143.2 million, or 5.1% of total deposits at June 30, ~~2020.~~2020.

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 commercial paper. On a longer term basis, ~~the Company maintains~~we maintain a strategy of investing in various lending products and investment securities, including mortgage-backed securities. HomeTrust Bancshares on a stand-alone level is a separate legal entity from the Bank and we must provide for ~~its~~our own liquidity and pay ~~its~~our own operating expenses. ~~Its~~Our primary source of funds consists of the net proceeds retained from the Conversion. ItWe also ~~has~~have 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~~March 31, ~~2020,~~2021, HomeTrust Bancshares on a stand-alone ~~level~~basis had liquid assets of ~~$5.0~~$8.5 million.

~~The Company uses its~~

We use our sources of funds primarily to meet ~~its~~our ongoing commitments, pay maturing deposits and fund withdrawals, and to fund loan commitments. At ~~December~~March 31, ~~2020,~~2021, the total approved loan commitments and unused lines of credit outstanding amounted to ~~$232.8~~$363.7 million and ~~$465.2~~$556.5 million, respectively, as compared to $199.4 million and $398.8 million, respectively, as of June 30, 2020. Certificates of deposit scheduled to mature in one year or less at ~~December~~March 31, ~~2020,~~2021, totaled ~~$460.6~~$448.2 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 a majority of our maturing deposits will remain with us.

During the first ~~six~~nine months of fiscal 2021, cash and cash equivalents increased ~~$104.7~~$42.5 million, or ~~86.1%~~34.9%, to ~~$226.3~~$164.1 million as of ~~December~~March 31, ~~2020~~2021 from $121.6 million as of June 30, ~~2020.~~2020. Cash provided by investing and operating activities ~~was $185.6~~were $134.9 million and $1.7 million, respectively, while cash used in financing ~~and operating~~ activities was ~~$49.3 million and $31.5 million, respectively.~~$94.1 million. Primary sources of cash for the ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 included a ~~$121.0~~$122.8 million increase in deposits, a $103.4 million decrease in loans, $67.1 million in net principal repayments of commercial paper, ~~$38.7~~$47.2 million in maturing securities available for sale, ~~a decrease in loans of $105.2 million, $8.2 million in principal repayments from mortgage-backed securities, and $7.0~~$13.7 million in maturities of certificates of deposit in other banks, net of ~~purchases.~~purchases, $11.7 million in principal repayments from mortgage-backed securities, and $10.0 million in net redemptions of other investments. Primary uses of cash during the period included ~~a $73.7~~$200.0 million in early retirement of borrowings, $95.6 million in purchases of securities available for sale, ~~$41.3~~$15.1 million in purchases of premises and equipment, $11.7 million in shares repurchased, a $9.5 million increase in loans held for sale, ~~$42.5 million decrease in deposits, $13.4 million in purchases of premises and equipment, $6.9~~$7.8 million in purchases of operating lease equipment, ~~$5.2~~$3.7 million in ~~shares repurchased,~~prepayment penalties, and ~~$2.5~~$3.7 million in cash dividends. All sources and uses of cash reflect our cash management strategy to increase our higher yielding investments and loans by increasing lower costing borrowings and reducing our holdings of lower yielding investments.

Off-Balance Sheet Activities

In the normal course of operations, ~~the Company engages~~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 ~~six~~nine months ended ~~December~~March 31, ~~2020, the Company engaged~~2021, we did not engage in noany off-balance sheet transactions likely to have a material effect on ~~its~~our financial condition, results of operations or cash flows.

A summary of our off-balance sheet commitments to extend credit at ~~December~~March 31, ~~2020,~~2021, is as ~~follows (in thousands):~~follows:



(Dollars in thousands)
Undisbursed portion of construction loans	$	~~146,181~~217,142
Commitments to make loans	~~86,648~~146,578
Unused lines of credit	~~465,200~~556,501
Unused letters of credit	~~7,936~~9,213
Total loan commitments	$	~~705,965~~929,434

Capital Resources

At ~~December~~March 31, ~~2020,~~2021, stockholders' equity totaled ~~$404.7~~$406.5 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, ~~the Company is~~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, 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.

HomeTrust Bancshares, Inc. and the Bank each exceeded all regulatory capital requirements as of ~~December~~March 31, ~~2020.~~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~~March 31, ~~2020~~2021 under applicable regulatory requirements.

HomeTrust Bancshares, Inc. and the Bank's actual and required minimum capital amounts and ratios are as ~~follows (dollars in thousands):~~follows:


						Regulatory Requirements													Regulatory Requirements
		Actual				Minimum for Capital Adequacy Purposes				Minimum to Be Well Capitalized
(Dollars in thousands)														(Dollars in thousands)	Actual				Minimum for Capital Adequacy Purposes				Minimum to Be Well Capitalized
		Amount		Ratio		Amount		Ratio		Amount		Ratio			Amount		Ratio		Amount		Ratio		Amount		Ratio
HomeTrust Bancshares, Inc.	HomeTrust Bancshares, Inc.													HomeTrust Bancshares, Inc.

As of December 31, 2020
As of March 31, 2021														As of March 31, 2021
Common Equity Tier I Capital to Risk-Weighted Assets	Common Equity Tier I Capital to Risk-Weighted Assets	$	384,255	11.86	%	$	145,826	4.50	%	$	210,638	6.50	%	Common Equity Tier I Capital to Risk-Weighted Assets	$	385,697	11.64	%	$	149,079	4.50	%	$	215,337	6.50	%
Tier I Capital (to Total Adjusted Assets)	Tier I Capital (to Total Adjusted Assets)	$	384,255	10.52	%	$	146,128	4.00	%	$	182,660	5.00	%	Tier I Capital (to Total Adjusted Assets)	$	385,697	10.34	%	$	149,257	4.00	%	$	186,571	5.00	%
Tier I Capital (to Risk-weighted Assets)	Tier I Capital (to Risk-weighted Assets)	$	384,255	11.86	%	$	194,435	6.00	%	$	259,246	8.00	%	Tier I Capital (to Risk-weighted Assets)	$	385,697	11.64	%	$	198,773	6.00	%	$	265,030	8.00	%
Total Risk-based Capital (to Risk-weighted Assets)	Total Risk-based Capital (to Risk-weighted Assets)	$	410,744	12.68	%	$	259,246	8.00	%	$	324,058	10.00	%	Total Risk-based Capital (to Risk-weighted Assets)	$	409,269	12.35	%	$	265,030	8.00	%	$	331,288	10.00	%

As of June 30, 2020	As of June 30, 2020													As of June 30, 2020
Common Equity Tier I Capital to Risk-Weighted Assets	Common Equity Tier I Capital to Risk-Weighted Assets	$	374,437	11.26	%	$	149,614	4.50	%	$	216,109	6.50	%	Common Equity Tier I Capital to Risk-Weighted Assets	$	374,437	11.26	%	$	149,614	4.50	%	$	216,109	6.50	%
Tier I Capital (to Total Adjusted Assets)	Tier I Capital (to Total Adjusted Assets)	$	374,437	10.26	%	$	146,047	4.00	%	$	182,559	5.00	%	Tier I Capital (to Total Adjusted Assets)	$	374,437	10.26	%	$	146,047	4.00	%	$	182,559	5.00	%
Tier I Capital (to Risk-weighted Assets)	Tier I Capital (to Risk-weighted Assets)	$	374,437	11.26	%	$	199,485	6.00	%	$	265,980	8.00	%	Tier I Capital (to Risk-weighted Assets)	$	374,437	11.26	%	$	199,485	6.00	%	$	265,980	8.00	%
Total Risk-based Capital (to Risk-weighted Assets)	Total Risk-based Capital (to Risk-weighted Assets)	$	402,964	12.12	%	$	265,980	8.00	%	$	332,476	10.00	%	Total Risk-based Capital (to Risk-weighted Assets)	$	402,964	12.12	%	$	265,980	8.00	%	$	332,476	10.00	%

HomeTrust Bank	HomeTrust Bank													HomeTrust Bank

As of December 31, 2020
As of March 31, 2021														As of March 31, 2021
Common Equity Tier I Capital to Risk-Weighted Assets	Common Equity Tier I Capital to Risk-Weighted Assets	$	371,075	11.45	%	$	145,820	4.50	%	$	210,629	6.50	%	Common Equity Tier I Capital to Risk-Weighted Assets	$	369,703	11.16	%	$	149,071	4.50	%	$	215,325	6.50	%
Tier I Capital (to Total Adjusted Assets)	Tier I Capital (to Total Adjusted Assets)	$	371,075	10.16	%	$	146,144	4.00	%	$	182,680	5.00	%	Tier I Capital (to Total Adjusted Assets)	$	369,703	9.91	%	$	149,267	4.00	%	$	186,584	5.00	%
Tier I Capital (to Risk-weighted Assets)	Tier I Capital (to Risk-weighted Assets)	$	371,075	11.45	%	$	194,427	6.00	%	$	259,236	8.00	%	Tier I Capital (to Risk-weighted Assets)	$	369,703	11.16	%	$	198,762	6.00	%	$	265,016	8.00	%
Total Risk-based Capital (to Risk-weighted Assets)	Total Risk-based Capital (to Risk-weighted Assets)	$	397,564	12.27	%	$	259,236	8.00	%	$	324,045	10.00	%	Total Risk-based Capital (to Risk-weighted Assets)	$	393,275	11.87	%	$	265,016	8.00	%	$	331,270	10.00	%

As of June 30, 2020	As of June 30, 2020													As of June 30, 2020
Common Equity Tier I Capital to Risk-Weighted Assets	Common Equity Tier I Capital to Risk-Weighted Assets	$	362,841	10.91	%	$	149,608	4.50	%	$	216,100	6.50	%	Common Equity Tier I Capital to Risk-Weighted Assets	$	362,841	10.91	%	$	149,608	4.50	%	$	216,100	6.50	%
Tier I Capital (to Total Adjusted Assets)	Tier I Capital (to Total Adjusted Assets)	$	362,841	9.94	%	$	146,010	4.00	%	$	182,512	5.00	%	Tier I Capital (to Total Adjusted Assets)	$	362,841	9.94	%	$	146,010	4.00	%	$	182,512	5.00	%
Tier I Capital (to Risk-weighted Assets)	Tier I Capital (to Risk-weighted Assets)	$	362,841	10.91	%	$	199,477	6.00	%	$	265,969	8.00	%	Tier I Capital (to Risk-weighted Assets)	$	362,841	10.91	%	$	199,477	6.00	%	$	265,969	8.00	%
Total Risk-based Capital (to Risk-weighted Assets)	Total Risk-based Capital (to Risk-weighted Assets)	$	391,368	11.77	%	$	265,969	8.00	%	$	332,461	10.00	%	Total Risk-based Capital (to Risk-weighted Assets)	$	391,368	11.77	%	$	265,969	8.00	%	$	332,461	10.00	%

In addition to the minimum CET1, Tier 1 and total risk-based capital ratios, both HomeTrust Bancshares, Inc. and the Bank 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. At ~~December~~March 31, ~~2020,~~2021, the conservation buffer was ~~4.68%~~4.35% and ~~4.27%~~3.87% for HomeTrust Bancshares, Inc. and the 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 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 2020 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~~March 31, ~~2020,~~2021, was carried out under the supervision and with the participation of the Company's Chief Executive Officer, Chief Financial Officer and 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~~March 31, ~~2020,~~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, on 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 the Company's internal control over financial reporting that occurred during the ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 that materially affected, or are reasonably likely to materially affect, the 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 errors 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~~"Note 10 - 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 2020 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable

(b) Not applicable

(c) 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, 2020 — $ — — 851,004
November 1 - November 30, 2020 48,242 18.36 48,242 802,762
December 1 - December 31, 2020 228,880 18.76 228,880 573,882
Total 277,122 $ 18.69 277,122 573,882


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
January 1 - January 31, 2021	104,053	$	20.19	104,053	469,829
February 1 - February 29, 2021	30,076	21.59		30,076	439,753
March 1 - March 31, 2021	155,204	24.44		155,204	284,549
Total	289,333	$	22.62	289,333	284,549

On April 2, 2020, the Company announced that its Board of Directors ~~had~~ authorized the repurchase of up to 851,004 shares of the Company's common stock, representing 5% of ~~the Company's~~its 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.

Item 3. Defaults Upon Senior Securities

Nothing to report.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Nothing to report.

Item 6. Exhibits

Regulation S-K Exhibit Number

Document

Reference to Prior Filing or Exhibit Number Attached Hereto

Regulation S-K Exhibit Number

Document

Reference to Prior Filing or Exhibit Number Attached Hereto

3.1

Charter of HomeTrust Bancshares, Inc.

(a)

3.1

Charter of HomeTrust Bancshares, Inc.

(a)

3.2

Articles Supplementary to the Charter of HomeTrust Bancshares, Inc. for HomeTrust Bancshares, Inc.'s Junior Participating Preferred Stock, Series A

(b)

3.2

Articles Supplementary to the Charter of HomeTrust Bancshares, Inc. for HomeTrust Bancshares, Inc.'s Junior Participating Preferred Stock, Series A

(b)

3.3

Amended and Restated Bylaws of HomeTrust Bancshares, Inc.

(c)

3.3

Amended and Restated Bylaws of HomeTrust Bancshares, Inc.

3.3

4.1

Tax Benefits Preservation Plan, dated as of September 25, 2012, between HomeTrust Bancshares, Inc. and Registrar and Transfer Company, as Rights Agent

(b)

4.1

Tax Benefits Preservation Plan, dated as of September 25, 2012, between HomeTrust Bancshares, Inc. and Registrar and Transfer Company, as Rights Agent

(b)

4.2

Amendment No. 1, dated as of August 31, 2015, to Tax Benefit Preservation Plan, dated as of September 25, 2012, between HomeTrust Bancshares, Inc. and Computershare Trust Company, N.A., as successor rights agent to Registrar and Transfer Company

(d)

4.2

(d)

4.3

Amendment No. 2, dated as of August 21, 2018, to Tax Benefits Preservation Plan, dated as ofSeptember 25, 2012, between HomeTrust Bancshares, Inc. and Computershare Trust Company,N.A., as successor rights agent to Registrar and Transfer Company

(e)

4.3

Amendment No. 2, dated as of August 21, 2018, to Tax Benefits Preservation Plan, dated as of September 25, 2012, between HomeTrust Bancshares, Inc. and Computershare Trust Company,N.A., as successor rights agent to Registrar and Transfer Company

(e)

10.1

HomeTrust Bancshares, Inc. Strategic Operating Committee Incentive Plan

10.1

HomeTrust Bancshares, Inc. Strategic Operating Committee Incentive Plan

(q)

10.2

Amended and Restated Employment Agreement entered into between HomeTrust Bancshares, Inc. and Dana L. Stonestreet

(g)

10.2

Amended and Restated Employment Agreement entered into between HomeTrust Bancshares, Inc. and Dana L. Stonestreet

(g)

10.3

Amended and Restated Employment Agreement entered into between HomeTrust Bancshares, Inc. and C. Hunter Westbrook

(g)

10.3

Amended and Restated Employment Agreement entered into between HomeTrust Bancshares, Inc. and C. Hunter Westbrook

(g)

10.3A

Amendment No. 1 to Amended and Restated Employment Agreement entered into between HomeTrust Bancshares, Inc. and C. Hunter Westbrook

(h)

10.3A

Amendment No. 1 to Amended and Restated Employment Agreement entered into between HomeTrust Bancshares, Inc. and C. Hunter Westbrook

(h)

10.3B

Amendment No. Two dated as of October 27, 2020, to Amended and Restated Employment Agreement, dated as of September 11, 2018, by and between the Company and C. Hunter Westbrook

(i)

10.3B

Amendment No. Two dated as of October 27, 2020, to Amended and Restated Employment Agreement, dated as of September 11, 2018, by and between the Company and C. Hunter Westbrook

(i)

10.4

Amended and Restated Employment Agreement entered into between HomeTrust Bancshares,Inc. and Tony J. VunCannon

(g)

10.4

Amended and Restated Employment Agreement entered into between HomeTrust Bancshares,Inc. and Tony J. VunCannon

(g)

10.5

Employment Agreement between HomeTrust Bancshares, Inc. and Howard L. Sellinger

(g)

10.5

Employment Agreement between HomeTrust Bancshares, Inc. and Howard L. Sellinger

(g)

10.6

Employment Agreement between HomeTrust Bank and Sidney A. Biesecker

(a)

10.6

Employment Agreement between HomeTrust Bank and Sidney A. Biesecker

(a)

10.7

HomeTrust Bank Executive Supplemental Retirement Income Master Agreement ("SERP")

(a)

10.7

HomeTrust Bank Executive Supplemental Retirement Income Master Agreement ("SERP")

(a)

10.7A

SERP Joinder Agreement for F. Edward Broadwell, Jr.

(a)

10.7A

SERP Joinder Agreement for F. Edward Broadwell, Jr.

(a)

10.7B

SERP Joinder Agreement for Dana L. Stonestreet

(a)

10.7B

SERP Joinder Agreement for Dana L. Stonestreet

(a)

10.7C

SERP Joinder Agreement for Tony J. VunCannon

(a)

10.7C

SERP Joinder Agreement for Tony J. VunCannon

(a)

10.7D

SERP Joinder Agreement for Howard L. Sellinger

(a)

10.7D

SERP Joinder Agreement for Howard L. Sellinger

(a)

10.7E

SERP Joinder Agreement for Stan Allen

(a)

10.7E

SERP Joinder Agreement for Stan Allen

(a)

10.7F

SERP Joinder Agreement for Sidney A. Biesecker

(a)

10.7F

SERP Joinder Agreement for Sidney A. Biesecker

(a)

10.7G

SERP Joinder Agreement for Peggy C. Melville

(a)

10.7G

SERP Joinder Agreement for Peggy C. Melville

(a)

10.7H

SERP Joinder Agreement for William T. Flynt

(a)

10.7H

SERP Joinder Agreement for William T. Flynt

(a)

10.7I

Amended and Restated Supplemental Income Agreement between HomeTrust Bank, as successor to Industrial Federal Savings Bank, and Sidney Biesecker

(j)

10.7I

Amended and Restated Supplemental Income Agreement between HomeTrust Bank, as successor to Industrial Federal Savings Bank, and Sidney Biesecker

(j)

10.8

HomeTrust Bank Director Emeritus Plan ("Director Emeritus Plan")

(a)

10.8

HomeTrust Bank Director Emeritus Plan ("Director Emeritus Plan")

(a)

10.8A

Director Emeritus Plan Joinder Agreement for William T. Flynt

(a)

10.8A

Director Emeritus Plan Joinder Agreement for William T. Flynt

(a)

10.8B

Director Emeritus Plan Joinder Agreement for J. Steven Goforth

(a)

10.8B

Director Emeritus Plan Joinder Agreement for J. Steven Goforth

(a)

10.8C

Director Emeritus Plan Joinder Agreement for Craig C. Koontz

(a)

10.8C

Director Emeritus Plan Joinder Agreement for Craig C. Koontz

(a)

10.8D

Director Emeritus Plan Joinder Agreement for Larry S. McDevitt

(a)

10.8D

Director Emeritus Plan Joinder Agreement for Larry S. McDevitt

(a)

10.8E

Director Emeritus Plan Joinder Agreement for F.K. McFarland, III

(a)

10.8E

Director Emeritus Plan Joinder Agreement for F.K. McFarland, III

(a)

10.8F

Director Emeritus Plan Joinder Agreement for Peggy C. Melville

(a)

10.8F

Director Emeritus Plan Joinder Agreement for Peggy C. Melville

(a)

10.8G

Director Emeritus Plan Joinder Agreement for Robert E. Shepherd, Sr.

(a)

10.8G

Director Emeritus Plan Joinder Agreement for Robert E. Shepherd, Sr.

(a)

10.9

HomeTrust Bank Defined Contribution Executive Medical Care Plan

(a)

10.9

HomeTrust Bank Defined Contribution Executive Medical Care Plan

(a)

10.10

HomeTrust Bank 2005 Deferred Compensation Plan

(a)

10.10

HomeTrust Bank 2005 Deferred Compensation Plan

(a)

10.11

HomeTrust Bank Pre-2005 Deferred Compensation Plan

(a)

10.11

HomeTrust Bank Pre-2005 Deferred Compensation Plan

(a)

10.12

HomeTrust Bancshares, Inc. 2013 Omnibus Incentive Plan ("Omnibus Incentive Plan")

(k)

10.12

HomeTrust Bancshares, Inc. 2013 Omnibus Incentive Plan ("Omnibus Incentive Plan")

(k)

10.13

Form of Incentive Stock Option Award Agreement under Omnibus Incentive Plan

(l)

10.13

Form of Incentive Stock Option Award Agreement under Omnibus Incentive Plan

(l)

10.14

Form of Non-Qualified Stock Option Award Agreement under Omnibus Incentive Plan

(l)

10.14

Form of Non-Qualified Stock Option Award Agreement under Omnibus Incentive Plan

(l)

10.15

Form of Stock Appreciation Right Award Agreement under Omnibus Incentive Plan

(l)

10.15

Form of Stock Appreciation Right Award Agreement under Omnibus Incentive Plan

(l)

10.16

Form of Restricted Stock Award Agreement under Omnibus Incentive Plan

(l)

10.16

Form of Restricted Stock Award Agreement under Omnibus Incentive Plan

(l)

10.17

Form of Restricted Stock Unit Award Agreement under Omnibus Incentive Plan

(l)

10.17

Form of Restricted Stock Unit Award Agreement under Omnibus Incentive Plan

(l)

10.18

Reserved

10.18

Agreement and General Release between HomeTrust Bancshares, Inc. and Paula Labian

10.18

10.19

Reserved

10.19

Reserved

10.20

Money Purchase Deferred Compensation Agreement, dated as of September 1, 1987, between HomeTrust Bank and F. Edward Broadwell, Jr.

(m)

10.20

Money Purchase Deferred Compensation Agreement, dated as of September 1, 1987, between HomeTrust Bank and F. Edward Broadwell, Jr.

(m)

10.21

Retirement Payment Agreement, dated as of September 1, 1987, between HomeTrust Bank and F. Edward Broadwell, Jr., as amended

(m)

10.21

Retirement Payment Agreement, dated as of September 1, 1987, between HomeTrust Bank and F. Edward Broadwell, Jr., as amended

(m)

10.22

Retirement Payment Agreement, dated as of September 1, 1987, between HomeTrust Bank and Larry S. McDevitt, as amended

(m)

10.22

Retirement Payment Agreement, dated as of September 1, 1987, between HomeTrust Bank and Larry S. McDevitt, as amended

(m)

10.23

Retirement Payment Agreement, dated as of September 1, 1987, between HomeTrust Bank and Peggy C. Melville, as amended

(m)

10.23

Retirement Payment Agreement, dated as of September 1, 1987, between HomeTrust Bank and Peggy C. Melville, as amended

(m)

10.24

Retirement Payment Agreement, dated as of August 1, 1988, between HomeTrust Bank and Robert E. Shepherd, Sr., as amended

(m)

10.24

Retirement Payment Agreement, dated as of August 1, 1988, between HomeTrust Bank and Robert E. Shepherd, Sr., as amended

(m)

10.25

Retirement Payment Agreement, dated as of May 1, 1991, between HomeTrust Bank and William T. Flynt, as amended

(m)

10.25

Retirement Payment Agreement, dated as of May 1, 1991, between HomeTrust Bank and William T. Flynt, as amended

(m)

10.26

Offer Letter between HomeTrust Bank and Keith J. Houghton

(n)

10.26

Offer Letter between HomeTrust Bank and Keith J. Houghton

(n)

10.27

Change in Control Severance Agreement between HomeTrust Bancshares, Inc. and Marty Caywood

(o)

10.27

Change in Control Severance Agreement between HomeTrust Bancshares, Inc. and Marty Caywood

(o)

10.28

Amended and Restated Change in Control Severance Agreement between HomeTrust Bancshares, Inc. and Keith J. Houghton

(g)

10.28

Amended and Restated Change in Control Severance Agreement between HomeTrust Bancshares, Inc. and Keith J. Houghton

(g)

10.29

Amended and Restated Change in Control Severance Agreement between HomeTrust Bancshares, Inc. and R. Parrish Little

(p)

10.29

Amended and Restated Change in Control Severance Agreement between HomeTrust Bancshares, Inc. and R. Parrish Little

(p)

31.1

Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.1

Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.1

31.2

Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certificate of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.0

Certificate of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.0

101

The following materials from HomeTrust Bancshares' Quarterly Report on Form 10-Q for the quarter ended December 31, 2020, 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

The following materials from HomeTrust Bancshares' Quarterly Report on Form 10-Q for the quarter ended March 31, 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 May 1, 2018 (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)Reserved

(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).

(q)Filed as an exhibit to HomeTrust Bancshares's Quarterly Report on Form 10-Q for the quarter ended December 31, 2020 (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: ~~February 5,~~May 7, 2021	By:	/s/ Dana L. Stonestreet
		Dana L. Stonestreet
		Chairman, President and CEO
		(Duly Authorized Officer)

Date: ~~February 5,~~May 7, 2021	By:	/s/ Tony J. VunCannon
		Tony J. VunCannon
		Executive Vice President, CFO, Corporate Secretary and Treasurer
		(Principal Financial and Accounting Officer)