ASHEVILLE, N.C., Oct. 25, 2023 (GLOBE NEWSWIRE) — HomeTrust Bancshares, Inc. (NASDAQ: HTBI) ("Company"), the holding company of HomeTrust Bank ("Bank"), today announced preliminary net income for the first quarter of the six-month transition period ending December 31, 2023* and an increase in its quarterly cash dividend.
For the quarter ended September 30, 2023 compared to the quarter ended June 30, 2023:
- net income was $14.8 million compared to $15.0 million;
- diluted earnings per share ("EPS") was $0.88 compared to $0.90;
- annualized return on assets ("ROA") was 1.33% compared to 1.39%;
- annualized return on equity ("ROE") was 12.23% compared to 12.85%;
- net interest income was $42.2 million compared to $43.9 million;
- net interest margin was 4.02% compared to 4.32%;
- provision for credit losses was $2.6 million compared to $405,000;
- noninterest income was $8.6 million compared to $6.9 million;
- tax-free death benefit proceeds from life insurance of $1.1 million compared to $0, which was the primary driver of the change in noninterest income noted above;
- net portfolio loan growth was $1.1 million, or 0.1% annualized, compared to $9.8 million, or 1.1% annualized; and
- quarterly cash dividends continued at $0.10 per share totaling $1.7 million for both periods.
The unrealized loss on our available for sale investment portfolio was $6.0 million, or 4.3% of book value, compared to $5.3 million, or 3.4% of book value as of September 30, 2023 and June 30, 2023, respectively. No held to maturity securities were held as of either date.
The Company also announced today that its Board of Directors declared a quarterly cash dividend of $0.11 per common share, reflecting a $0.01, or 10.0%, increase over the previous quarter’s dividend. This is the fifth increase of the quarterly dividend since the Company initiated cash dividends in November 2018. The dividend is payable on November 30, 2023 to shareholders of record as of the close of business on November 16, 2023.
"We are pleased to report another quarter of strong financial results," said Hunter Westbrook, President and Chief Executive Officer. "Our well-positioned balance sheet and resilient performance despite the most challenging interest rate environment of my 35-year banking career validates the strategic makeover of HomeTrust Bank.
"Our net interest margin remains in the top quartile despite the funding pressure being experienced across the industry. We are intentionally focused on prudent loan growth which is reflected in the minimal loan growth for the quarter. In addition, our credit quality metrics remain strong when compared to the industry and historical periods.
"This performance is a direct result of our strategic decisions and investments over the last several years, and the required buy-in, focused execution, and ongoing hard work of our teammates. I couldn’t be more proud of our HomeTrust family."
WEBSITE: WWW.HTB.COM
*As previously announced, on July 24, 2023, the Board of Directors approved a change in the Company’s fiscal year end from June 30 to December 31. The transition period of July 1, 2023 to December 31, 2023 will be covered on a Transition Report Form 10-KT.
Comparison of Results of Operations for the Three Months Ended September 30, 2023 and June 30, 2023
Net Income. Net income totaled $14.8 million, or $0.88 per diluted share, for the three months ended September 30, 2023 compared to net income of $15.0 million, or $0.90 per diluted share, for the three months ended June 30, 2023, a decrease of $179,000, or 1.2%. The results for the three months ended September 30, 2023 were negatively impacted by an increase of $2.2 million in the provision for credit losses and a decrease of $1.7 million in net interest income, partially offset by a $1.7 million increase in noninterest income and $1.3 million decrease in noninterest expense. Details of the changes in the various components of net income are further discussed below.
Net Interest Income. The following table presents the distribution of average assets, liabilities and equity, as well as interest income earned on average interest-earning assets and interest expense paid on 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.
| Three Months Ended | |||||||||||||||||||
| September 30, 2023 | June 30, 2023 | ||||||||||||||||||
| (Dollars in thousands) | Average Balance Outstanding |
Interest Earned / Paid |
Yield / Rate |
Average Balance Outstanding |
Interest Earned / Paid |
Yield / Rate |
|||||||||||||
| Assets | |||||||||||||||||||
| Interest-earning assets | |||||||||||||||||||
| Loans receivable(1) | $ | 3,865,502 | $ | 58,496 | 6.00 | % | $ | 3,769,449 | $ | 56,122 | 5.97 | % | |||||||
| Debt securities available for sale | 146,877 | 1,259 | 3.40 | 164,105 | 1,338 | 3.27 | |||||||||||||
| Other interest-earning assets(2) | 148,386 | 2,110 | 5.64 | 138,420 | 1,671 | 4.84 | |||||||||||||
| Total interest-earning assets | 4,160,765 | 61,865 | 5.90 | 4,071,974 | 59,131 | 5.82 | |||||||||||||
| Other assets | 276,210 | 270,410 | |||||||||||||||||
| Total assets | $ | 4,436,975 | $ | 4,342,384 | |||||||||||||||
| Liabilities and equity | |||||||||||||||||||
| Interest-bearing liabilities | |||||||||||||||||||
| Interest-bearing checking accounts | $ | 597,856 | $ | 1,117 | 0.74 | % | $ | 639,250 | $ | 1,148 | 0.72 | % | |||||||
| Money market accounts | 1,222,372 | 7,726 | 2.51 | 1,261,590 | 6,539 | 2.08 | |||||||||||||
| Savings accounts | 207,489 | 46 | 0.09 | 217,997 | 49 | 0.09 | |||||||||||||
| Certificate accounts | 789,668 | 7,540 | 3.79 | 641,256 | 4,926 | 3.08 | |||||||||||||
| Total interest-bearing deposits | 2,817,385 | 16,429 | 2.31 | 2,760,093 | 12,662 | 1.84 | |||||||||||||
| Junior subordinated debt | 9,979 | 236 | 9.38 | 9,954 | 218 | 8.78 | |||||||||||||
| Borrowings | 208,157 | 3,040 | 5.79 | 169,134 | 2,355 | 5.58 | |||||||||||||
| Total interest-bearing liabilities | 3,035,521 | 19,705 | 2.58 | 2,939,181 | 15,235 | 2.08 | |||||||||||||
| Noninterest-bearing deposits | 861,788 | 879,303 | |||||||||||||||||
| Other liabilities | 58,513 | 55,268 | |||||||||||||||||
| Total liabilities | 3,955,822 | 3,873,752 | |||||||||||||||||
| Stockholders’ equity | 481,153 | 468,632 | |||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 4,436,975 | $ | 4,342,384 | |||||||||||||||
| Net earning assets | $ | 1,125,244 | $ | 1,132,793 | |||||||||||||||
| Average interest-earning assets to average interest-bearing liabilities | 137.07 | % | 138.54 | % | |||||||||||||||
| Non-tax-equivalent | |||||||||||||||||||
| Net interest income | $ | 42,160 | $ | 43,896 | |||||||||||||||
| Interest rate spread | 3.32 | % | 3.74 | % | |||||||||||||||
| Net interest margin(3) | 4.02 | % | 4.32 | % | |||||||||||||||
| Tax-equivalent(4) | |||||||||||||||||||
| Net interest income | $ | 42,475 | $ | 44,194 | |||||||||||||||
| Interest rate spread | 3.35 | % | 3.77 | % | |||||||||||||||
| Net interest margin(3) | 4.05 | % | 4.35 | % | |||||||||||||||
(1) Average loans receivable balances include loans held for sale and nonaccruing loans.
(2) Average other interest-earning assets consist of FRB stock, FHLB stock, SBIC investments and deposits in other banks.
(3) Net interest income divided by average interest-earning assets.
(4) Tax-equivalent results include adjustments to interest income of $315 and $298 for the three months ended September 30, 2023 and June 30, 2023, respectively, calculated based on a combined federal and state tax rate of 24%.
Total interest and dividend income for the three months ended September 30, 2023 increased $2.7 million, or 4.6%, compared to the three months ended June 30, 2023, which was driven by a $2.4 million, or 4.2%, increase in interest income on loans. Accretion income on acquired loans of $378,000 and $973,000 was recognized during the same periods, respectively, and was included in interest income on loans.
Total interest expense for the three months ended September 30, 2023 increased $4.5 million, or 29.3%, compared to the three months ended June 30, 2023. The increase was the result of both increases in the average cost of funds across funding sources and an increase in average deposits and borrowings outstanding.
The following table shows the effects that changes in average balances (volume), including differences in the number of days in the periods compared, and average interest rates (rate) had on the interest earned on interest-earning assets and interest paid on interest-bearing liabilities:
| Increase / (Decrease) Due to |
Total Increase / (Decrease) |
||||||||||
| (Dollars in thousands) | Volume | Rate | |||||||||
| Interest-earning assets | |||||||||||
| Loans receivable | $ | 2,066 | $ | 308 | $ | 2,374 | |||||
| Debt securities available for sale | (127 | ) | 48 | (79 | ) | ||||||
| Other interest-earning assets | 143 | 296 | 439 | ||||||||
| Total interest-earning assets | 2,082 | 652 | 2,734 | ||||||||
| Interest-bearing liabilities | |||||||||||
| Interest-bearing checking accounts | (62 | ) | 31 | (31 | ) | ||||||
| Money market accounts | (119 | ) | 1,306 | 1,187 | |||||||
| Savings accounts | (2 | ) | (1 | ) | (3 | ) | |||||
| Certificate accounts | 1,222 | 1,392 | 2,614 | ||||||||
| Junior subordinated debt | 3 | 15 | 18 | ||||||||
| Borrowings | 576 | 109 | 685 | ||||||||
| Total interest-bearing liabilities | 1,618 | 2,852 | 4,470 | ||||||||
| Decrease in net interest income | $ | (1,736 | ) | ||||||||
Provision for Credit Losses. The provision for credit losses is the amount of expense that, based on our judgment, is required to maintain the allowance for credit losses ("ACL") at an appropriate level under the current expected credit losses model.
The following table presents a breakdown of the components of the provision for credit losses:
| Three Months Ended | |||||||||||||
| (Dollars in thousands) | September 30, 2023 | June 30, 2023 | $ Change | % Change | |||||||||
| Provision for credit losses | |||||||||||||
| Loans | $ | 2,850 | $ | 910 | $ | 1,940 | 213 | % | |||||
| Off-balance-sheet credit exposure | (280 | ) | (505 | ) | 225 | 45 | |||||||
| Total provision for credit losses | $ | 2,570 | $ | 405 | $ | 2,165 | 535 | % | |||||
For the quarter ended September 30, 2023, the "loans" portion of the provision for credit losses was the result of the following, offset by net charge-offs of $2.6 million during the quarter:
- $0.2 million benefit driven by changes in the loan mix.
- $0.2 million provision due to changes in the projected economic forecast, specifically the national unemployment rate, and changes in qualitative adjustments.
- $0.3 million increase in specific reserves on individually evaluated credits.
For the quarter ended June 30, 2023, the "loans" portion of the provision for credit losses was primarily the result of the following, offset by net charge-offs of $1.2 million during the quarter:
- $0.1 million provision driven by changes in the loan mix.
- $0.3 million benefit due to changes in the projected economic forecast, specifically the national unemployment rate, and changes in qualitative adjustments.
- $0.1 million decrease in specific reserves on individually evaluated credits.
For the quarters ended September 30, 2023 and June 30, 2023, the amounts recorded for off-balance-sheet credit exposure were the result of changes in the balance of loan commitments, loan mix and projected economic forecast as outlined above.
Noninterest Income. Noninterest income for the three months ended September 30, 2023 increased $1.7 million, or 25.2%, when compared to the quarter ended June 30, 2023. Changes in the components of noninterest income are discussed below:
| Three Months Ended | ||||||||||||
| (Dollars in thousands) | September 30, 2023 | June 30, 2023 | $ Change | % Change | ||||||||
| Noninterest income | ||||||||||||
| Service charges and fees on deposit accounts | $ | 2,318 | $ | 2,393 | $ | (75 | ) | (3 | )% | |||
| Loan income and fees | 559 | 792 | (233 | ) | (29 | ) | ||||||
| Gain on sale of loans held for sale | 1,293 | 1,109 | 184 | 17 | ||||||||
| Bank owned life insurance ("BOLI") income | 1,749 | 573 | 1,176 | 205 | ||||||||
| Operating lease income | 1,785 | 1,225 | 560 | 46 | ||||||||
| Gain on sale of premises and equipment | — | 82 | (82 | ) | (100 | ) | ||||||
| Other | 923 | 714 | 209 | 29 | ||||||||
| Total noninterest income | $ | 8,627 | $ | 6,888 | $ | 1,739 | 25 | % | ||||
- Loan income and fees: The decrease in loan income and fees was due to a $308,000 reduction in prepayment penalties quarter over quarter.
- Gain on sale of loans held for sale: The increase in the gain on sale of loans held for sale was primarily driven by home equity lines of credit ("HELOCs") sold during the period. During the quarter ended September 30, 2023, there were $31.2 million of HELOCs sold for a gain of $197,000 compared to no HELOCs sold in the prior quarter. There were $20.4 million of residential mortgage loans originated for sale which were sold during the current quarter with gains of $251,000 compared to $22.0 million sold with gains of $236,000 in the prior quarter. Our hedging of mandatory commitments on the residential mortgage loan pipeline contributed an additional $158,000 and $152,000 in income in the same periods, respectively. Lastly, there were $12.4 million in sales of the guaranteed portion of SBA commercial loans with gains of $687,000 for the quarter ended September 30, 2023, compared to $12.1 million sold and gains of $721,000 for the quarter ended June 30, 2023.
- BOLI income: The increase in BOLI income was due to a $1.1 million tax-free gain on death benefit proceeds in excess of the cash surrender value of the policies. No such gains were recognized in the prior quarter.
- Operating lease income: The increase in operating lease income was the result of higher contractual earnings as well as gains or losses incurred at the end of operating leases, where we recognized a net gain of $51,000 at the end of operating leases for the quarter ended September 30, 2023 versus a net loss of $279,000 for the quarter ended June 30, 2023.
Noninterest Expense. Noninterest expense for the three months ended September 30, 2023 decreased $1.3 million, or 4.4%, when compared to the three months ended June 30, 2023. Changes in the components of noninterest expense are discussed below:
| Three Months Ended | ||||||||||||
| (Dollars in thousands) | September 30, 2023 | June 30, 2023 | $ Change | % Change | ||||||||
| Noninterest expense | ||||||||||||
| Salaries and employee benefits | $ | 16,514 | $ | 16,676 | $ | (162 | ) | (1)% | ||||
| Occupancy expense, net | 2,489 | 2,600 | (111 | ) | (4 | ) | ||||||
| Computer services | 3,173 | 3,302 | (129 | ) | (4 | ) | ||||||
| Telephone, postage and supplies | 652 | 677 | (25 | ) | (4 | ) | ||||||
| Marketing and advertising | 487 | 696 | (209 | ) | (30 | ) | ||||||
| Deposit insurance premiums | 717 | 549 | 168 | 31 | ||||||||
| Core deposit intangible amortization | 859 | 859 | — | — | ||||||||
| Other | 4,673 | 5,552 | (879 | ) | (16 | ) | ||||||
| Total noninterest expense | $ | 29,564 | $ | 30,911 | $ | (1,347 | ) | (4)% | ||||
- Marketing and advertising: The decrease in marketing and advertising is due to changes in media and product campaign spending quarter over quarter.
- Deposit insurance premiums: The increase in deposit insurance premiums is due to an increase in the rates the Company is charged for deposit insurance as well as growth in the assessment base.
- Other: The decrease is primarily the result of $552,000 in fraud losses recorded during the prior quarter versus a $16,000 net recovery of previously recorded losses in the current quarter.
Income Taxes. The amount of income tax expense is influenced by the amount of pre-tax income, the amount of tax-exempt income, changes in the statutory rate, and the effect of changes in valuation allowances maintained against deferred tax benefits. The effective tax rates for the three months ended September 30, 2023 and June 30, 2023 were 20.5% and 22.9%, respectively. The decline in the effective tax rate was primarily driven by the tax-free gain on BOLI death benefit proceeds in addition to other changes in permanent book/tax differences.
Balance Sheet Review
Total assets increased by $44.5 million to $4.7 billion and total liabilities increased by $31.3 million to $4.2 billion, respectively, at September 30, 2023 as compared to June 30, 2023. The majority of these changes were the result of an increase in deposits, which, combined with maturing investments, were used to fund growth in loans held for sale and provide additional liquidity.
Stockholders’ equity increased $13.2 million to $484.4 million at September 30, 2023 as compared to June 30, 2023. Activity within stockholders’ equity included $14.8 million in net income, offset by $1.7 million in cash dividends declared. As of September 30, 2023, the Bank was considered "well capitalized" in accordance with its regulatory capital guidelines and exceeded all regulatory capital requirements.
Asset Quality
The ACL on loans was $47.4 million, or 1.30% of total loans, at September 30, 2023 compared to $47.2 million, or 1.29% of total loans, as of June 30, 2023. The drivers of this change are discussed in the "Comparison of Results of Operations for the Three Months Ended September 30, 2023 and June 30, 2023 – Provision for Credit Losses" section above.
Net loan charge-offs totaled $2.6 million, or 0.27% as a percent of average loans, for the three months ended September 30, 2023 compared to $1.2 million, or 0.13% as a percentage of average loans, for the three months ended June 30, 2023. The charge-offs recognized the past two quarters have been concentrated in our equipment finance and SBA portfolios, with the increase quarter-over-quarter being driven by the SBA portfolio.
Nonperforming assets, made up entirely of nonaccrual loans for both periods, increased by $3.5 million, or 42.4%, to $11.8 million, or 0.25% of total assets, at September 30, 2023 compared to $8.3 million, or 0.18% of total assets, at June 30, 2023. Nonperforming loans to total loans was 0.32% at September 30, 2023 and 0.23% at June 30, 2023.
The ratio of classified assets to total assets increased to 0.76% at September 30, 2023 from 0.53% at June 30, 2023 as classified assets increased $10.7 million, or 43.7%, to $35.2 million at September 30, 2023 compared to $24.5 million at June 30, 2023. The increase was primarily due to a single commercial real estate non-owner occupied relationship which totaled approximately $9.0 million.
About HomeTrust Bancshares, Inc.
HomeTrust Bancshares, Inc. is the holding company for the Bank. As of September 30, 2023, the Company had assets of $4.7 billion. The Bank, founded in 1926, is a North Carolina state chartered, community-focused financial institution committed to providing value added relationship banking with over 30 locations as well as online/mobile channels. Locations include: North Carolina (including the Asheville metropolitan area, the "Piedmont" region, Charlotte, and Raleigh/Cary), Upstate South Carolina (Greenville), East Tennessee (including Kingsport/Johnson City, Knoxville, and Morristown), Southwest Virginia (including the Roanoke Valley) and Georgia (Greater Atlanta).
Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact, but instead are based on certain assumptions including statements with respect to the Company’s 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 forward-looking statements. The factors that could result in material differentiation include, but are not limited to the impact of bank failures or adverse developments of other banks and related negative press about the banking industry in general on investor and depositor sentiment; the remaining effect of the COVID-19 pandemic on general economic and financial market conditions and on public health, both nationally and in the Company’s market areas; expected revenues, cost savings, synergies and other benefits from merger and acquisition activities, including the Company’s recent merger with Quantum Capital Corp., might not be realized to the extent anticipated, within the anticipated time frames, or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; goodwill impairment charges might be incurred; increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and the effects of inflation, a potential recession, and other factors described in the Company’s latest annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other documents filed with or furnished to the Securities and Exchange Commission – which are available on the Company’s website at www.htb.com and on the SEC’s website at www.sec.gov. Any of the forward-looking statements that the Company makes in this press release or the documents they file with or furnish to the SEC are based upon management’s beliefs and assumptions at the time they are made and may turn out to be wrong because of inaccurate assumptions they might make, because of the factors described above or because of other factors that they cannot foresee. The Company does not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
Consolidated Balance Sheets (Unaudited)
| (Dollars in thousands) | September 30, 2023 | June 30, 2023(1) | March 31, 2023 | December 31, 2022 | September 30, 2022 | ||||||||||||||
| Assets | |||||||||||||||||||
| Cash | $ | 18,090 | $ | 19,266 | $ | 18,262 | $ | 15,825 | $ | 18,026 | |||||||||
| Interest-bearing deposits | 306,924 | 284,231 | 296,151 | 149,209 | 76,133 | ||||||||||||||
| Cash and cash equivalents | 325,014 | 303,497 | 314,413 | 165,034 | 94,159 | ||||||||||||||
| Commercial paper, net | — | — | — | — | 85,296 | ||||||||||||||
| Certificates of deposit in other banks | 35,380 | 33,152 | 33,102 | 29,371 | 27,535 | ||||||||||||||
| Debt securities available for sale, at fair value | 134,348 | 151,926 | 157,718 | 147,942 | 161,741 | ||||||||||||||
| FHLB and FRB stock | 19,612 | 20,208 | 19,125 | 13,661 | 9,404 | ||||||||||||||
| SBIC investments, at cost | 14,586 | 14,927 | 13,620 | 12,414 | 12,235 | ||||||||||||||
| Loans held for sale, at fair value | 4,616 | 6,947 | 1,209 | 518 | — | ||||||||||||||
| Loans held for sale, at the lower of cost or fair value | 200,834 | 161,703 | 89,172 | 72,777 | 76,252 | ||||||||||||||
| Total loans, net of deferred loan fees and costs | 3,659,914 | 3,658,823 | 3,649,333 | 2,985,623 | 2,867,783 | ||||||||||||||
| Allowance for credit losses – loans | (47,417 | ) | (47,193 | ) | (47,503 | ) | (38,859 | ) | (38,301 | ) | |||||||||
| Loans, net | 3,612,497 | 3,611,630 | 3,601,830 | 2,946,764 | 2,829,482 | ||||||||||||||
| Premises and equipment, net | 72,463 | 73,171 | 74,107 | 65,216 | 68,705 | ||||||||||||||
| Accrued interest receivable | 16,513 | 14,829 | 13,813 | 11,076 | 9,667 | ||||||||||||||
| Deferred income taxes, net | 9,569 | 10,912 | 10,894 | 11,319 | 11,838 | ||||||||||||||
| BOLI | 106,059 | 106,572 | 105,952 | 96,335 | 95,837 | ||||||||||||||
| Goodwill | 34,111 | 34,111 | 33,682 | 25,638 | 25,638 | ||||||||||||||
| Core deposit intangibles, net | 9,918 | 10,778 | 11,637 | 32 | 58 | ||||||||||||||
| Other assets | 56,477 | 53,124 | 49,596 | 48,918 | 47,339 | ||||||||||||||
| Total assets | $ | 4,651,997 | 4,607,487 | 4,529,870 | 3,647,015 | 3,555,186 | |||||||||||||
| Liabilities and stockholders’ equity | |||||||||||||||||||
| Liabilities | |||||||||||||||||||
| Deposits | $ | 3,640,961 | 3,601,168 | 3,675,599 | 3,048,020 | 3,102,668 | |||||||||||||
| Junior subordinated debt | 9,995 | 9,971 | 9,945 | — | — | ||||||||||||||
| Borrowings | 452,263 | 457,263 | 320,263 | 130,000 | — | ||||||||||||||
| Other liabilities | 64,367 | 67,899 | 62,821 | 58,840 | 56,296 | ||||||||||||||
| Total liabilities | 4,167,586 | 4,136,301 | 4,068,628 | 3,236,860 | 3,158,964 | ||||||||||||||
| Stockholders’ equity | |||||||||||||||||||
| Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued or outstanding | — | — | — | — | — | ||||||||||||||
| Common stock, $0.01 par value, 60,000,000 shares authorized(2) | 174 | 174 | 174 | 157 | 156 | ||||||||||||||
| Additional paid in capital | 171,663 | 171,222 | 170,670 | 128,486 | 127,153 | ||||||||||||||
| Retained earnings | 321,799 | 308,651 | 295,325 | 290,271 | 278,120 | ||||||||||||||
| Unearned Employee Stock Ownership Plan ("ESOP") shares | (4,629 | ) | (4,761 | ) | (4,893 | ) | (5,026 | ) | (5,158 | ) | |||||||||
| Accumulated other comprehensive loss | (4,596 | ) | (4,100 | ) | (3,034 | ) | (3,733 | ) | (4,049 | ) | |||||||||
| Total stockholders’ equity | 484,411 | 471,186 | 458,242 | 410,155 | 396,222 | ||||||||||||||
| Total liabilities and stockholders’ equity | $ | 4,651,997 | $ | 4,607,487 | $ | 4,526,870 | $ | 3,647,015 | $ | 3,555,186 | |||||||||
(1) Derived from audited financial statements.
(2) Shares of common stock issued and outstanding were 17,380,307 at September 30, 2023; 17,366,673 at June 30, 2023; 17,370,063 at March 31, 2023; 15,673,595 at December 31, 2022; and 15,632,348 at September 30, 2022.
Consolidated Statements of Income (Unaudited)
| Three Months Ended | |||||
| (Dollars in thousands) | September 30, 2023 | June 30, 2023 | |||
| Interest and dividend income | |||||
| Loans | $ | 58,496 | $ | 56,122 | |
| Debt securities available for sale | 1,259 | 1,338 | |||
| Other investments and interest-bearing deposits | 2,110 | 1,671 | |||
| Total interest and dividend income | 61,865 | 59,131 | |||
| Interest expense | |||||
| Deposits | 16,429 | 12,662 | |||
| Junior subordinated debt | 236 | 218 | |||
| Borrowings | 3,040 | 2,355 | |||
| Total interest expense | 19,705 | 15,235 | |||
| Net interest income | 42,160 | 43,896 | |||
| Provision for credit losses | 2,570 | 405 | |||
| Net interest income after provision for credit losses | 39,590 | 43,491 | |||
| Noninterest income | |||||
| Service charges and fees on deposit accounts | 2,318 | 2,393 | |||
| Loan income and fees | 559 | 792 | |||
| Gain on sale of loans held for sale | 1,293 | 1,109 | |||
| BOLI income | 1,749 | 573 | |||
| Operating lease income | 1,785 | 1,225 | |||
| Gain on sale of premises and equipment | — | 82 | |||
| Other | 923 | 714 | |||
| Total noninterest income | 8,627 | 6,888 | |||
| Noninterest expense | |||||
| Salaries and employee benefits | 16,514 | 16,676 | |||
| Occupancy expense, net | 2,489 | 2,600 | |||
| Computer services | 3,173 | 3,302 | |||
| Telephone, postage, and supplies | 652 | 677 | |||
| Marketing and advertising | 487 | 696 | |||
| Deposit insurance premiums | 717 | 549 | |||
| Core deposit intangible amortization | 859 | 859 | |||
| Other | 4,673 | 5,552 | |||
| Total noninterest expense | 29,564 | 30,911 | |||
| Income before income taxes | 18,653 | 19,468 | |||
| Income tax expense | 3,820 | 4,455 | |||
| Net income | $ | 14,833 | $ | 15,013 | |
Per Share Data
| Three Months Ended | |||||
| September 30, 2023 | June 30, 2023 | ||||
| Net income per common share(1) | |||||
| Basic | $ | 0.88 | $ | 0.91 | |
| Diluted | $ | 0.88 | $ | 0.90 | |
| Average shares outstanding | |||||
| Basic | 16,792,177 | 16,774,661 | |||
| Diluted | 16,800,901 | 16,781,923 | |||
| Book value per share at end of period | $ | 27.87 | $ | 27.13 | |
| Tangible book value per share at end of period(2) | $ | 25.47 | $ | 24.69 | |
| Cash dividends declared per common share | $ | 0.10 | $ | 0.10 | |
| Total shares outstanding at end of period | 17,380,307 | 17,366,673 | |||
(1) Basic and diluted net income per common share have been prepared in accordance with the two-class method.
(2) See Non-GAAP reconciliations below for adjustments.
Selected Financial Ratios and Other Data
| Three Months Ended | |||||
| September 30, 2023 | June 30, 2023 | ||||
| Performance ratios(1) | |||||
| Return on assets (ratio of net income to average total assets) | 1.33 | % | 1.39 | % | |
| Return on equity (ratio of net income to average equity) | 12.23 | 12.85 | |||
| Yield on earning assets | 5.90 | 5.82 | |||
| Rate paid on interest-bearing liabilities | 2.58 | 2.08 | |||
| Average interest rate spread | 3.32 | 3.74 | |||
| Net interest margin(2) | 4.02 | 4.32 | |||
| Average interest-earning assets to average interest-bearing liabilities | 137.07 | 138.54 | |||
| Noninterest expense to average total assets | 2.64 | 2.86 | |||
| Efficiency ratio | 58.21 | 60.87 | |||
| Efficiency ratio – adjusted(3) | 59.12 | 60.61 | |||
(1) Ratios are annualized where appropriate.
(2) Net interest income divided by average interest-earning assets.
(3) See Non-GAAP reconciliations below for adjustments.
| At or For the Three Months Ended | ||||||||||||||
| September 30, 2023 | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | ||||||||||
| Asset quality ratios | ||||||||||||||
| Nonperforming assets to total assets(1) | 0.25 | % | 0.18 | % | 0.18 | % | 0.17 | % | 0.20 | % | ||||
| Nonperforming loans to total loans(1) | 0.32 | 0.23 | 0.22 | 0.21 | 0.24 | |||||||||
| Total classified assets to total assets | 0.76 | 0.53 | 0.49 | 0.50 | 0.54 | |||||||||
| Allowance for credit losses to nonperforming loans(1) | 400.41 | 567.56 | 600.47 | 629.40 | 561.10 | |||||||||
| Allowance for credit losses to total loans | 1.30 | 1.29 | 1.30 | 1.30 | 1.34 | |||||||||
| Net charge-offs to average loans (annualized) | 0.27 | 0.13 | 0.01 | 0.25 | 0.01 | |||||||||
| Capital ratios | ||||||||||||||
| Equity to total assets at end of period | 10.41 | % | 10.23 | % | 10.12 | % | 11.25 | % | 11.14 | % | ||||
| Tangible equity to total tangible assets(2) | 9.60 | 9.39 | 9.27 | 10.62 | 10.50 | |||||||||
| Average equity to average assets | 10.84 | 10.79 | 11.14 | 11.50 | 11.00 | |||||||||
(1) Nonperforming assets include nonaccruing loans and REO. There were no accruing loans more than 90 days past due at the dates indicated. At September 30, 2023, $3.1 million, or 26.4%, of nonaccruing loans were current on their loan payments as of that date.
(2) See Non-GAAP reconciliations below for adjustments.
Loans
| (Dollars in thousands) | September 30, 2023 | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | ||||||||||||||
| Commercial real estate loans | |||||||||||||||||||
| Construction and land development | $ | 352,143 | $ | 356,674 | $ | 368,756 | $ | 328,253 | $ | 310,985 | |||||||||
| Commercial real estate – owner occupied | 526,534 | 529,721 | 524,247 | 340,824 | 336,456 | ||||||||||||||
| Commercial real estate – non-owner occupied | 880,348 | 901,685 | 926,991 | 690,241 | 661,644 | ||||||||||||||
| Multifamily | 83,430 | 81,827 | 85,285 | 69,156 | 79,082 | ||||||||||||||
| Total commercial real estate loans | 1,842,455 | 1,869,907 | 1,905,279 | 1,428,474 | 1,388,167 | ||||||||||||||
| Commercial loans | |||||||||||||||||||
| Commercial and industrial | 237,366 | 245,428 | 229,840 | 194,679 | 205,844 | ||||||||||||||
| Equipment finance | 470,387 | 462,211 | 440,345 | 426,507 | 411,012 | ||||||||||||||
| Municipal leases | 147,821 | 142,212 | 138,436 | 135,922 | 130,777 | ||||||||||||||
| Total commercial loans | 855,574 | 849,851 | 808,621 | 757,108 | 747,633 | ||||||||||||||
| Residential real estate loans | |||||||||||||||||||
| Construction and land development | 103,381 | 110,074 | 105,617 | 100,002 | 91,488 | ||||||||||||||
| One-to-four family | 560,399 | 529,703 | 518,274 | 400,595 | 374,849 | ||||||||||||||
| HELOCs | 185,289 | 187,193 | 193,037 | 194,296 | 164,701 | ||||||||||||||
| Total residential real estate loans | 849,069 | 826,970 | 816,928 | 694,893 | 631,038 | ||||||||||||||
| Consumer loans | 112,816 | 112,095 | 118,505 | 105,148 | 100,945 | ||||||||||||||
| Total loans, net of deferred loan fees and costs | 3,659,914 | 3,658,823 | 3,649,333 | 2,985,623 | 2,867,783 | ||||||||||||||
| Allowance for credit losses – loans | (47,417 | ) | (47,193 | ) | (47,503 | ) | (38,859 | ) | (38,301 | ) | |||||||||
| Loans, net | $ | 3,612,497 | $ | 3,611,630 | $ | 3,601,830 | $ | 2,946,764 | $ | 2,829,482 | |||||||||
Deposits
| (Dollars in thousands) | September 30, 2023 | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | |||||||||
| Core deposits | ||||||||||||||
| Noninterest-bearing accounts | $ | 827,362 | $ | 825,481 | $ | 872,492 | $ | 726,416 | $ | 794,242 | ||||
| NOW accounts | 602,804 | 611,105 | 678,178 | 638,896 | 636,859 | |||||||||
| Money market accounts | 1,195,482 | 1,241,840 | 1,299,503 | 992,083 | 960,150 | |||||||||
| Savings accounts | 202,971 | 212,220 | 228,390 | 230,896 | 240,412 | |||||||||
| Total core deposits | 2,828,619 | 2,890,646 | 3,078,563 | 2,588,291 | 2,631,663 | |||||||||
| Certificates of deposit | 812,342 | 710,522 | 597,036 | 459,729 | 471,005 | |||||||||
| Total | $ | 3,640,961 | $ | 3,601,168 | $ | 3,675,599 | $ | 3,048,020 | $ | 3,102,668 | ||||
The following bullet points provide further information regarding the composition of our deposit portfolio as of September 30, 2023:
- Total deposits increased $39.8 million, or 1.1%, during the quarter.
- The balance of uninsured deposits was $962.7 million, or 26.4% of total deposits, which included $294.8 million of collateralized deposits to municipalities.
- The balance of brokered deposits was $328.0 million, or 9.0% of total deposits.
- Commercial and consumer depositors represented 51% and 49% of total deposits, respectively.
- The average balance of our deposit accounts was $33,000.
- Our largest 25 depositors made up $541.9 million, or 15.0% of total deposits.
Non-GAAP Reconciliations
In addition to results presented in accordance with generally accepted accounting principles utilized in the United States ("GAAP"), this earnings release contains certain non-GAAP financial measures, which include: the efficiency ratio, tangible book value, tangible book value per share and the tangible equity to tangible assets ratio. The Company believes these non-GAAP financial measures and ratios as presented are useful for both investors and management to understand the effects of certain items and provide an alternative view of its performance over time and in comparison to its competitors. These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for total stockholders’ equity or operating results determined in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.
Set forth below is a reconciliation to GAAP of the Company’s efficiency ratio:
| Three Months Ended | |||||
| (Dollars in thousands) | September 30, 2023 | June 30, 2023 | |||
| Noninterest expense | $ | 29,564 | $ | 30,911 | |
| Net interest income | $ | 42,160 | $ | 43,896 | |
| Plus: tax-equivalent adjustment | 315 | 298 | |||
| Plus: noninterest income | 8,627 | 6,888 | |||
| Less: BOLI death benefit proceeds in excess of cash surrender value | 1,092 | — | |||
| Less: gain on sale of premises and equipment | — | 82 | |||
| Net interest income plus noninterest income – adjusted | $ | 50,010 | $ | 51,000 | |
| Efficiency ratio | 58.21 | % | 60.87 | % | |
| Efficiency ratio – adjusted | 59.12 | % | 60.61 | % |
Set forth below is a reconciliation to GAAP of tangible book value and tangible book value per share:
| As of | ||||||||||||||
| (Dollars in thousands, except per share data) | September 30, 2023 | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | |||||||||
| Total stockholders’ equity | $ | 484,411 | $ | 471,186 | $ | 458,242 | $ | 410,155 | $ | 396,222 | ||||
| Less: goodwill, core deposit intangibles, net of taxes | 41,748 | 42,410 | 42,642 | 25,663 | 25,683 | |||||||||
| Tangible book value | $ | 442,663 | $ | 428,776 | $ | 415,600 | $ | 384,492 | $ | 370,539 | ||||
| Common shares outstanding | 17,380,307 | 17,366,673 | 17,370,063 | 15,673,595 | 15,632,348 | |||||||||
| Book value per share | $ | 27.87 | $ | 27.13 | $ | 26.38 | $ | 26.17 | $ | 25.35 | ||||
| Tangible book value per share | $ | 25.47 | $ | 24.69 | $ | 23.93 | $ | 24.53 | $ | 23.70 | ||||
Set forth below is a reconciliation to GAAP of tangible equity to tangible assets:
| As of | ||||||||||||||
| (Dollars in thousands) | September 30, 2023 | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | |||||||||
| Tangible equity(1) | $ | 442,663 | $ | 428,776 | $ | 415,600 | $ | 384,492 | $ | 370,539 | ||||
| Total assets | 4,651,997 | 4,607,487 | 4,526,870 | 3,647,015 | 3,555,186 | |||||||||
| Less: goodwill, core deposit intangibles, net of taxes | 41,748 | 42,410 | 42,642 | 25,663 | 25,683 | |||||||||
| Total tangible assets | $ | 4,610,249 | $ | 4,565,077 | $ | 4,484,228 | $ | 3,621,352 | $ | 3,529,503 | ||||
| Tangible equity to tangible assets | 9.60 | % | 9.39 | % | 9.27 | % | 10.62 | % | 10.50 | % |
(1) Tangible equity (or tangible book value) is equal to total stockholders’ equity less goodwill and core deposit intangibles, net of related deferred tax liabilities.
