HomeTrust Bancshares(HTBI) - 2021 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements This section presents HomeTrust Bancshares' unaudited consolidated financial statements, detailing financial position, operational results, cash flows, and the initial CECL adoption impact Consolidated Balance Sheets Total assets slightly decreased to $3.68 billion, driven by liquidity shifts and loan reductions, while equity declined due to CECL and repurchases Consolidated Balance Sheet Highlights (Unaudited) | (In thousands) | Dec 31, 2020 | June 30, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $226,344 | $121,622 | | Net loans | $2,638,780 | $2,741,047 | | Total Assets | $3,679,971 | $3,722,852 | | Liabilities & Equity | | | | Deposits | $2,743,269 | $2,785,756 | | Total liabilities | $3,275,247 | $3,314,589 | | Total stockholders' equity | $404,724 | $408,263 | | Total Liabilities and Stockholders' Equity | $3,679,971 | $3,722,852 | Consolidated Statements of Income Net income for the quarter increased to $9.5 million due to a credit loss benefit, while the six-month period saw a decline to $15.2 million from lower net interest income Income Statement Highlights (Unaudited) | (In thousands, except per share data) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $26,122 | $27,034 | $51,631 | $54,107 | | Provision (Benefit) for Credit Losses | ($3,030) | $400 | ($2,080) | $400 | | Noninterest Income | $9,344 | $9,074 | $17,983 | $16,734 | | Noninterest Expense | $26,443 | $24,041 | $52,443 | $47,574 | | Net Income | $9,461 | $9,191 | $15,214 | $17,995 | | Diluted EPS | $0.57 | $0.52 | $0.92 | $1.01 | Consolidated Statements of Comprehensive Income Comprehensive income for the quarter was $9.4 million, driven by net income and minor changes in unrealized gains/losses on securities Comprehensive Income (Unaudited) | (In thousands) | Three Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net Income | $9,461 | $15,214 | | Total other comprehensive income (loss) | ($65) | $88 | | Comprehensive Income | $9,396 | $15,302 | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity decreased to $404.7 million, primarily due to the $13.4 million CECL impact, share repurchases, and dividends - The adoption of ASU 2016-13 (CECL) on July 1, 2020, resulted in a cumulative-effect adjustment that reduced retained earnings by $13.4 million[19] - During the six months ended December 31, 2020, the company repurchased 277,122 shares for $5.2 million and paid cash dividends of $2.5 million[19] Consolidated Statements of Cash Flows Cash and cash equivalents increased by $104.7 million, primarily from investing activities, partially offset by cash used in financing and operating activities Cash Flow Summary (Unaudited) | (In thousands) | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($31,532) | ($6,969) | | Net cash provided by investing activities | $185,603 | $50,816 | | Net cash used in financing activities | ($49,349) | ($25,972) | | Net Increase in Cash and Cash Equivalents | $104,722 | $17,875 | Notes to Consolidated Financial Statements Notes detail accounting policies, including CECL adoption's $13.4 million retained earnings impact, loan portfolio composition, and significant reduction in COVID-19 deferrals - The Company adopted ASU 2016-13 (CECL) on July 1, 2020, recording a $15.1 million increase in the Allowance for Credit Losses (ACL) on financial instruments and a $13.4 million reduction to retained earnings[56][57] - In response to COVID-19, the Company offered loan modifications. As of December 31, 2020, total loans on principal and interest deferral had decreased to $7.9 million (0.3% of total loans) from $551.3 million (20.6% of total loans) at June 30, 2020[123][124][126] Loan Portfolio Composition | (In thousands) | Dec 31, 2020 | June 30, 2020 | | :--- | :--- | :--- | | Total commercial loans | $1,834,779 | $1,861,588 | | Total retail consumer loans | $843,845 | $907,342 | | Total loans | $2,678,624 | $2,768,930 | Allowance for Credit Losses (ACL) on Loans | (In thousands) | Dec 31, 2020 | June 30, 2020 | | :--- | :--- | :--- | | ACL on Loans | $39,844 | $28,072 | | ACL as % of Total Loans | 1.49% | 1.01% | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operations, highlighting COVID-19 and CECL impacts, with stable asset quality and strong capital despite margin compression - The company adopted the CECL accounting standard on July 1, 2020, resulting in a $14.8 million increase in the ACL for loans and a $13.2 million reduction to retained earnings[217] - COVID-19 related loan deferrals decreased significantly from $551.3 million (20.6% of portfolio) at June 30, 2020, to $7.9 million (0.3% of portfolio) at December 31, 2020[211][212] - The company originated $80.8 million in PPP loans for 290 customers as of December 31, 2020, and expects to recognize the remaining $1.1 million in deferred fees over the next several quarters as loans are forgiven[208] Key Performance Metrics | Metric | Q2 FY2021 (ended Dec 31, 2020) | Q2 FY2020 (ended Dec 31, 2019) | | :--- | :--- | :--- | | Net Income | $9.5 million | $9.2 million | | Diluted EPS | $0.57 | $0.52 | | Net Interest Margin (FTE) | 3.09% | 3.27% | | Nonperforming Assets / Total Assets | 0.40% | N/A (0.44% at June 30, 2020) | Comparison of Financial Condition (Dec 31, 2020 vs. June 30, 2020) Total assets remained stable at $3.7 billion, with liquidity repositioning, a $90.5 million loan decrease, and a strategic shift in deposits - Total loans receivable decreased by $90.5 million (3.3%), driven by two large commercial relationship payoffs ($52.8 million), PPP loan forgiveness ($15.9 million), and runoff of purchased HELOCs ($13.1 million)[222] - Deposits saw a strategic mix shift: certificates of deposit decreased by $212.9 million (28.8%), while core deposits (noninterest-bearing, NOW, money market, savings) grew by $170.4 million (8.3%)[236][237] - Nonperforming assets decreased by $1.5 million to $14.8 million, representing 0.40% of total assets at December 31, 2020, down from 0.44% at June 30, 2020[224] - The Allowance for Credit Losses (ACL) increased to $39.8 million (1.49% of total loans) from $28.1 million (1.01% of total loans), primarily due to the adoption of CECL[228] Comparison of Results of Operations Quarterly net income increased to $9.5 million due to a credit loss benefit, while six-month net income decreased to $15.2 million from lower net interest income and higher expenses Net Interest Income and Margin Comparison | (In thousands) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $26,122 | $27,034 | $51,631 | $54,107 | | Net Interest Margin (FTE) | 3.09% | 3.27% | 3.05% | 3.30% | - A net benefit for credit losses of $3.0 million for the quarter and $2.1 million for the six months was recorded, compared to a $400,000 provision in both prior-year periods. This was due to an improved economic forecast post-CECL adoption[253][264] - Noninterest expense for the six months ended Dec 31, 2020 increased by $4.9 million (10.2%) year-over-year, primarily due to higher salaries and benefits ($2.8 million) and other expenses driven by equipment finance depreciation ($2.0 million)[267] Liquidity and Capital Resources The company maintains strong liquidity and is well-capitalized, with Tier 1 capital at 11.86% and total risk-based capital at 12.68%, exceeding regulatory minimums - Primary liquidity sources include deposits, loan payments, and cash flows from the securities portfolio. Secondary sources include FHLB advances and other lines of credit[269][270] - At December 31, 2020, the company had total loan commitments and unused lines of credit of $706.0 million[275] HomeTrust Bancshares, Inc. Capital Ratios (as of Dec 31, 2020) | Ratio | Actual | Minimum to Be Well Capitalized | | :--- | :--- | :--- | | Common Equity Tier I Capital | 11.86% | 6.50% | | Tier I Capital (to Risk-weighted Assets) | 11.86% | 8.00% | | Total Risk-based Capital | 12.68% | 10.00% | Quantitative and Qualitative Disclosures about Market Risk No material changes in market risk disclosures from the prior fiscal year's Form 10-K have been reported - There has not been any material change in the market risk disclosures contained in the 2020 Form 10-K[282] Controls and Procedures Management concluded disclosure controls were effective, with internal control enhancements implemented for CECL adoption - The CEO and CFO concluded that disclosure controls and procedures were effective as of December 31, 2020[283] - Following the adoption of CECL on July 1, 2020, the Company implemented relevant changes and enhancements to its internal control environment and processes for estimating credit losses[283] PART II OTHER INFORMATION Legal Proceedings The company is not party to any pending legal proceedings expected to materially affect its financial condition or operations - The Company is not a party to any pending legal proceedings that management believes would have a material adverse effect on its financial condition or operations[143][285] Risk Factors No material changes in risk factors from the prior fiscal year's Form 10-K have been reported - There have been no material changes in the Risk Factors previously disclosed in Item 1A of the Company's 2020 Form 10-K[286] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 277,122 shares during the quarter, with 573,882 shares remaining under the current plan Share Repurchase Activity (Quarter Ended Dec 31, 2020) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | October 2020 | — | $— | | November 2020 | 48,242 | $18.36 | | December 2020 | 228,880 | $18.76 | | Total | 277,122 | $18.69 | - As of December 31, 2020, 573,882 shares may yet be purchased under the publicly announced repurchase plan[287] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications, XBRL data, and referenced documents - Lists required exhibits, including CEO/CFO certifications (Exhibits 31.1, 31.2, 32) and XBRL filings (Exhibit 101)[292]