ASHEVILLE, N.C., Jan. 28, 2021 (GLOBE NEWSWIRE) -- HomeTrust Bancshares, Inc. (NASDAQ: HTBI) ("Company"), the holding company of HomeTrust Bank ("Bank"), today announced preliminary net income for the second quarter of fiscal 2021 and approval of its quarterly dividend.

For the quarter ended December 31, 2020 compared to the corresponding quarter in the previous year:

  • net income was $9.5 million, compared to $9.2 million;
  • diluted earnings per share ("EPS") was $0.57, compared to $0.52;
  • return on assets ("ROA") was 1.03%, compared to 1.02%;
  • return on equity ("ROE") was 9.41%, compared to 8.87%;
  • provision for credit losses was a net benefit of $3.0 million, compared to provision of $400,000;
  • noninterest income increased $270,000, or 3.0% to $9.3 million from $9.1 million;
  • 277,122 shares were repurchased during the quarter at an average price of $18.69 per share; and
  • quarterly cash dividends increased $0.01 per share, or 14.3% to $0.08 per share totaling $1.3 million.

For the six months ended December 31, 2020 compared to the previous year:

  • net income was $15.2 million, compared to $18.0 million;
  • diluted EPS was $0.92, compared to $1.01;
  • ROA was 0.83%, compared to 1.00%;
  • ROE was 7.58%, compared to 8.72%;
  • provision for credit losses was a net benefit of $2.1 million, compared to a provision of $400,000; and
  • noninterest income increased $1.2 million, or 7.5% to $18.0 million from $16.7 million

Earnings for the three and six months ended December 31, 2020 continue to be negatively impacted by an economy weakened by COVID-19 as well as a lower interest rate margin than the same periods last year, due to the decrease in interest rates over the past year.

The Company also announced today that its Board of Directors declared a quarterly cash dividend of $0.08 per common share payable on March 4, 2021 to shareholders of record as of the close of business on February 18, 2021.

“We are extremely pleased that loan payment deferrals related to COVID-19 have decreased 99% since June to just $7.9 million,” said Dana Stonestreet, Chairman, President, and Chief Executive Officer. “This change, coupled with continued strong asset quality indicators and the improvement in the economic forecasts that drive our estimates for credit losses, allowed us to release $3 million of our allowance for credit losses.

“With this positive trend, we restarted our share repurchase program to capitalize on the current opportunity to buy back shares of HomeTrust at less than tangible book value. We repurchased 277,122 shares at approximately 83% of tangible book value and have 573,882 shares remaining on this buyback program originally authorized back in April 2020.

“We set another new quarterly record of $109 million of mortgage loans originated for sale, which resulted in a gain on sale of almost $3 million. In addition, loan originations across the Company continue to exceed our expectations given the headwinds of the pandemic. The energy, enthusiasm, and engagement of all of our team will continue to drive our success as we work to put the pandemic behind us and focus on maturing all of our newer and diversified lines of business to achieve financial results that create shareholder value."

COVID-19 Update

Loan Programs. The Company continues to offer certain relief options designed to support its customers and communities, including participating in the additional SBA PPP funds approved in the recent stimulus bill enacted on December 27, 2020. However, the Company expects a smaller number of applications to be made by its customers for these additional PPP funds. The Company did not originate any PPP loans for the three months ended December 31, 2020. As of December 31, 2020, the Company had originated $80.8 million of PPP loans for 290 customers under the program. Total net origination fees deferred on these loans were approximately $2.1 million which are being accreted into interest income over the life of the loans. For the three months ended December 31, 2020, the Company earned $488,000 in fees through accretion including some accelerated accretion resulting from loan forgiveness. At December 31, 2020 the Company had $1.1 million of deferred PPP loan fees remaining which are expected to be recognized over the next several quarters as loan forgiveness accelerates. Additional PPP loans were processed and funded through a third party provider due to demand exceeding the Bank's capacity, which to date total $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.

Loan Modifications. The Company continues to closely monitor the effects of COVID-19 on its loan portfolio and all associated risks to minimize any potential losses. For the quarter ended December 31, 2020, the Bank experienced a significant decline in requests by borrowers for payment and financial relief programs; however, it will continue to work with individual borrowers in order to minimize the impact to both the Bank and its customers. 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. The Company has transitioned $75.8 million in commercial loans recently coming off deferral to interest-only payments for a period of time before returning to their original contractual payments. The breakout of loans deferred by loan type as of the dates indicated is as follows:

Payment Deferrals by Loan Type        
 December 31, 2020 September 30, 2020 June 30, 2020
 Deferral Percent of
Total Loan
Portfolio
 Deferral Percent of
Total Loan
Portfolio
 Deferral Percent of
Total Loan
Portfolio
Lodging$ % $60,782 2.2% $108,171 4.0%
Other commercial real estate, construction and development, and commercial and industrial4,018 0.2  27,169 1.0  367,443 13.7 
Equipment finance2,196 0.1  2,187 0.1  33,693 1.3 
One-to-four family822   684   36,821 1.4 
Other consumer loans832   422   5,203 0.2 
Total$7,868 0.3% $91,244 3.3% $551,331 20.6%

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

Branch Operations. Since October 13, 2020, all of the Company's branch lobbies across its four state footprint have been open with appropriate protective measures to help ensure the safety of its customers and retail banking employees.

Income Statement Review

Net interest income decreased to $26.1 million for the quarter ended December 31, 2020, compared to $27.0 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 and dividend income, primarily driven by lower rates on loans and commercial paper as a result of lower federal funds and other market interest rates. This decrease was partially offset by a $4.8 million decrease in interest expense. Average interest-earning assets increased $77.9 million, or 2.3% to $3.4 billion for the quarter ended December 31, 2020. The average balance of total loans receivable increased by $43.7 million, or 1.6% compared to the same quarter last year due to organic loan growth and PPP loan originations. The average balance of commercial paper and deposits in other banks increased $71.0 million, or 20.5% driven by increases in commercial paper investments as a result of the Company's increased liquidity between the periods. The Company's 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 million, or 56.4% increase in average 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 31, 2020 decreased to 3.09% from 3.27% for the same period a year ago.

Total interest and dividend income decreased $5.7 million, or 16.0% for the three months ended December 31, 2020 as compared to the same period last year, which was primarily driven by a $3.8 million, or 11.8% decrease in loan interest income, a $1.3 million, or 67.9% decrease in interest income from commercial paper and deposits in other banks, and a $589,000, or 53.9% 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 61 basis points to 4.05% for the quarter ended December 31, 2020 from 4.66% in the corresponding quarter last year. Average yields on commercial paper and deposits in other banks decreased 162 basis points to 0.59% for the quarter ended December 31, 2020 from 2.21% in the corresponding quarter last year. Average yields on securities available for sale decreased 114 basis points to 1.50% for the quarter ended December 31, 2020 from 2.64% in the corresponding quarter last year.

Total interest expense decreased $4.8 million, or 54.5% for the quarter ended December 31, 2020 compared to the same period last year. The decrease was driven by a $4.0 million, or 62.9% decrease in interest expense on deposits and a $853,000, or 33.6% decrease in interest expense on borrowings. Average interest-bearing deposits for the quarter ended December 31, 2020 increased $27.8 million, or 1.3%, but was more than offset by the 74 basis point decrease in cost of deposits, down to 0.42% compared to 1.16% in the same period last year. Average borrowings for the quarter ended December 31, 2020 decreased $130.5 million, or 21.6% along with a 26 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 67 basis points to 0.60% for the current quarter compared to 1.27% in the same quarter last year due primarily to the impact of the lower amount of borrowings and rates.

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 sale 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 income 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.

Noninterest income increased $270,000, or 3.0% to $9.3 million for the three months ended December 31, 2020 from $9.1 million for the same period in the previous year primarily due to a $830,000, or 63.2% increase in other noninterest income, partially offset by a $302,000, or 34.7% decrease in loan income and fees, a $189,000, or 7.3% decrease in service charges and fees on deposit accounts, and a $71,000, or 1.9% decrease in gain of sale of loans. 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 in loan income and fees is primarily a result of lower fees from our adjustable rate conversion program and servicing fees. The decrease in service charges on deposit accounts was a result of fewer transactions as customers have decreased spending during the pandemic. The decrease in gain on the sale of loans 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 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 million of residential mortgage loans originated for sale which were sold with gains of $2.8 million compared to $57.8 million sold and gains of $1.4 million in the corresponding quarter in the prior year. Included in 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. In addition, $23.2 million of home equity loans were sold during the quarter ended December 31, 2020 for a gain of $158,000.

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 same period in the previous year primarily due to a $1.7 million, or 63.4% increase in other noninterest income, 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 operating lease income from the equipment finance line of business. The increase in gain on the sale of loans was driven by an increase 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 compared to $103.2 million sold and gains of $2.7 million in the corresponding period in the prior year. As previously mentioned, 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 servicing 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 for the three months ended December 31, 2020 increased $2.4 million, or 10.0% to $26.4 million compared to $24.0 million for the three months ended December 31, 2019. The increase was primarily due to a $1.5 million, or 10.8% increase in salaries and employee benefits as a result of new positions, mortgage loan origination incentives, and annual salary increases; a $892,000, or 26.9% increase in other expenses, mainly driven by depreciation from our equipment finance line of business; a $475,000 increase in deposit insurance premiums as a result of credits issued by the Federal Deposit Insurance Corporation being utilized in the prior year period, and a $235,000, or 11.8% increase in computer services. Partially offsetting these increases was a cumulative decrease of $608,000, or 17.9% in net occupancy expense; marketing and advertising expense; and core deposit intangible amortization for the three months ended December 31, 2020 compared to the same period last year. In addition, there was a $195,000, or 54.2% decrease in real estate owned ("REO") related expenses as a result of fewer properties held and no post-foreclosure writedowns.

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 corresponding period last year. 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 same period last year.

For the three months ended December 31, 2020, the Company's income tax expense increased $116,000, or 4.7% to $2.6 million from $2.5 million as a result of higher taxable income. The effective tax rate for the three months ended December 31, 2020 and 2019 was 21.5% and 21.2%, respectively.

For the six months ended December 31, 2020, the Company's income tax expense decreased $835,000, or 17.1% to $4.0 million from $4.9 million as a result of lower taxable income. The effective tax rate for the six months ended December 31, 2020 and 2019 was 21.0% and 21.3%, respectively.

Balance Sheet Review

Total assets and liabilities remained at $3.7 billion and $3.3 billion, respectively, at December 31, 2020 and June 30, 2020. The cumulative increase of $130.7 million, or 52.5% in cash and cash equivalents and securities held for sale was offset by the cumulative decrease of $128.2 million, or 35.6% in commercial paper and deposits in other banks as the Company repositioned its liquidity due to maturities and lower short-term rates during the period. The $41.3 million, or 53.5% increase in loans held for sale primarily relates to additional 1-4 family and home equity loans originated for sale during the period.

Total loans decreased $90.5 million, or 3.3% to $2.7 billion at December 31, 2020 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 million, and the continued payoff of purchased HELOCs of $13.1 million.

Total deposits decreased $42.5 million, or 1.5% to $2.7 billion at December 31, 2020 from $2.8 billion at June 30, 2020 which was driven by our focused effort to realign the deposit mix. As part of a managed runoff, certificates of deposit and brokered deposits decreased $212.9 million, or 28.8% to $526.2 million at December 31, 2020. This decrease was partially offset by successful efforts to increase core deposits which increased $170.4 million, 8.3%.

On July 1, 2020, the Company adopted the current expected credit loss ("CECL") accounting standard in accordance with Accounting Standards Update ("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 policy resulted in an increase in our allowance for credit losses 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 allowance for credit loss 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 months ended December 31, 2020.

Stockholders' equity at December 31, 2020 decreased $3.5 million, or 0.9% to $404.7 million compared to $408.3 million at June 30, 2020. Changes within stockholders' equity included $15.2 million in net income and $2.2 million in stock-based compensation and stock option exercises, offset by $13.4 million related to the adoption of the new CECL accounting standard, 277,122 shares of common stock being repurchased at an average cost of $18.69, or approximately $5.2 million in total, and $2.5 million related to cash dividends declared. As of December 31, 2020, the Bank and the Company were considered "well capitalized" in accordance with their regulatory capital guidelines and exceeded all regulatory capital requirements.

Asset Quality

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

Provision for credit losses was a net benefit of $2.1 million for the six months ended December 31, 2020, compared to a $400,000 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 recoveries totaled $62,000 for the three months ended December 31, 2020, compared to $317,000 for the same period last year. Net recoveries as a percentage of average loans were 0.01% and 0.05% for the quarter ended December 31, 2020 and 2019, respectively.

Nonperforming assets decreased by $1.5 million, or 9.2% to $14.8 million, or 0.40% of total assets at December 31, 2020 compared to $16.3 million, or 0.44% of total assets at June 30, 2020. Nonperforming assets included $14.5 million in nonaccruing loans and $252,000 in REO at December 31, 2020, compared to $15.9 million and $337,000 in nonaccruing loans and REO, respectively, at June 30, 2020. Included in nonperforming loans are $5.9 million of loans restructured from their original terms of which $4.1 million were current at December 31, 2020, with respect to their modified payment terms. Nonperforming loans to total loans was 0.54% at December 31, 2020 and 0.58% at June 30, 2020.

The ratio of classified assets to total assets decreased to 0.74% at December 31, 2020 from 0.84% at June 30, 2020 due to the decrease in classified loans during fiscal 2021. Classified assets decreased to $27.2 million at December 31, 2020 compared to $31.1 million at June 30, 2020 primarily due to $3.1 million in payoffs and $1.5 million in charge-offs during the period. The Company's overall asset quality metrics continue to demonstrate its commitment to growing and maintaining a loan portfolio with a moderate risk profile; however, the Company will remain diligent in its review of the portfolio and overall economy as it continues to maneuver through the uncertainty surrounding COVID-19.

About HomeTrust Bancshares, Inc.

HomeTrust Bancshares, Inc. is the holding company for HomeTrust Bank. As of December 31, 2020, the Company had assets of $3.7 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 40 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/Bristol, Knoxville, and Morristown) and Southwest Virginia (including the Roanoke Valley). The Bank is the 2nd largest community bank headquartered in North Carolina.

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements often include words such as "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events, many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially, from those currently expected or projected in these forward-looking statements. Factors that could cause our actual results to differ materially from those described in the forward-looking statements include: the effect of the COVID-19 pandemic, including on our credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID-19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate customers, including economic activity, employment levels and market liquidity; 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 other factors described in HomeTrust'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 our website at www.htb.com and on the SEC's website at www.sec.gov. These risks could cause our actual results for fiscal 2021 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect our operating and stock performance. Any of the forward-looking statements that we make in this press release or the documents we 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 we might make, because of the factors described above or because of other factors that we cannot foresee. We do 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.

WEBSITE: WWW.HOMETRUSTBANCSHARES.COM

Contact:
 Dana L. Stonestreet – Chairman, President and Chief Executive Officer
 Tony J. VunCannon – Executive Vice President, Chief Financial Officer, Corporate Secretary and Treasurer
 828-259-3939



Consolidated Balance Sheets (Unaudited)

(Dollars in thousands)December 31,
2020
 September 30,
2020
 June 30,
2020(1)
 March 31,
2020
 December 31,
2019
Assets         
Cash$27,365  $29,472  $31,908  $41,206  $47,213 
Interest-bearing deposits198,979  141,672  89,714  40,855  41,705 
Cash and cash equivalents226,344  171,144  121,622  82,061  88,918 
Commercial paper, net183,778  204,867  304,967  281,955  253,794 
Certificates of deposit in other banks48,637  52,361  55,689  57,544  47,628 
Securities available for sale, at fair value153,540  96,159  127,537  158,621  146,022 
Other investments, at cost39,572  38,949  38,946  41,201  36,898 
Loans held for sale118,439  124,985  77,177  38,682  118,055 
Total loans, net of deferred loan costs2,678,624  2,769,396  2,769,119  2,663,524  2,554,541 
Allowance for credit losses(39,844) (43,132) (28,072) (26,850) (22,031)
Net loans2,638,780  2,726,264  2,741,047  2,636,674  2,532,510 
Premises and equipment, net70,104  59,418  58,462  58,738  58,020 
Accrued interest receivable9,796  10,648  12,312  9,501  9,714 
Real estate owned ("REO")252  144  337  1,075  1,451 
Deferred income taxes18,626  19,209  16,334  21,750  22,066 
Bank owned life insurance ("BOLI")93,326  92,775  92,187  91,612  91,048 
Goodwill25,638  25,638  25,638  25,638  25,638 
Core deposit intangibles638  840  1,078  1,381  1,715 
Other assets52,501  50,633  49,519  41,600  36,755 
Total Assets$3,679,971  $3,674,034  $3,722,852  $3,548,033  $3,470,232 
Liabilities and Stockholders' Equity         
Liabilities         
Deposits$2,743,269  $2,742,046  $2,785,756  $2,554,787  $2,557,769 
Borrowings475,000  475,000  475,000  535,000  435,000 
Other liabilities56,978  56,637  53,833  52,806  60,468 
Total liabilities3,275,247  3,273,683  3,314,589  3,142,593  3,053,237 
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)168  170  170  171  177 
Additional paid in capital166,352  170,204  169,648  170,368  182,366 
Retained earnings242,182  234,023  242,776  240,325  240,312 
Unearned Employee Stock Ownership Plan ("ESOP") shares(6,083) (6,216) (6,348) (6,480) (6,612)
Accumulated other comprehensive income2,105  2,170  2,017  1,056  752 
Total stockholders' equity404,724  400,351  408,263  405,440  416,995 
Total Liabilities and Stockholders' Equity$3,679,971  $3,674,034  $3,722,852  $3,548,033  $3,470,232 

_________________________________
(1) Derived from audited financial statements.
(2) Shares of common stock issued and outstanding were 16,791,027 at December 31, 2020; 17,020,724 at September 30, 2020; 17,021,357 at June 30, 2020; 17,101,954 at March 31, 2020; and 17,664,384 at December 31, 2019.

Consolidated Statements of Income (Unaudited)

 Three Months Ended Six Months Ended
 December 31, September 30, December 31, December 31, December 31,
(Dollars in thousands)2020 2020 2019 2020 2019
Interest and Dividend Income         
Loans$28,343  $28,592  $32,119 $56,935  $64,385
Commercial paper and interest-bearing deposits614  881  1,912 1,495  4,165
Securities available for sale504  528  1,093 1,032  1,989
Other investments696  448  772 1,144  1,604
Total interest and dividend income30,157  30,449  35,896 60,606  72,143
Interest Expense         
Deposits2,347  3,253  6,321 5,600  12,174
Borrowings1,688  1,687  2,541 3,375  5,862
Total interest expense4,035  4,940  8,862 8,975  18,036
Net Interest Income26,122  25,509  27,034 51,631  54,107
Provision for Credit Losses(3,030) 950  400 (2,080) 400
Net Interest Income after Provision for Credit Losses29,152  24,559  26,634 53,711  53,707
Noninterest Income         
Service charges and fees on deposit accounts2,416  2,097  2,605 4,513  5,048
Loan income and fees569  474  871 1,043  1,753
Gain on sale of loans held for sale3,704  3,344  3,775 7,048  6,074
BOLI income511  532  509 1,043  1,206
Other, net2,144  2,192  1,314 4,336  2,653
Total noninterest income9,344  8,639  9,074 17,983  16,734
Noninterest Expense         
Salaries and employee benefits15,700  15,207  14,170 30,907  28,082
Net occupancy expense2,261  2,293  2,384 4,554  4,726
Computer services2,220  2,307  1,985 4,527  4,009
Telephone, postage, and supplies871  662  798 1,533  1,600
Marketing and advertising327  325  641 652  1,320
Deposit insurance premiums487  511  12 998  12
Loss (gain) on sale and impairment of REO  (35) 122 (35) 103
REO expense165  248  238 413  496
Core deposit intangible amortization202  238  373 440  784
Other4,210  4,244  3,318 8,454  6,442
Total noninterest expense26,443  26,000  24,041 52,443  47,574
Income Before Income Taxes12,053  7,198  11,667 19,251  22,867
Income Tax Expense2,592  1,445  2,476 4,037  4,872
Net Income$9,461  $5,753  $9,191 $15,214  $17,995
                  


Per Share Data

 Three Months Ended Six months ended
 December 31, September 30, December 31, December 31, December 31,
 2020 2020 2019 2020 2019
Net income per common share:(1)         
Basic$0.58 $0.35 $0.54 $0.93 $1.05
Diluted$0.57 $0.35 $0.52 $0.92 $1.01
Average shares outstanding:         
Basic16,202,844 16,230,990 16,906,457 16,216,917 17,002,052
Diluted16,563,359 16,469,242 17,567,680 16,514,831 17,660,687
Book value per share at end of period$24.10 $23.52 $23.61 $24.10 $23.61
Tangible book value per share at end of period (2)$22.55 $21.98 $22.08 $22.55 $22.08
Cash dividends declared per common share$0.08 $0.07 $0.07 $0.15 $0.13
Total shares outstanding at end of period16,791,027 17,020,724 17,664,384 16,791,027 17,664,384

_________________________________
(1) Basic and diluted net income per common share have been prepared in accordance with the two-class method.
(2) See Non-GAAP reconciliation tables below for adjustments.


Selected Financial Ratios and Other Data

 Three Months Ended Six Months Ended
 December 31, September 30, December 31, December 31, December 31,
 2020 2020 2019 2020 2019
Performance ratios: (1)     
Return on assets (ratio of net income to average total assets)1.03% 0.62% 1.02% 0.83% 1.00%
Return on equity (ratio of net income to average equity)9.41  5.74  8.87  7.58  8.72 
Tax equivalent yield on earning assets(2)3.57  3.57  4.34  3.57  4.38 
Rate paid on interest-bearing liabilities0.60  0.72  1.27  0.66  1.30 
Tax equivalent average interest rate spread (2)2.97  2.85  3.07  2.91  3.08 
Tax equivalent net interest margin(2) (3)3.09  3.00  3.27  3.05  3.30 
Average interest-earning assets to average interest-bearing liabilities126.99  125.21  119.53  126.09  119.47 
Operating expense to average total assets2.88  2.81  2.66  2.85  2.65 
Efficiency ratio74.56  76.14  66.58  75.33  67.16 
Efficiency ratio - adjusted (4)73.92  75.45  66.05  74.67  66.62 

_________________________________
(1) Ratios are annualized where appropriate.
(2) The weighted average rate for municipal leases is adjusted for a 24% combined federal and state tax rate since the interest from these leases is tax exempt.
(3) Net interest income divided by average interest-earning assets.
(4) See Non-GAAP reconciliation tables below for adjustments.    

 At or For the Three Months Ended
 December 31, September 30, June 30, March 31, December 31,
 2020 2020 2020 2020 2019
Asset quality ratios:         
Nonperforming assets to total assets(1)0.40 % 0.40% 0.44% 0.47% 0.45 %
Nonperforming loans to total loans(1)0.54   0.52  0.58  0.59  0.56  
Total classified assets to total assets0.74   0.73  0.84  0.86  0.90  
Allowance for credit losses to nonperforming loans(1)274.05   299.11  176.30  171.40  154.48  
Allowance for credit losses to total loans1.49   1.56  1.01  1.01  0.86  
Allowance for credit losses to total gross loans excluding PPP loans(2)1.52   1.61  1.04  N/A  N/A  
Net charge-offs (recoveries) to average loans (annualized)(0.01)  0.10  0.21  0.09  (0.05) 
Capital ratios:         
Equity to total assets at end of period11.00 % 10.90% 10.97% 11.43% 12.02 %
Tangible equity to total tangible assets(2)10.36   10.25  10.33  10.76  11.33  
Average equity to average assets10.95   10.85  11.02  11.80  11.52  

_________________________________
(1) Nonperforming assets include nonaccruing loans, consisting of certain restructured loans, and REO. There were no accruing loans more than 90 days past due at the dates indicated. At December 31, 2020, there were $5.9 million of restructured loans included in nonaccruing loans and $7.0 million, or 48.0% of nonaccruing loans were current on their loan payments.
(2) See Non-GAAP reconciliation tables below for adjustments.

Average Balance Sheet Data

 For the Three Months Ended December 31,
 2020 2019
 Average
Balance
Outstanding
 Interest
Earned/
Paid(2)
 Yield/
Rate(2)
 Average
Balance
Outstanding
 Interest
Earned/
Paid(2)
 Yield/
Rate(2)
(Dollars in thousands)                   
Assets:           
Interest-earning assets:           
Loans receivable(1)$2,826,133  $28,648 4.05% $2,782,412  $32,409 4.66%
Commercial paper and deposits in other banks417,401  614 0.59% 346,376  1,912 2.21%
Securities available for sale133,856  504 1.50% 165,577  1,093 2.64%
Other interest-earning assets(3)39,290  696 7.08% 44,398  772 6.95%
Total interest-earning assets3,416,680  30,462 3.57% 3,338,763  36,186 4.34%
Other assets257,572      269,679     
Total assets$3,674,252      $3,608,442     
Liabilities and equity:           
Interest-bearing deposits:           
Interest-bearing checking accounts584,530  353 0.24% 455,747  375 0.33%
Money market accounts848,760  414 0.20% 785,374  2,083 1.06%
Savings accounts206,205  38 0.07% 168,022  50 0.12%
Certificate accounts576,078  1,542 1.07% 778,664  3,813 1.96%
Total interest-bearing deposits2,215,573  2,347 0.42% 2,187,807  6,321 1.16%
Borrowings475,000  1,688 1.42% 605,489  2,541 1.68%
Total interest-bearing liabilities2,690,573  4,035 0.60% 2,793,296  8,862 1.27%
Noninterest-bearing deposits523,488      334,732     
Other liabilities57,813      65,812     
Total liabilities3,271,874      3,193,840     
Stockholders' equity402,378      414,602     
Total liabilities and stockholders' equity$3,674,252      $3,608,442     
            
Net earning assets$726,107      $545,467     
Average interest-earning assets to           
average interest-bearing liabilities126.99%     119.53%    
Tax-equivalent:           
Net interest income  $26,427     $27,324  
Interest rate spread    2.97%     3.07%
Net interest margin(4)    3.09%     3.27%
Non-tax-equivalent:           
Net interest income  $26,122     $27,034  
Interest rate spread    2.93%     3.03%
Net interest margin(4)    3.06%     3.24%

_________________________________
(1) The average loans receivable, net balances include loans held for sale and nonaccruing loans.
(2) Interest income used in the average interest earned and yield calculation includes the tax equivalent adjustment of $305 and $290 for the three months ended December 31, 2020 and 2019, 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
 Average
Balance
Outstanding
 Interest
Earned/
Paid(2)
 Yield/
Rate(2)
 Average
Balance
Outstanding
 Interest
Earned/
Paid(2)
 Yield/
Rate(2)
(Dollars in thousands) 
Assets:           
Interest-earning assets:           
Loans receivable(1)$2,850,783  $57,550 4.04% $2,766,022  $64,960 4.70%
Commercial paper and deposits in other banks420,785  1,495 0.71% 354,750  4,165 2.35%
Securities available for sale120,062  1,032 1.72% 152,143  1,989 2.61%
Other interest-earning assets(3)39,118  1,144 5.85% 45,054  1,604 7.12%
Total interest-earning assets3,430,748  61,221 3.57% 3,317,969  72,718 4.38%
Other assets254,610      267,028     
Total assets$3,685,358      $3,584,997     
Liabilities and equity:           
Interest-bearing liabilities:           
Interest-bearing checking accounts572,505  750 0.26% 448,636  694 0.31%
Money market accounts837,153  964 0.23% 752,178  3,844 1.02%
Savings accounts203,374  75 0.07% 170,207  103 0.12%
Certificate accounts632,894  3,811 1.20% 761,810  7,533 1.98%
Total interest-bearing deposits2,245,926  5,600 0.50% 2,132,831  12,174 1.14%
Borrowings475,000  3,375 1.42% 644,451  5,862 1.82%
  Total interest-bearing liabilities2,720,926  8,975 0.66% 2,777,282  18,036 1.30%
Noninterest-bearing deposits507,087      330,418     
Other liabilities55,699      64,456     
Total liabilities3,283,712      3,172,156     
Stockholders' equity401,646      412,841     
Total liabilities and stockholders' equity$3,685,358      $3,584,997     
            
Net earning assets$709,822      $540,687     
Average interest-earning assets to           
average interest-bearing liabilities126.09%     119.47%    
Tax-equivalent:           
Net interest income  $52,246     $54,682  
Interest rate spread    2.91%     3.08%
Net interest margin(4)    3.05%     3.30%
Non-tax-equivalent:           
Net interest income  $51,631     $54,107  
Interest rate spread    2.87%     3.05%
Net interest margin(4)    3.01%     3.26%

_________________________________
(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 and $575 for the six months ended December 31, 2020 and 2019, 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.

Loans

(Dollars in thousands)December 31,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
Commercial loans:         
Commercial real estate$1,056,971  $1,068  $1,053  $991  $998,019 
Construction and development172,892  216,757  215,934  249,714  223,839 
Commercial and industrial138,761  148,413  154,825  164,539  152,727 
Equipment finance272,761  250,813  229,239  198,962  185,427 
Municipal leases128,549  130,337  127,987  115,992  115,240 
PPP loans64,845  80,816  80,697     
Total commercial loans1,834,779  1,895,391  1,861,588  1,719,900  1,675,252 
Retail consumer loans         
One-to-four family452,421  459.285  473.693  487.777  417,255 
HELOCs - originated125,397  135,885  137,447  144,804  142,989 
HELOCs - purchased58,640  61,535  71,781  82,232  92,423 
Construction and land/lots75,108  78,799  81,859  80,765  71,901 
Indirect auto finance122,947  128,466  132,303  135,449  142,533 
Consumer9,332  10,035  10,259  11,576  11,102 
Total retail consumer loans843,845  874,005  907,342  942,603  878,203 
Total loans2,678,624  2,769,396  2,768,930  2,662,503  2,553,455 
Deferred loan costs, net (1)    189  1,021  1,086 
Total loans, net of deferred loan costs2,678,624  2,769,396  2,769,119  2,663,524  2,554,541 
Allowance for credit losses(39,844) (43,132) (28,072) (26,850) (22,031)
Loans, net$2,638,780  $2,726,264  $2,741,047  $2,636,674  $2,532,510 

_________________________________
(1) In accordance with the adoption of ASU 2016-13, the above table reflects the loan portfolio at the amortized cost basis for all periods in fiscal 2021.

Deposits

(Dollars in thousands)December 31,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
Core deposits:         
Noninterest-bearing accounts$469,998 $458,157 $429,901 $322,812 $327,320
NOW accounts654,960 608,968 582,299 496,561 457,428
Money market accounts882,366 826,970 836,738 801,424 815,949
Savings accounts209,699 202,787 197,676 169,792 167,520
Total core deposits2,217,023 2,096,882 2,046,614 1,790,589 1,768,217
Certificates of deposit526,246 645,164 739,142 764,198 789,552
Total deposits$2,743,269 $2,742,046 $2,785,756 $2,554,787 $2,557,769

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; tangible equity to tangible assets ratio; and the ratio of the allowance for credit losses to total loans excluding PPP loans. 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 the Company's performance over time and in comparison to the Company's 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 our efficiency ratio:

 Three Months Ended Six Months Ended
(Dollars in thousands)December 31, September 30, December 31, December 31, December 31,
 2020 2020 2019 2020 2019
Noninterest expense$26,443  $26,000  $24,041  $52,443  $47,574 
          
Net interest income$26,122  $25,509  $27,034  $51,631  $54,107 
Plus noninterest income9,344  8,639  9,074  17,983  16,734 
Plus tax equivalent adjustment305  310  290  615  574 
Net interest income plus noninterest income – as adjusted$35,771  $34,458  $36,398  $70,229  $71,415 
Efficiency ratio - adjusted73.92% 75.45% 66.05% 74.67% 66.62%
Efficiency ratio74.56% 76.14% 66.58% 75.33% 67.16%

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)December 31, September 30, June 30, March 31, December 31,
 2020 2020 2020 2019 2019
Total stockholders' equity$404,724 $400,351 $408,263 $405,440 $416,995
Less: goodwill, core deposit intangibles, net of taxes26,130 26,285 26,468 26,701 26,959
Tangible book value (1)$378,594 $374,066 $381,795 $378,739 $390,036
Common shares outstanding16,791,027 17,020,724 17,021,357 17,101,954 17,664,384
Tangible book value per share$22.55 $21.98 $22.43 $22.15 $22.08
Book value per share$24.10 $23.52 $23.99 $23.71 $23.61

(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, June 30, March 31, December 31,
 2020 2020 2020 2020 2019
 (Dollars in thousands)
Tangible equity(1)$378,594  $374,066  $381,795  $378,739  $390,036 
Total assets3,679,971  3,674,034  3,722,852  3,548,033  3,470,232 
Less: goodwill, core deposit intangibles, net of taxes26,130  26,285  26,468  26,701  26,959 
Total tangible assets(2)$3,653,841  $3,647,749  $3,696,384  $3,521,332  $3,443,273 
Tangible equity to tangible assets10.36% 10.25% 10.33% 10.76% 11.33%

(1) Tangible equity (or tangible book value) is equal to total stockholders' equity less goodwill and core deposit intangibles, net of related deferred tax liabilities.
(2) Total tangible assets is equal to total assets less goodwill and core deposit intangibles, net of related deferred tax liabilities.

Set forth below is a reconciliation to GAAP of the allowance for credit losses to total loans (excluding net deferred loan costs) and the allowance for credit losses as adjusted to exclude PPP loans:

 As of
(Dollars in thousands)December 31, September 30, June 30, March 31, December 31,
 2020 2020 2020 2020 2019
Total gross loans receivable (GAAP)$2,678,624  $2,769,396  $2,768,930  $2,662,503  $2,553,455 
Less: PPP loans (1)64,845  80,816  80,697     
Adjusted loans (non-GAAP)$2,613,779  $2,688,580  $2,688,233  $2,662,503  $2,553,455 
          
Allowance for credit losses (GAAP)$39,844  $43,132  $28,072  $26,850  $22,031 
Allowance for credit losses / Adjusted loans (non-GAAP)1.52% 1.60% 1.04% 1.01% 0.86%

(1) PPP loans are fully guaranteed loans by the U.S, government and became available with the CARES Act.