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HomeTrust says COVID-19 affected net

HomeTrust Bancshares, holding company of HomeTrust Bank, today announced  preliminary net income for the fourth quarter and fiscal year of 2020, approval of its quarterly cash dividend, and its updated response to the COVID-19 pandemic.

For the quarter ended June 30, 2020 compared to the corresponding quarter in the previous year:

  • net income was $3.6 million, compared to $8.0 million;
  • diluted earnings per share (“EPS”) was $0.22, compared to $0.44;
  • return on assets (“ROA”) was 0.39%, compared to 0.92%;
  • return on equity (“ROE”) was 3.54%, compared to 7.87%;
  • provision for loan losses was $2.7 million, compared to $200,000;
  • noninterest income increased $377,000, or 5.5% to $7.2 million from $6.8 million;
  • organic net loan growth, which excludes one-to-four family loans transferred to held for sale, U.S. Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) loans, and purchases of home
  • equity lines of credit, was $35.3 million, or 5.5% annualized compared to $56.0 million, or 8.9% annualized; and
  • quarterly cash dividends continued at $0.07 per share totaling $1.1 million.

For the fiscal year ended June 30, 2020 compared to the previous year:

  • net income was $22.8 million, compared to $27.1 million;
  • EPS was $1.30, compared to $1.46;
  • ROA was 0.63%, compared to 0.80%;
  • ROE was 5.54%, compared to 6.62%;
  • provision for loan losses was $8.5 million, compared to $5.7 million;
  • noninterest income increased $7.4 million, or 32.2% to $30.3 million from $22.9 million;
  • organic net loan growth was $183.3 million,  or 7.1% compared to $228.6 million, or 9.7%; and
  • total deposits increased $458.5 million, or 19.7% to $2.8 billion from $2.3 billion.

Earnings during the three months and year ended June 30 were negatively impacted by a significant increase in the provision for loan losses based on the Company’s assessment of COVID-19 on various macroeconomic factors. In addition, the decrease in interest rates over the past year has negatively affected the Company’s net interest margin.

The Company also announced today that its Board of Directors declared a quarterly cash dividend of $0.07 per common share payable on September 3, 2020 to shareholders of record as of the close of business on August 20, 2020.

“Fiscal 2020 has certainly been one for the record books in two significant ways,” said Dana Stonestreet, Chairman, President and Chief Executive Officer. “In the first half of fiscal 2020 we achieved record results in earnings per share, annualized return on assets and return on equity along with annualized loan and deposit growth of 9% and 20%, respectively. Our team members execution of our strategy to transform HomeTrust from a historic rural thrift to a top quartile performing community commercial bank was setting new milestones. We entered the second half of the year with tremendous momentum and in February successfully completed the conversion and upgrade of our core technology systems after two years of arduous preparation.

“Then just two weeks later, the COVID-19 pandemic hit and we quickly pivoted around employee safety and customer needs. We set new records in change management as more than 375 employees or 70% of our workforce were set up with safe and effective technology to work from home. Our courageous team members continued taking good care of our customers by keeping drive-thrus open at all branch locations and lobbies open by appointment while implementing continuously changing safety protocols.  In addition, they began making personal phone calls to customers to check in on them and their banking needs. Over 40,000 conversations resulted in many customers getting the debit cards and mobile banking services they needed while others greatly appreciated a caring conversation during their quarantine time. Our lending and credit teams were proactive in communicating with customers and providing payment deferrals, originating PPP loans and providing consultations and discussions on dealing with the impacts of the pandemic.

“We are so proud of the entire HomeTrust team for their dedication and personal sacrifices to find every way possible to serve and care for our customers and to support each other. Our people are truly the key to making HomeTrust always – Ready For What’s Next!

“We enter fiscal 2021 with energy, enthusiasm and confidence that we will manage well through the impacts of the pandemic and continue maturing all of our new lines of business to achieve financial results that create shareholder value.”

Response to COVID-19

Loan Programs.  In response to the current global situation surrounding the COVID-19 pandemic, the Company continues to offer a variety of relief options designed to support our customers and communities, including participating in the SBA’s PPP loans. As of June 30, 2020, we had originated $80.7 million of PPP loans for 285 customers. Net origination fees on these loans were approximately $2.1 million which will be deferred and amortized into interest income over the life of the loans. Due to demand exceeding our capacity, we partnered with a third party to process and fund an additional $30.4 million of PPP loans for almost 900 customers. We are also continuing to work with our clients to assist them with accessing other borrowing options, including the Main Street Lending Program and other government sponsored lending programs, as appropriate.

Loan Modifications.  The Company is closely monitoring the effects of COVID-19 on our loan portfolio and will continue to monitor all the associated risks to minimize any potential losses. HomeTrust Bank is offering payment and financial relief programs for borrowers impacted by COVID-19. These programs include loan payment deferrals for up to 90 days, waived late fees, and suspension of foreclosure proceedings and repossessions. We have received numerous requests from borrowers for some type of payment relief.  As of July 22, 2020, we have processed and approved payment deferrals on loans totaling $585.0 million, or 21.1% of total loans. The breakout by loan type is as follows:

Payment Deferrals by Loan Types as of July 22, 2020 Percent of
Total
Loan
Portfolio
(dollars in thousands) Total
Current
Deferrals
Percent of
Total
Loan
Portfolio
1st
Deferral(1)
2nd
Deferral(2)
Out of
Deferral(3)
Total
Deferrals
Commercial real estate,
construction and development,
and commercial and industrial
$ 392,714 $ 82,147 $ 474,861 17.1 % $ $ 474,861 17.1 %
Equipment finance 20,428 1,488 21,916 0.8 21,925 43,841 1.6
One-to-four family 19,401 8,871 28,272 1.0 25,015 53,287 1.9
Other consumer loans 1,072 933 2,005 0.1 11,007 13,012 0.5
Total $ 433,615 $ 93,439 $ 527,054 19.0 % $ 57,947 $ 585,001 21.1 %

(1) Loans that have requested an initial payment deferral.
(2) Loans that have requested a second deferral after the original deferral period ended.
(3) Loans that have exited their deferral period.

In addition, the Company’s management has evaluated its loan portfolio and identified the following loan categories as potentially the most impacted by the COVID-19 pandemic:

Payment Deferrals In Higher Risk Loan Sub-Categories as of June 30, 2020
(dollars in thousands) Percent of
Dollars in
Deferral
Percent of
Total
Loan
Portfolio
Total
Deferrals
Total
Balance
Lodging $ 108,171 $ 118,729 91.1 % 3.9 %
Restaurants 28,044 45,560 61.6 1.0
Shopping centers 53,337 89,285 59.7 1.9
Other retail businesses 36,101 150,229 24.0 1.3
Equipment finance 43,841 229,239 19.1 1.6
Total $ 269,494 $ 633,042 42.6 % 9.7 %

The Company does not have any exposure to oil/gas or credit cards at June 30, 2020.

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

Allowance for Loan Losses. The Company recorded a provision for loan losses of $2.7 million and $8.5 million for the three months and year ended June 30, 2020, respectively, compared to a $200,000 and $5.7 million provision in the corresponding periods in fiscal 2019. Approximately $4.3 million of the provision for the current year reflects probable credit losses related to COVID-19 based upon the conditions that existed as of June 30, 2020, including consideration for the recent downturn in certain leading economic indicators, such as the weaker stock market, lower manufacturing activity and retail sales, consumer confidence, and increases in unemployment with the remaining provision being driven by increased charge-offs and impairments in our commercial and equipment finance portfolios. The provision during the previous year was primarily related to one commercial customer relationship.

Branch Operations and Support Personnel.  We have taken various steps to ensure the safety of our customers and our team members by continuing to limit branch activities to appointment only and use of our drive-up facilities, and by encouraging the use of our digital and electronic banking channels, all the while adjusting for evolving State and Federal guidelines. Many of our employees are continuing to work remotely or have flexible work schedules, and we have established protective measures within our offices to help ensure the safety of those employees who must work on-site.

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