• HomeTrust Bancshares, Inc. Announces Financial Results for the First Quarter of the Six-Month Transition Period Ending December 31, 2023* and an Increase in the Quarterly Dividend

    Source: Nasdaq GlobeNewswire / 25 Oct 2023 08:00:01   America/New_York

    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 assets5.90  5.82 
    Rate paid on interest-bearing liabilities2.58  2.08 
    Average interest rate spread3.32  3.74 
    Net interest margin(2)4.02  4.32 
    Average interest-earning assets to average interest-bearing liabilities137.07  138.54 
    Noninterest expense to average total assets2.64  2.86 
    Efficiency ratio58.21  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 assets0.76  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 loans1.30  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 period10.41% 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 assets10.84  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 ratio58.21% 60.87%
    Efficiency ratio – adjusted59.12% 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 assets9.60% 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.


    Contact:
C. Hunter Westbrook – President and Chief Executive Officer
Tony J. VunCannon – Executive Vice President, Chief Financial Officer, Corporate Secretary and Treasurer
828-259-3939

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