HOMETRUST BANCSHARES, INC. InNovember 2020 , theSEC adopted amendments to Regulation S-K to eliminate certain disclosure requirements and to revise several others to make the disclosures provided in the management's discussion and analysis section more useful for investors. When providing a discussion and analysis of interim period results, the amendments provide a registrant with the option to discuss its interim results by comparing its most recent quarter to the immediately preceding quarter rather than to the same quarter of the prior year. The Company elected to exercise this option as it believes that the comparison of current quarter results to a linked quarter, rather than the prior year comparable quarter, more accurately reflects management's perspective of the organization and its results. Forward-Looking Statements Certain matters in this Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. Forward-looking statements are not statements of historical fact, but instead are based on certain assumptions and are generally identified by use of the words "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions or future or conditional verbs such as "may," "will," "should," "would," and "could." Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions, and statements about future economic performance and projections of financial items. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated or implied by our forward-looking statements. The factors that could result in material differentiation include, but are not limited to: •the remaining effects of the COVID-19 pandemic on general economic and financial market conditions and on public health, both nationally and in our market areas; •expected revenues, cost savings, synergies and other benefits from our merger and acquisition activities, including our recent merger with Quantum, 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; •the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write offs and changes in our allowance for credit losses and provision for credit losses that may be impacted by deterioration in the housing and commercial real estate markets; •changes in general economic conditions, either nationally or in our market areas; •changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources and the effects of inflation or a potential recession; •uncertainty regarding the limited future of LIBOR, and the expected transition toward new interest rate benchmarks; •fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; •decreases in the secondary market for the sale of loans that we originate; •results of examinations of us by theFederal Reserve , the NCCOB, or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings; •legislative or regulatory changes that adversely affect our business including the effects of the Dodd-Frank Wall Street Reform and Consumer Protection Act, changes in laws or regulations, changes in regulatory policies and principles or the application or interpretation of laws and regulations by regulatory agencies and tax authorities, including changes in deferred tax asset and liability activity, or the interpretation of regulatory capital or other rules, including as a result of Basel III; •our ability to attract and retain deposits; •management's assumptions in determining the adequacy of the allowance for credit losses; •our ability to control operating costs and expenses, especially costs associated with our operation as a public company; •the use of estimates in determining fair value of certain assets, which estimates may prove to be incorrect and result in significant declines in valuation; •difficulties in reducing risks associated with the loans on our balance sheet; •staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; •disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; •our ability to retain key members of our senior management team; •costs and effects of litigation, including settlements and judgments; •our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; •increased competitive pressures among financial services companies; •changes in consumer spending, borrowing and savings habits; •the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; •adverse changes in the securities markets; •inability of key third-party providers to perform their obligations to us; •changes in accounting principles, policies or guidelines and practices, as may be adopted by the financial institution regulatory agencies, thePublic Company Accounting Oversight Board or the FASB; 36 -------------------------------------------------------------------------------- •other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services including the CARES Act; and •other risks detailed from time to time in our filings with theSEC , including this report on Form 10-Q. Any forward-looking statements are based upon management's beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise any forward-looking statements included in this report or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur and you should not put undue reliance on any forward-looking statements.
As used throughout this report, the terms "we," "our," "us," "HomeTrust
Bancshares" or the "Company" refer to
Overview
HomeTrust Bancshares, Inc. , aMaryland corporation, was formed for the purpose of becoming the holding company forHomeTrust Bank in connection with the Bank's conversion from mutual to stock form, which was completed onJuly 10, 2012 . As a bank holding company and financial holding company, we are regulated by theFederal Reserve . The Company has not engaged in any significant activity other than holding the stock of the Bank. As aNorth Carolina state-chartered bank, and member of the FRB, the Bank's primary regulators are the NCCOB and theFederal Reserve . The Bank's deposits are federally insured up to applicable limits by theFDIC . The Bank is a member of the FHLB ofAtlanta , which is one of the 11 regional banks in the FHLB System. Our headquarters is located inAsheville, North Carolina . After completing our merger with Quantum onFebruary 12, 2023 , the Bank has more than 30 locations acrossGeorgia ,North Carolina ,South Carolina ,Tennessee , andVirginia , many of which are located in markets experiencing growth rates above the national average. Historically, our branches and facilities have primarily been located in small- to medium-sized communities, but in recent years we have implemented a strategy of expanding into larger, higher growth markets via business banking centers rather than retail-focused branches. Our principal business consists of attracting deposits from the general public and investing those funds, along with borrowed funds, in commercial real estate loans, construction and development loans, commercial and industrial loans, equipment finance leases, municipal leases, loans secured by first and second mortgages on one-to-four family residences including home equity and other consumer loans. We also originate one-to-four family loans, SBA loans, and HELOCs to sell to third parties. In addition, we invest in debt securities issued by United States Government agencies and GSEs, corporate bonds, commercial paper, and certificates of deposit in other banks insured by theFDIC . We offer a variety of deposit accounts for individuals, businesses, and nonprofit organizations. Our primary source of pre-tax income is net interest income. Net interest income is the difference between interest income, which is the income that we earn on our loans and investments, and interest expense, which is the interest that we pay on our deposits and borrowings. Changes in levels of interest rates affect our net interest income. A secondary source of income is noninterest income, which includes revenue we receive from providing products and services, including service charges and fees on deposit accounts, loan income and fees, gains on the sale of loans held for sale, BOLI income, and operating lease income. An offset to net interest income is the provision for credit losses which is required to establish the ACL at a level that adequately provides for current expected credit losses inherent in our loan portfolio, off balance sheet credit commitments, and available for sale debt securities. See "Note 1 - Summary of Significant Accounting Policies" in Item 1 of our 2022 Form 10-K for further discussion. Our noninterest expenses consist primarily of salaries and employee benefits, expenses for occupancy, marketing and computer services, andFDIC deposit insurance premiums. Salaries and benefits consist primarily of the salaries and wages paid to our employees, payroll taxes, expenses for retirement, and other employee benefits. Occupancy expenses, which are the fixed and variable costs of buildings and equipment, consist primarily of lease payments, property taxes, depreciation charges, maintenance, and costs of utilities.
Critical Accounting Policies and Estimates
Certain of our accounting policies are important to the portrayal of our financial condition, since they require management to make difficult, complex, or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances which could include, but are not limited to, changes in interest rates, changes in the performance of the economy, and changes in the financial condition of borrowers.
The following represent our critical accounting policies:
Allowance for Credit Losses, or ACL, on Loans. The ACL reflects our estimate of
credit losses that will result from the inability of our borrowers to make
required loan payments. We charge off loans against the ACL and subsequent
recoveries, if any, increase the ACL when they are recognized. We use a
systematic methodology to determine our ACL for loans held for investment and
certain off-balance-sheet credit exposures. The ACL is a valuation account that
is deducted from the amortized cost basis to present the net amount expected to
be collected on the loan portfolio. We consider the effects of past events,
current conditions, and reasonable and supportable forecasts on the
collectability of the loan portfolio. The estimate of our ACL involves a high
degree of judgment; therefore, our process for determining expected credit
losses may result in a range of expected credit losses. Our ACL recorded in the
balance sheet reflects our best estimate within the range of expected credit
losses. We recognize in net income the amount needed to adjust the ACL for
management's current estimate of expected credit losses. Our ACL is calculated
using collectively evaluated and individually evaluated loans.
Business Combinations and Acquired Loans. ASC 805 requires that we use the
acquisition method of accounting for all business combinations. The acquisition
method of accounting requires us as the acquirer to recognize the fair value of
assets acquired and liabilities assumed at the acquisition date, as well as,
recognize goodwill or a gain from a bargain purchase, if appropriate. Any
acquisition-related costs and restructuring costs are recognized as period
expenses as incurred.
37
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The fair value for acquired loans at the time of acquisition is based on a
variety of factors including discounted expected cash flows, adjusted for
estimated prepayments and credit losses. In accordance with ASC 326, the fair
value adjustment is recorded as premium or discount to the unpaid principal
balance of each acquired loan. Loans that have been identified as having
experienced a more-than-insignificant deterioration in credit quality since
origination are PCD loans. An ACL on PCD loans is established at the time of
acquisition as part of the purchase accounting adjustments, while the remaining
net premium or discount is accreted or amortized into interest income over the
remaining life of the loan using the level yield method. The net premium or
discount on non-PCD loans, that includes credit quality and interest rate
considerations, is accreted or amortized into interest income over the remaining
life of the loan using the level yield method. The Company then records the
necessary ACL on the non-PCD loans through provision for credit losses expense.
Financial Highlights
Results for the quarter endedMarch 31, 2023 include the impact of the merger of Quantum into the Company effectiveFebruary 12, 2023 . The addition of Quantum contributed total assets of$656.7 million , including loans of$561.9 million , and$570.6 million of deposits, all reflecting the impact of purchase accounting adjustments. Merger-related expenses of$4.7 million and$5.5 million were recognized during the three and nine months endedMarch 31, 2023 , while a$5.3 million provision for credit losses was recognized during the three months endedMarch 31, 2023 to establish allowances for credit losses on both Quantum's loan portfolio and off-balance-sheet credit exposure. Quantum's scheduled core system conversion was completed in March. For the quarter endedMarch 31, 2023 compared to the quarter endedDecember 31, 2022 : •net income was$6.7 million compared to$13.7 million ; •diluted EPS was$0.40 compared to$0.90 ; •annualized ROA was 0.69% compared to 1.54%; •annualized ROE was 6.21% compared to 13.37%; •net interest income was$41.5 million compared to$37.5 million ; •net interest margin was 4.55% compared to 4.53%; •provision for credit losses was$8.8 million compared to$2.2 million ; •noninterest income was$8.3 million compared to$8.5 million ; •net organic loan growth was$104.1 million , or 14.2% annualized, compared to$121.9 million , or 17.4% annualized; and •quarterly cash dividends of$0.10 per share totaling$1.7 million compared to$1.5 million . For the nine months endedMarch 31, 2023 compared to the nine months endedMarch 31, 2022 : •net income was$29.6 million compared to$29.6 million ; •diluted EPS was$1.90 compared to$1.84 ; •annualized ROA was 1.07% compared to 1.12%; •annualized ROE was 9.52% compared to 9.91%; •net interest income was$113.5 million compared to$81.9 million ; •net interest margin was 4.40% compared to 3.34%; •provision for credit losses was$15.0 million compared to a net benefit of$4.0 million ; •noninterest income was$24.2 million compared to$29.4 million ; •net organic loan growth was$307.8 million , or 15.1% annualized, compared to$34.9 million , or 1.8% annualized; and •cash dividends of$0.29 per share totaling$4.5 million compared to$0.26 per share totaling$4.1 million . Three Months Ended Nine Months Ended March 31, 2023 December 31, March 31, 2023 March 31, (Dollars in thousands) 2022 2022 Interest and dividend income$ 50,666 $ 41,402 $ 127,995 $ 85,988 Interest expense 9,212 3,857 14,476 4,073 Net interest income 41,454 37,545 113,519 81,915 Provision (benefit) for credit losses 8,760 2,240 14,987 (4,005) Net interest income after provision (benefit) for credit losses 32,694 35,305 98,532 85,920 Noninterest income 8,310 8,454 24,162 29,393 Noninterest expense 32,833 26,076 84,998 77,638 Income before income taxes 8,171 17,683 37,696 37,675 Income tax expense 1,437 4,025 8,105 8,047 Net income $ 6,734$ 13,658 $ 29,591 $ 29,628 Net income per common share(1) Basic $ 0.40$ 0.90 $ 1.91$ 1.87 Diluted 0.40 0.90 1.90 1.84 Cash dividends declared per common share 0.10 0.10 0.29 0.26 Book value per share at end of period 26.38 26.17 26.38 24.73 Tangible book value per share at end of period(2) 23.93 24.53 23.93 23.13 Market price per share at end of period 24.59 24.17 24.59 29.53
(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.
38
--------------------------------------------------------------------------------GAAP Reconciliation of Non-GAAP Financial Measures
We believe the non-GAAP financial measures included within this report provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with US GAAP; however, we acknowledge that our non-GAAP financial measures have a number of limitations. The following reconciliation tables provide detailed analyses of these non-GAAP financial measures.
Set forth below is a reconciliation to US GAAP of tangible book value and tangible book value per share:
As of
March 31, December 31, September 30, June 30,
(Dollars in thousands, except per share 2023 2022 2022 2022
data)
Total stockholders' equity$ 458,242 $
410,155
42,642 25,663 25,683 25,710
net of taxes
Tangible book value $ 415,600 $ 384,492 $ 370,539 $ 363,135
Common shares outstanding 17,370,063 15,673,595 15,632,348 15,591,466
Book value per share at end of period $ 26.38 $
26.17
$ 23.93 $
24.53
Set forth below is a reconciliation to US GAAP of tangible equity to tangible
assets:
As of
March 31, December 31, September 30, June 30,
(Dollars in thousands) 2023 2022 2022 2022
Tangible equity (1) $ 415,600 $
384,492
4,526,870 3,647,015 3,555,186 3,549,204
Less: goodwill, core deposit intangibles, 42,642 25,663 25,683 25,710
net of taxes
Total tangible assets $ 4,484,228 $ 3,621,352 $ 3,529,503 $ 3,523,494 Tangible equity to tangible assets 9.27 % 10.62 % 10.50 % 10.31 %
(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.
39
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Comparison of Results of Operations for the Three Months Ended
Net Income. Net income totaled$6.7 million , or$0.40 per diluted share, for the three months endedMarch 31, 2023 compared to net income of$13.7 million , or$0.90 per diluted share, for the three months endedDecember 31, 2022 , a decrease of$7.0 million , or 50.7%. The results for the three months endedMarch 31, 2023 were negatively impacted by increases of$6.5 million in the provision for credit losses and$6.8 million in noninterest expense, partially offset by a$4.0 million increase in net interest income. These changes were primarily related to the merger with Quantum completed this quarter. Details of the changes in the various components of net income are further discussed below. Net Interest Income. The following table presents the distribution of average assets, liabilities and equity, as well as interest income earned on average interest-earning assets and interest expense paid on average interest-bearing liabilities. All average balances are daily average balances. Nonaccruing loans have been included in the table as loans carrying a zero yield. Three Months Ended March 31, 2023 December 31, 2022 Average Interest Average Interest Balance Earned / Yield / Balance Earned / Yield / (Dollars in thousands) Outstanding Paid Rate Outstanding Paid Rate Assets Interest-earning assets Loans receivable(1)$ 3,413,641 $ 47,908 5.69 %$ 2,999,207 $ 38,995 5.16 % Commercial paper - - - 34,487 184 2.12 Debt securities available for sale 156,778 1,183 3.06 167,818 1,151 2.72 Other interest-earning assets(2) 124,120 1,575 5.15 86,430 1,072 4.92 Total interest-earning assets 3,694,539 50,666 5.56 3,287,942 41,402 5.00 Other assets 253,746 236,159 Total assets$ 3,948,285 $ 3,524,101 Liabilities and equity Interest-bearing liabilities Interest-bearing checking accounts $ 645,011$ 976 0.61 % $ 627,548$ 571 0.36 % Money market accounts 1,133,415 4,338 1.55 954,007 1,935 0.80 Savings accounts 230,820 48 0.08 236,027 45 0.08 Certificate accounts 515,326 2,502 1.97 444,845 1,052 0.94 Total interest-bearing deposits 2,524,572 7,864 1.26 2,262,427 3,603 0.63 Junior subordinated debt 5,299 109 8.34 - - - Borrowings 98,400 1,239 5.11 26,063 254 3.87 Total interest-bearing liabilities 2,628,271 9,212 1.42 2,288,490 3,857 0.67 Noninterest-bearing deposits 830,510 785,785 Other liabilities 49,674 44,333 Total liabilities 3,508,455 3,118,608 Stockholders' equity 439,830 405,493 Total liabilities and stockholders' equity$ 3,948,285 $ 3,524,101 Net earning assets$ 1,066,268 $ 999,452 Average interest-earning assets to average interest-bearing liabilities 140.57 % 143.67 % Non-tax-equivalent Net interest income$ 41,454 $ 37,545 Interest rate spread 4.14 % 4.33 % Net interest margin(3) 4.55 % 4.53 % Tax-equivalent(4) Net interest income$ 41,744 $ 37,832 Interest rate spread 4.17 % 4.36 % Net interest margin(3) 4.58 % 4.56 % (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)Interest income used in the average interest earned and yield calculation includes the tax equivalent adjustment of$290 and$287 for the three months endedMarch 31, 2023 andDecember 31, 2022 , respectively, calculated based on a combined federal and state tax rate of 24%. Total interest and dividend income for the three months endedMarch 31, 2023 increased$9.3 million , or 22.4%, compared to the three months endedDecember 31, 2022 , which was driven by a$8.9 million , or 22.9%, increase in interest income on loans. Accretion income on acquired loans of$353,000 and$195,000 was recognized during the same periods, respectively, and was included in interest income on loans. 40 -------------------------------------------------------------------------------- Beyond accretion income, the increase was driven by a continued increase in the average yield on loans and the inclusion of Quantum's loan portfolio for roughly half a quarter. Total interest expense for the three months endedMarch 31, 2023 increased$5.4 million , or 138.8%, compared to the three months endedDecember 31, 2022 . The increase was the result of increases in the average cost of funds across funding sources, an increase in average deposits outstanding and the inclusion of junior subordinated debt assumed from Quantum. The following table shows the effects that changes in average balances (volume), including differences in the number of days in the periods compared, and average interest rates (rate) had on the interest earned on interest-earning assets and interest paid on interest-bearing liabilities: Increase / (Decrease) Due to Total Increase / (Dollars in thousands) Volume Rate (Decrease) Interest-earning assets Loans receivable$ 4,324 $ 4,589 $ 8,913 Commercial paper (184) - (184) Debt securities available for sale (102) 134
32
Other interest-earning assets 432 71
503
Total interest-earning assets 4,470 4,794
9,264
Interest-bearing liabilities Interest-bearing checking accounts (6) 411 405 Money market accounts 267 2,136 2,403 Savings accounts (2) 5 3 Certificate accounts 111 1,339 1,450 Junior subordinated debt 109 - 109 Borrowings 677 308 985 Total interest-bearing liabilities 1,156 4,199
5,355
Net increase in interest income
Provision for Credit Losses. The provision for credit losses is the amount of expense that, based on our judgment, is required to maintain the ACL at an appropriate level under the CECL model.
The following table presents a breakdown of the components of the provision for
credit losses:
Three Months Ended
December 31,
(Dollars in thousands) March 31, 2023 2022 $ Change % Change
Provision for credit losses
Loans $ 8,360 $ 2,425 $ 5,935 245 %
Off-balance-sheet credit exposure 400 (85) 485 571
Commercial paper - (100) 100 100
Total provision for credit losses $ 8,760 $ 2,240 $ 6,520 291 %
For the quarter ended March 31, 2023 , the "loans" portion of the provision for
credit losses was the result of the following, offset by net charge-offs of $0.1
million during the quarter:
•$4.9 million provision to establish an allowance on Quantum's loan portfolio.
•$2.0 million provision driven by loan growth and changes in the loan mix.
•$1.2 million provision due to changes in the projected economic forecast, specifically the national unemployment rate, and changes in qualitative adjustments.
•$0.2 million increase in specific reserves on individually evaluated credits.
For the quarter endedDecember 31, 2022 , the "loans" portion of the provision for credit losses was the result of the following, offset by net charge-offs of$1.9 million during the quarter:
•$1.6 million provision driven by loan growth and changes in the loan mix.
•$0.4 million provision due to changes in the projected economic forecast, specifically the national unemployment rate, and changes in qualitative adjustments.
•$1.5 million reduction of specific reserves on individually evaluated credits, which was tied to two relationships which were fully charged-off during the quarter.
For the quarter endedMarch 31, 2023 , a provision of$0.4 million was also recorded to establish an allowance on Quantum's off-balance-sheet credit exposure. For the quarter endedDecember 31, 2022 , the change was the result of changes in the balance of loan commitments as well as changes in the loan mix and changes in the projected economic forecast outlined above. 41 -------------------------------------------------------------------------------- Noninterest Income. Noninterest income for the three months endedMarch 31, 2023 decreased$0.1 million , or 1.7%, when compared to the quarter endedDecember 31, 2022 . Changes in the components of noninterest income are discussed below: Three Months Ended March 31, 2023 December 31, (Dollars in thousands) 2022 $ Change % Change Noninterest income Service charges and fees on deposit accounts$ 2,256 $ 2,523 $ (267) (11) % Loan income and fees 562 647 (85) (13) Gain on sale of loans held for sale 1,811 1,102 709 64 BOLI income 522 494 28 6 Operating lease income 1,505 1,156 349 30 Gain (loss) on sale of premises and equipment 900 1,127 (227) (20) Other 754 1,405 (651) (46) Total noninterest income$ 8,310 $ 8,454 $ (144) (2) % •Gain on sale of loans held for sale: The increase in the gain on sale of loans held for sale was primarily driven by an increase in volume of SBA loans sold during the period. During the quarter endedMarch 31, 2023 , there were$16.6 million in sales of the guaranteed portion of SBA commercial loans with gains of$1.2 million compared to$8.2 million sold and gains of$568,000 for the quarter endedDecember 31, 2022 . There were$6.4 million of residential mortgage loans originated for sale which were sold during the current quarter with gains of$147,000 compared to$7.3 million sold with gains of$183,000 in the prior quarter. There were$35.2 million of HELOCs sold during the current quarter for a gain of$354,000 compared to$41.4 million sold and gains of$340,000 in the prior quarter. •Operating lease income: The increase in operating lease income was the result of a net gain of$17,000 at the end of operating leases for the quarter endedMarch 31, 2023 versus a net loss of$337,000 for the quarter endedDecember 31, 2022 . •Gain (loss) on sale of premises and equipment: During the quarter endedMarch 31, 2023 , one property was sold for a gain of$900,000 . During the quarter endedDecember 31, 2022 , two properties were sold for a combined gain of$1.6 million , partially offset by additional impairment of$420,000 on premises and equipment associated with prior branch closures. •Other: The decrease in other income was driven by a$721,000 gain recognized during the quarter endedDecember 31, 2022 on the sale of closely held equity securities which the Company obtained through a prior bank acquisition. No such sales occurred during the quarter endedMarch 31, 2023 . Noninterest Expense. Noninterest expense for the three months endedMarch 31, 2023 increased$6.8 million , or 25.9%, when compared to the three months endedDecember 31, 2022 . Changes in the components of noninterest expense are discussed below: Three Months Ended March 31, 2023 December 31, (Dollars in thousands) 2022 $ Change % Change Noninterest expense Salaries and employee benefits$ 16,246 $ 14,484 $ 1,762 12 % Occupancy expense, net 2,467 2,428 39 2 Computer services 2,911 2,796 115 4 Telephone, postage and supplies 613 575 38 7 Marketing and advertising 372 481 (109) (23) Deposit insurance premiums 612 546 66 12 Core deposit intangible amortization 606 26 580 2,231 Merger-related expenses 4,741 250 4,491 1,796 Other 4,265 4,490 (225) (5) Total noninterest expense$ 32,833 $ 26,076 $ 6,757 26 % •Salaries and employee benefits: The increase in salaries and employee benefits expense is primarily the result of the inclusion of Quantum employees for half a quarter, partially offset by lower mortgage banking incentive pay as a result of the reduction in the volume of originations due to rising interest rates. •Core deposit intangible amortization: The increase in amortization expense is a result of a$12.2 million core deposit intangible associated with the Company's merger with Quantum, which will be amortized on an accelerated basis over ten years. •Merger-related expenses: With the closing of the Company's merger with Quantum, merger-related expenses increased both in anticipation of and after the closing. The most significant expenses incurred included the payout of severance and employment contracts, professional fees, termination of prior contracts, and conversion of IT systems which occurred during the 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. Income tax expense for the three months endedMarch 31, 2023 decreased$2.6 million as a result of lower pre-tax income and permanent tax differences associated with employee stock options recognized during the current quarter. 42 --------------------------------------------------------------------------------
Comparison of Results of Operations for the Nine Months Ended
Net Income. Net income totaled$29.6 million , or$1.90 per diluted share, for the nine months endedMarch 31, 2023 compared to net income of$29.6 million , or$1.84 per diluted share, for the nine months endedMarch 31, 2022 , a decrease of$37,000 , or 0.1%. The results for the nine months endedMarch 31, 2023 were negatively impacted by an increase of$19.0 million in the provision for credit losses, a$5.2 million decrease in noninterest income, and a$7.4 million increase in noninterest expense driven by$5.5 million in merger-related expenses, partially offset by a$31.6 million increase in net interest income. Details of the changes in the various components of net income are further discussed below. Net Interest Income. The following table presents the distribution of average assets, liabilities and equity, as well as interest income earned on average interest-earning assets and interest expense paid on average interest-bearing liabilities. All average balances are daily average balances. Nonaccruing loans have been included in the table as loans carrying a zero yield. Nine Months Ended March 31, 2023 March 31, 2022 Average Interest Average Interest Balance Earned / Yield / Balance Earned / Yield / (Dollars in thousands) Outstanding Paid Rate Outstanding Paid
Rate
Assets
Interest-earning assets Loans receivable(1)$ 3,095,358 $ 120,148 5.17 %$ 2,810,240 $ 81,440 3.86 % Commercial paper 83,506 1,300 2.07 211,739 869 0.55 Debt securities available for sale 153,178 3,012 2.62 124,053 1,319 1.42 Other interest-earning assets(2) 108,007 3,535 4.36 121,936 2,360 2.58 Total interest-earning assets 3,440,049 127,995 4.96 3,267,968 85,988 3.51 Other assets 244,271 259,535 Total assets$ 3,684,320 $ 3,527,503 Liabilities and equity Interest-bearing liabilities Interest-bearing checking accounts $ 642,217$ 1,814 0.38 % $ 640,194$ 1,038 0.22 % Money market accounts 1,017,663 6,794 0.89 1,002,542 1,056 0.14 Savings accounts 235,312 137 0.08 224,664 120 0.07 Certificate accounts 478,712 4,117 1.15 447,623 1,814 0.54 Total interest-bearing deposits 2,373,904 12,862 0.72 2,315,023 4,028 0.23 Junior subordinated debt 1,741 109 8.34 - - - Borrowings 41,585 1,505 4.82 48,894 45 0.12 Total interest-bearing liabilities 2,417,230 14,476 0.80 2,363,917 4,073 0.23 Noninterest-bearing deposits 805,555 719,872 Other liabilities 47,544 45,443 Total liabilities 3,270,329 3,129,232 Stockholders' equity 413,991 398,271 Total liabilities and stockholders' equity$ 3,684,320 $ 3,527,503 Net earning assets$ 1,022,819 $ 904,051 Average interest-earning assets to average interest-bearing liabilities 142.31 % 138.24 % Non-tax-equivalent Net interest income$ 113,519 $ 81,915 Interest rate spread 4.16 % 3.28 % Net interest margin(3) 4.40 % 3.34 % Tax-equivalent Net interest income$ 114,383 $ 82,852 Interest rate spread 4.19 % 3.31 % Net interest margin(3) 4.43 % 3.38 % (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)Interest income used in the average interest earned and yield calculation includes the tax equivalent adjustment of$864 and$937 for the nine months endedMarch 31, 2023 andMarch 31, 2022 , respectively, calculated based on a combined federal and state tax rate of 24%. Total interest and dividend income for the nine months endedMarch 31, 2023 increased$42.0 million , or 48.9%, compared to the nine months endedMarch 31, 2022 , which was driven by a$38.7 million , or 47.5%, increase in interest income on loans, a combined increase of$2.1 million , or 97.4%, in interest income on commercial paper and debt securities available for sale, and an increase of$1.2 million , or 49.8%, in interest income on other interest-earning assets. The overall increase in average yield on interest-earning assets and rate paid on 43 -------------------------------------------------------------------------------- liabilities was the result of rising interest rates. Specific to debt securities available for sale, the Company has intentionally maintained a relatively short-term duration portfolio which has allowed, and will continue to allow, the Company to take advantage of rising rates when reinvesting the proceeds of maturing instruments.
Total interest expense for the nine months ended
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 /
(Dollars in thousands) Volume Rate (Decrease)
Interest-earning assets
Loans receivable $ 8,263 $ 30,445 $ 38,708
Commercial paper (526) 957 431
Debt securities available for sale 310 1,383 1,693
Other interest-earning assets (270) 1,445
1,175
Total interest-earning assets 7,777 34,230
42,007
Interest-bearing liabilities Interest-bearing checking accounts 3 773 776 Money market accounts 16 5,722 5,738 Savings accounts 6 11 17 Certificate accounts 126 2,177 2,303 Junior subordinated debt 109 - 109 Borrowings (7) 1,467 1,460 Total interest-bearing liabilities 253 10,150
10,403
Net increase in interest income
Provision (Benefit) for Credit Losses. The following table presents a breakdown of the components of the provision (benefit) for credit losses:
Nine Months Ended
March 31, 2023 March 31,
(Dollars in thousands) 2022 $ Change % Change
Provision (benefit) for credit losses
Loans $ 14,479 $ (4,415) $ 18,894 428 %
Off-balance-sheet credit exposure 758 415 343 83
Commercial paper (250) (5) (245) (4,900)
Total provision (benefit) for credit losses
474 %
For the nine months ended
•$4.9 million provision to establish an allowance on Quantum's loan portfolio.
•$0.9 million provision specific to fintech portfolios which have a riskier credit profile than loans originated in-house. The elevated credit risk is offset by the higher yields earned on the portfolios.
•$4.9 million provision driven by loan growth and changes in the loan mix.
•$3.1 million provision due to changes in the projected economic forecast, specifically the national unemployment rate, and changes in qualitative adjustments.
•$1.3 million reduction of specific reserves on individually evaluated credits, which was tied to two relationships which were fully charged-off during the period.
For the nine months endedMarch 31, 2022 , the "loans" portion of the benefit for credit losses was driven by an improvement in the economic forecast, as more clarity was gained regarding the impact of COVID-19 upon the loan portfolio. For the nine months endedMarch 31, 2023 , a provision of$0.4 million was also recorded to establish an allowance on Quantum's off-balance-sheet credit exposure. The remainder of the change was the result of changes in the balance of loan commitments as well as changes in the loan mix and changes in the projected economic forecast outlined above, which is the same reasoning for the provision for the nine months endedMarch 31, 2022 . 44 -------------------------------------------------------------------------------- Noninterest Income. Noninterest income for the nine months endedMarch 31, 2023 decreased$5.2 million , or 17.8%, when compared to the same period last year. Changes in the components of noninterest income are discussed below: Nine Months Ended March 31, 2023 March 31, (Dollars in thousands) 2022 $ Change % Change
Noninterest income
Service charges and fees on deposit accounts $ 7,117
- %
Loan income and fees 1,779 2,536 (757) (30)
Gain on sale of loans held for sale 4,499 10,927 (6,428) (59)
BOLI income 1,543 1,500 43 3
Operating lease income 4,246 4,920 (674) (14)
Gain (loss) on sale of premises and equipment 2,015 (87) 2,102 2,416
Other 2,963 2,496 467 19
Total noninterest income $ 24,162 $ 29,393 $ (5,231) (18) %
•Loan income and fees: The decrease in loan income and fees was driven by lower
underwriting fees, interest rate swap fees, and prepayment penalties in the
current period compared to the same period last year, all of which were impacted
by rising interest rates.
•Gain on sale of loans held for sale: The decrease in the gain on sale of loans
held for sale was primarily driven by a decrease in volume of SBA loans and
residential mortgages sold during the period as a result of rising interest
rates. During the nine months ended March 31, 2023 , there were $36.9 million of
sales of the guaranteed portion of SBA commercial loans with gains of $2.7
million compared to $43.5 million sold and gains of $4.5 million for the
corresponding period in the prior year. There were $34.6 million of residential
mortgage loans originated for sale which were sold during the current period
with gains of $823,000 compared to $204.1 million sold with gains of $5.6
million for the corresponding period in the prior year. There were $99.4 million
of HELOCs sold during the current period for a gain of $897,000 compared to
$97.2 million sold and gains of $581,000 for the corresponding period in the
prior year. Lastly, $11.5 million of indirect auto finance loans were sold out
of the held for investment portfolio during the nine months ended March 31, 2022
for a gain of $205,000 . No such sales occurred in the same period in the current
year.
•Operating lease income: The decrease in operating lease income was the result
of lower contractual earnings as well as gains or losses incurred at the end of
operating leases, where we recognized a net loss of $172,000 for the nine months
ended March 31, 2023 versus a net loss of $17,000 in the same period last year.
•Gain (loss) on sale of premises and equipment: During the nine months ended
March 31, 2023 three properties were sold for a combined gain of $2.5 million ,
partially offset by additional impairment of $420,000 on premises associated
with prior branch closures. For the nine months ended March 31, 2022 , no sales
occurred but $87,000 of additional impairment was recorded on premises held for
sale.
•Other: The increase in other income was driven by a $721,000 gain recognized on
the sale of closely held equity securities which the Company obtained through a
prior bank acquisition. No such sales occurred in the same period in the prior
year.
Noninterest Expense. Noninterest expense for the nine months ended
Nine Months Ended
March 31, 2023 March 31,
(Dollars in thousands) 2022 $ Change % Change
Noninterest expense
Salaries and employee benefits $ 45,545 $ 44,882 $ 663 1 %
Occupancy expense, net 7,291 7,201 90 1
Computer services 8,470 7,817 653 8
Telephone, postage and supplies 1,791 1,946 (155) (8)
Marketing and advertising 1,443 2,110 (667) (32)
Deposit insurance premiums 1,700 1,280 420 33
Core deposit intangible amortization 666 208 458 220
Merger-related expenses 5,465 - 5,465 100
Other 12,627 12,194 433 4
Total noninterest expense $ 84,998 $ 77,638 $ 7,360 9 %
•Computer services: The increase in expense between periods is due to continued
investments in technology as well as increases in the cost of services provided
by third parties.
•Marketing and advertising: The decrease in expense is primarily driven by a
reduction in traditional media advertising (print, billboards, etc.) in favor of
digital platforms at lower costs during the current fiscal year.
•Deposit insurance premiums: The increase in expense can be traced to an increase in rates the Company is charged for deposit insurance and the inclusion of Quantum's deposit portfolio for roughly half a quarter.
45
--------------------------------------------------------------------------------
•Core deposit intangible amortization: The increase in amortization expense
during the nine months ended March 31, 2023 is a result of a $12.2 million core
deposit intangible associated with the Company's merger with Quantum, which will
be amortized on an accelerated basis over ten years.
•Merger-related expenses: These are expenses related to the merger of Quantum
into the Company. The most significant expenses incurred included the payout of
severance and employment contracts, due diligence, professional fees,
termination of prior contracts, due diligence, and conversion of IT systems
which occurred during the period.
•Other: During the nine months ended March 31, 2023 the Company wrote off
$350,000 in previously capitalized costs associated with a technology project
which the Company is no longer pursuing. No such expense was incurred in the
prior period.
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. Income tax expense for the nine months ended March 31, 2023
increased $58,000 compared to the prior period.
Comparison of Financial Condition at
General. Total assets increased by$977.7 million to$4.5 billion and total liabilities increased by$908.3 million to$4.1 billion , respectively, atMarch 31, 2023 as compared toJune 30, 2022 . The majority of these changes were the result of the Company's merger with Quantum. Cash and cash equivalents and commercial paper. Total cash and cash equivalents increased$209.3 million , or 199.1%, to$314.4 million atMarch 31, 2023 from$105.1 million atJune 30, 2022 . Commercial paper decreased from$194.4 million to none atMarch 31, 2023 as the proceeds were used to fund loan growth during the period. Debt securities available for sale and other investments. Debt securities available for sale increased$27.7 million , or 21.8%, to$154.7 million atMarch 31, 2023 from$127.0 million atJune 30, 2022 . This increase can be traced to securities acquired from Quantum. Loans held for sale. Loans held for sale increased$11.1 million , or 14.0%, to$90.4 million atMarch 31, 2023 from$79.3 million atJune 30, 2022 . This was driven by an increase of$15.1 million , or 102.3%, in SBA loans held for sale, partially offset by a$2.8 million , or 67.3%, decrease in mortgage loans held for sale. Loans, net of deferred loan fees and costs. Total loans increased$880.0 million , or 31.8%, to$3.6 billion atMarch 31, 2023 from$2.8 billion atJune 30, 2022 . Excluding the$561.9 million acquired as part of the merger with Quantum, total loans increased$318.1 million , or 11.5%. The following table illustrates the changes within the portfolio: As of Percent of Total (Dollars in thousands) March 31, June 30, Change March 31, June 30, 2023 2022 $ % 2023 2022 Commercial real estate loans Construction and land development$ 368,756 $ 291,202 $ 77,554 27 % 10 % 11 % Commercial real estate - owner occupied 524,247 335,658 188,589 56 15 12 Commercial real estate - non-owner occupied 926,991 662,159 264,832 40 25 24 Multifamily 85,285 81,086 4,199 5 2 3 Total commercial real estate loans 1,905,279 1,370,105 535,174 39 52 50 Commercial loans Commercial and industrial 229,840 193,313 36,527 19 6 7 Equipment finance 440,345 394,541 45,804 12 12 14 Municipal leases 138,436 129,766 8,670 7 4 5 Total commercial loans 808,621 717,620 91,001 13 22 26 Residential real estate loans Construction and land development 105,617 81,847 23,770 29 3 3 One-to-four family 518,274 354,203 164,071 46 14 13 HELOCs 193,037 160,137 32,900 21 6 6 Total residential real estate loans 816,928 596,187 220,741 37 23 22 Consumer loans 118,505 85,383 33,122 39 3 2 Loans, net of deferred loan fees and costs$ 3,649,333 $ 2,769,295 $ 880,038 32 % 100 % 100 % Asset quality. Nonperforming assets increased by$1.7 million , or 27.1%, to$8.0 million , or 0.18% of total assets, atMarch 31, 2023 compared to$6.3 million , or 0.18% of total assets, atJune 30, 2022 . Nonperforming assets included$7.9 million in nonaccruing loans and$123,000 of REO atMarch 31, 2023 , compared to$6.1 million and$200,000 in nonaccruing loans and REO, respectively, atJune 30, 2022 . Nonperforming loans to total loans was 0.22% atMarch 31, 2023 and 0.22% atJune 30, 2022 . The ratio of classified assets to total assets decreased to 0.49% atMarch 31, 2023 from 0.61% atJune 30, 2022 , mainly due to growth in the balance sheet as a result of the merger with Quantum. Classified assets increased$416,000 , or 1.9%, to$22.0 million atMarch 31, 2023 compared to$21.5 million atJune 30, 2022 . Our individually evaluated loans include loans on nonaccrual status and all TDRs, whether performing or on nonaccrual status under their restructured terms. Individually evaluated loans may be evaluated for reserve purposes using either the discounted cash flow or the collateral valuation method. As ofMarch 31, 2023 , there was$7.5 million in loans individually evaluated compared to$5.3 million atJune 30, 2022 , due to the inclusion of PCD loans from the merger with Quantum. 46 -------------------------------------------------------------------------------- Allowance for credit losses. The ACL on loans was$47.5 million , or 1.30% of total loans, atMarch 31, 2023 compared to$34.7 million , or 1.25% of total loans, as ofJune 30, 2022 . Net loan charge-offs totaled$2.0 million , or 0.09% as a percentage of average loans, for the nine months endedMarch 31, 2023 compared to$19,000 , or 0.00% as a percentage of average loans, for the same period last year. The drivers of these changes are discussed in the "Nine Months EndedMarch 31, 2023 andMarch 31, 2022 " section above. Other assets. Other assets decreased$3.4 million , or 6.4%, to$49.6 million atMarch 31, 2023 from$53.0 million atJune 30, 2022 . The decrease was primarily driven by lower current taxes receivable and the sale of properties held for sale.
Deposits. The following table summarizes the composition of our deposit portfolio as of the dates indicated:
As of
March 31, June 30, Change
(Dollars in thousands) 2023 2022 $ %
Core deposits
Noninterest-bearing accounts $ 872,492 $ 745,746 $ 126,746 17 %
NOW accounts 678,178 654,981 23,197 4
Money market accounts 1,299,503 969,661 329,842 34
Savings accounts 228,390 238,197 (9,807) (4)
Total core deposits 3,078,563 2,608,585 469,978 18
Certificates of deposit 597,036 491,176 105,860 22
Total $ 3,675,599 $ 3,099,761 $ 575,838 19 %
The following bullet points provide further information regarding the
composition of our deposit portfolio as of
•Total deposits increased
•The balance of uninsured deposits was
•The balance of brokered deposits was
•Total deposits are evenly distributed between commercial and consumer depositors.
•The average balance of our deposit accounts was
•Our largest 25 depositors made up
Liquidity
Management maintains a liquidity position that it believes will adequately provide for funding of loan demand and deposit run-off that may occur in the normal course of business. We rely on a number of different sources in order to meet our potential liquidity demands. The primary sources are increases in deposit accounts, wholesale borrowings, and cash flows from loan payments and the securities portfolio. In addition to these primary sources of funds, management has several secondary sources available to meet potential funding requirements. As ofMarch 31, 2023 , the Bank had an available borrowing capacity of$68.5 million and$23.1 million with the FHLB ofAtlanta and FRB, respectively, and revolving lines of credit with three unaffiliated banks, the unused portion of which totaled$129.7 million . Additionally, we classify our securities portfolio as available for sale, providing an additional source of liquidity. Management believes that our securities portfolio is of high quality and the securities would therefore be readily marketable. In addition, we have historically sold fixed-rate mortgage loans in the secondary market to reduce interest rate risk and to create still another source of liquidity. From time to time we also utilize brokered time deposits to supplement our other sources of funds. Brokered time deposits are obtained by utilizing an outside broker that is paid a fee. This funding requires advance notification to structure the type of deposit desired by us. Brokered deposits can vary in term from one month to several years and have the benefit of being a source of longer-term funding. We also utilize brokered deposits to help manage interest rate risk by extending the term to repricing of our liabilities, enhance our liquidity, and fund asset growth. Brokered deposits are typically from outside our primary market areas, and our brokered deposit levels may vary from time to time depending on competitive interest rate conditions and other factors. AtMarch 31, 2023 brokered deposits totaled$134.9 million , or 3.7%, of total deposits. Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in short-term investments, such as overnight deposits and federal funds. On a longer term basis, we maintain a strategy of investing in various lending products and debt securities, including MBS. On a stand-alone basis we are a separate legal entity from the Bank and must provide for our own liquidity and pay our own operating expenses. Our primary source of funds consists of dividends or capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to pay dividends. AtMarch 31, 2023 , we (on an unconsolidated basis) had liquid assets of$3.4 million . At the Bank level, we use our sources of funds primarily to meet our ongoing commitments, pay maturing deposits and fund withdrawals, and fund loan commitments. AtMarch 31, 2023 , the total approved loan commitments and unused lines of credit outstanding amounted to$364.4 million and$597.5 million , respectively, as compared to$417.6 million and$485.2 million as ofJune 30, 2022 . Certificates of deposit scheduled to mature in one year or less atMarch 31, 2023 , totaled$495.8 million . It is management's policy to manage deposit rates that are competitive with other local financial institutions. Based on this management strategy, we believe a majority of our maturing deposits will remain with us. 47 --------------------------------------------------------------------------------
Off-Balance Sheet Activities
In the normal course of operations, we engage in a variety of financial transactions that are not recorded in our financial statements, mainly to manage customers' requests for funding. These transactions primarily take the form of loan commitments and lines of credit and involve varying degrees of off-balance sheet credit, interest rate, and liquidity risks. For further information, see "Note 12 - Commitments and Contingencies" in this Quarterly Report on Form 10-Q.
Capital Resources
AtMarch 31, 2023 , stockholders' equity totaled$458.2 million compared to$388.8 million atJune 30, 2022 , an increase of$69.4 million which was the result of net income for the nine months and the issuance of our common stock as consideration in our merger with Quantum.HomeTrust Bancshares, Inc. is a bank holding company subject to regulation by theFederal Reserve . As a bank holding company, we are subject to capital adequacy requirements of theFederal Reserve under the Bank Holding Company Act of 1956, as amended and the regulations of theFederal Reserve . Our subsidiary, the Bank, anFDIC -insured,North Carolina state-chartered bank and a member of theFederal Reserve System , is supervised and regulated by the FRB and NCCOB and is subject to minimum capital requirements applicable to state member banks established by theFederal Reserve that are calculated in a manner similar to those applicable to bank holding companies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly discretionary actions by bank regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. AtMarch 31, 2023 ,HomeTrust Bancshares, Inc. and the Bank each exceeded all regulatory capital requirements. Consistent with our goals to operate a sound and profitable organization, our policy is for the Bank to maintain a "well-capitalized" status under the regulatory capital categories of theFederal Reserve . The Bank was categorized as "well-capitalized" under applicable regulatory requirements.
Regulatory Requirements
Minimum for Capital Minimum to Be
Actual Adequacy Purposes Well Capitalized(Dollars in thousands) Amount Ratio Amount Ratio Amount RatioHomeTrust Bancshares, Inc. March 31, 2023 CET1 Capital (to risk-weighted assets)$ 423,577 10.43 %$ 182,836 4.50 %$ 264,096 6.50 % Tier I Capital (to total adjusted assets) 433,522 11.08 156,481 4.00 195,602
5.00
Tier I Capital (to risk-weighted assets) 433,522 10.67 243,781 6.00 325,041
8.00
Total Risk-based Capital (to risk-weighted assets) 473,543 11.65 325,041 8.00 406,301 10.00 June 30, 2022 CET1 Capital (to risk-weighted assets)$ 372,797 10.76 %$ 155,844 4.50 %$ 225,108 6.50 % Tier I Capital (to total adjusted assets) 372,797 10.50 142,028 4.00 177,535
5.00
Tier I Capital (to risk-weighted assets) 372,797 10.76 207,792 6.00 277,057
8.00
Total Risk-based Capital (to risk-weighted assets) 395,962 11.43 277,057 8.00 346,321 10.00 HomeTrust Bank March 31, 2023 CET1 Capital (to risk-weighted assets)$ 443,910 10.93 %$ 182,836 4.50 %$ 264,096 6.50 % Tier I Capital (to total adjusted assets) 443,910 11.35 156,493 4.00 195,617
5.00
Tier I Capital (to risk-weighted assets) 443,910 10.93 243,781 6.00 325,041
8.00
Total Risk-based Capital (to risk-weighted assets) 483,931 11.91 325,041 8.00 406,301 10.00 June 30, 2022 CET1 Capital (to risk-weighted assets)$ 358,600 10.35 %$ 155,844 4.50 %$ 225,108 6.50 % Tier I Capital (to total adjusted assets) 358,600 10.11 141,814 4.00 177,267
5.00
Tier I Capital (to risk-weighted assets) 358,600 10.35 207,792 6.00 277,057
8.00
Total Risk-based Capital (to risk-weighted assets) 381,765 11.02 277,057 8.00 346,321 10.00 As permitted by the interim final rule issued onMarch 27, 2020 by the federal banking regulatory agencies, the Company elected the option to delay the estimated impact on regulatory capital of ASU 2016-13, which was adopted onJuly 1, 2020 . The initial adoption of ASU 2016-13 as well as 25% of the quarterly increases in the ACL subsequent to adoption (collectively the "transition adjustments") was delayed for two years. StartingJuly 1, 2022 , the cumulative amount of the transition adjustments became fixed and will be phased out of the regulatory capital calculations evenly over a three-year period, with 75% recognized in year three, 50% recognized in year four, and 25% recognized in year five. After five years, the temporary regulatory capital benefits will be fully reversed. 48 -------------------------------------------------------------------------------- In addition to the minimum CET1, Tier 1 and total risk-based capital ratios, bothHomeTrust Bancshares, Inc. and the Bank have to maintain a capital conservation buffer consisting of additional CET1 capital of more than 2.50% above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions. As ofMarch 31, 2023 , the Company's and Bank's risk-based capital exceeded the required capital contribution buffer.
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