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HomeTrust Bancshares, Inc. Reports Financial Results For The Third Fiscal Quarter Of 2016

ASHEVILLE, N.C., April 29, 2016 (GLOBE NEWSWIRE) -- HomeTrust Bancshares, Inc. (NASDAQ:HTBI) ("Company"), the holding company of HomeTrust Bank ("Bank"), today announced preliminary net income of $3.1 million for the quarter ended March 31, 2016, a $1.9 million, or 170.3% increase over net income of $1.2 million for the same period a year ago. The Company's basic and diluted earnings per share increased to $0.18 for the three months ended March 31, 2016 compared to $0.06 per share for the same period in fiscal 2015.

Net income totaled $8.2 million for the nine months ended March 31, 2016, a $2.7 million, or 49.1% increase compared to $5.5 million for the same period in 2015. The Company's basic and diluted earnings per share increased to $0.46 from $0.28 per share for the nine months ended March 31, 2016 compared to the same period in 2015. Tangible book value per share increased $0.70, or 3.9% to $18.76 as of March 31, 2016 compared to $18.06 at June 30, 2015.

For the three-month period ended March 31, 2016, retail loan portfolio originations increased $2.6 million from $54.4 million to $57.0 million, or 4.7% compared to the same period in the previous year. For the three-month period ended March 31, 2016, commercial loan portfolio originations increased $3.6 million from $48.9 million to $52.5 million, or 7.3% compared to the same period in the previous year. For the nine-month period ended March 31, 2016, retail loan portfolio originations increased $33.1 million from $161.5 million to $194.7 million, or 20.5% compared to the same period in the previous year. For the nine-month period ended March 31, 2016, commercial loan portfolio originations increased $91.0 million from $153.7 million to $244.7 million, or 59.2% compared to the same period in the previous year. Organic loan growth for the nine months ended March 31, 2016 was $43.3 million, or 3.4% annualized. Including the growth in unfunded construction loans of $74.5 million over this nine month period, organic loan growth was 9.3% annualized.

"Our solid performance was driven by modest loan growth, continued improvements in asset quality, and a strong focus on improving efficiencies across all areas of the Bank. We are particularly pleased with the impact of recent strategies to control our noninterest expenses as our efficiency ratio continues its positive trend," commented Dana Stonestreet, Chairman, President, and CEO. "In addition, we recently completed a branch optimization project to further improve efficiencies in our retail network going into the 2017 fiscal year," said Stonestreet.

Income Statement Review

Net interest income of $20.2 million for the quarter ended March 31, 2016, remained consistent with the same period in 2015. Average interest-earning assets increased $114.1 million to $2.5 billion for the quarter ended March 31, 2016 from the comparative quarter in 2015, mainly from our leveraging strategy, where additional short-term Federal Home Loan Bank ("FHLB") borrowings are invested in various short-term liquid assets to generate additional net interest income, as well as increased dividend income from the required purchase of additional FHLB stock. Net interest margin (on a fully taxable-equivalent basis) for the three months ended March 31, 2016 decreased 16 basis points to 3.36% from 3.52%, primarily due to the $233.3 million average increase in additional short-term FHLB borrowings over the comparative quarter in 2015. During the three months ended March 31, 2016, our leveraging strategy produced an additional $923,000 in interest income at an average yield of 92 basis points, while the average cost of the borrowings was 40 basis points, resulting in approximately $517,000 in net interest income. During the same quarter in the prior fiscal year, our leveraging strategy produced an additional $367,000 in interest income at an average yield of 59 basis points, while the average cost of the borrowings was 20 basis points, resulting in approximately $239,000 in net interest income. Excluding the effects of the leveraging strategy, the net interest margin would be 3.91% and 3.90% for the quarter ended March 31, 2016 and 2015, respectively.

For the quarter ended March 31, 2016, the average balance of loans increased by $108.1 million from organic loan growth and the purchase of home equity lines of credit ("HELOCs"), however loan interest income decreased $135,000 to $19.4 million as compared to the same quarter last year. Driving the quarter over quarter decrease in loan interest income was a $262,000 decrease in the accretion of purchase discounts on acquired loans to $1.2 million for the quarter ended March 31, 2016 from $1.4 million for the same quarter in 2015. Average loan yields decreased 35 basis points to 4.58% for the quarter ended March 31, 2016 from 4.93% in the corresponding quarter in 2015. Total interest expense increased $229,000 for the quarter ended March 31, 2016 compared to the same period last year. This increase was primarily due to average FHLB borrowings increasing by $233.3 million to $483.3 million due to our leveraging strategy, partially offset by a decrease in average certificates of deposit of $144.9 million to $486.4 million compared to the same period in 2015 as we continue to reduce higher rate certificates of deposit. The overall average cost of funds increased three basis points due to the impact of the recent increase in the federal funds rate on our other borrowings.

Net interest income increased $2.0 million, or 3.3% to $60.9 million for the nine months ended March 31, 2016 compared to $58.9 million for the nine months ended March 31, 2015. Average interest-earning assets increased $318.1 million to $2.5 billion for the nine months ended March 31, 2016 compared to the same period in 2015, mainly from our leveraging strategy and new loans from acquisitions and organic growth. Net interest margin (on a fully taxable-equivalent basis) for the nine months ended March 31, 2016 decreased 37 basis points to 3.36% from 3.73% as a result of the $305.7 million increase in average short-term FHLB borrowings from the nine months ended March 31, 2015. For the nine months ended March 31, 2016, our leveraging strategy produced an additional $2.3 million in interest income at an average yield of 75 basis points, while the average cost of the borrowings was 28 basis points, resulting in approximately $1.5 million in net interest income. During the same nine-month period in the prior fiscal year, our leveraging strategy produced an additional $494,000 in interest income at an average yield of 144 basis points, while the average cost of the borrowings was 21 basis points, resulting in approximately $278,000 in net interest income. Excluding the effects of the leveraging strategy, the net interest margin would be 3.93% and 3.97% for the nine months ended March 31, 2016 and 2015, respectively.

Interest income on loans for the nine months ended March 31, 2016 increased $454,000 due to a $135.2 million increase in the average balance of loans offsetting a 36 basis point decrease in the average loan yields as compared to the same period in 2015. Interest income on loans also included $3.4 million and $3.6 million in accretion of purchase discounts on acquired loans for the nine months ended March 31, 2016 and 2015, respectively. Total interest expense increased $450,000 for the nine months ended March 31, 2016 compared to the same period last year. This increase was primarily due to average FHLB borrowings increasing by $305.7 million to $480.4 million, partially offset by a decrease in average certificates of deposit by $111.7 to $520.3 million compared to the same period in 2015.

Noninterest income increased $71,000, or 2.1%, to $3.4 million for the three months ended March 31, 2016 from $3.3 million for the same period in the previous year. The $161,000, or 17.7% increase in other noninterest income was directly related to the receipt of a one-time $150,000 payment related to the change in our merchant credit card vendor, which was partially offset by a $118,000, or 6.8% decrease in deposit account fees. Noninterest expense for the quarter ended March 31, 2016 decreased $2.7 million, or 12.0%, to $19.4 million compared to $22.0 million for the quarter ended March 31, 2015. This decrease was primarily related to a $1.7 million decrease in merger-related expenses, a $345,000 decrease in computer services related to the integration of prior acquisitions, and the consolidation of six branches during second quarter of fiscal 2016 as reflected by a $374,000 decrease in salaries and employee benefits and a $147,000 decrease in net occupancy expense. Real estate owned ("REO")-related expenses increased $119,000 primarily as a result of $172,000 in net losses in the quarter ended March 31, 2016, compared to $32,000 in net gains in the same quarter in 2015.

Noninterest income increased $857,000, or 9.6%, to $9.8 million for the nine months ended March 31, 2016 from $8.9 million for the same period in the previous year, as a result of a $820,000, or 19.9%, increase in fees and service charges on checking accounts, a $322,000, or 12.9% increase in other income, partially offset by a $224,000, or 10.0% decrease in mortgage banking income and fees. Noninterest expense for the nine months ended March 31, 2016 decreased $1.6 million, or 2.6%, to $59.1 million compared to $60.7 million for the nine months ended March 31, 2015. The overall decrease was a result of a $5.4 million decrease in merger-related expenses, partially offset by a $1.5 million increase in salaries and employee benefits, a $533,000 increase in net occupancy expense, a $487,000 increase in amortization of core deposit intangibles, and a $922,000 increase in other expenses, all of which were primarily related to our branch acquisition in November 2014. REO-related expenses increased $387,000 primarily as a result of $310,000 in net losses for the nine months ended March 31, 2016, compared to $268,000 in net gains in the same period in 2015, partially offset by a $191,000 decrease in expenses related to REO properties.

The Company's income tax expense increased $776,000 to $1.1 million for the quarter ended March 31, 2016 over the same quarter in 2015 as a result of additional pretax income. The Company's effective income tax rate for the quarter ended March 31, 2016 was 25.8% compared to 21.3% for the quarter ended March 31, 2015.

For the nine months ended March 31, 2016, the Company's income tax expense was $3.5 million, an increase of $1.5 million, or 74.3% compared to $2.0 million for the nine months ended March 31, 2015. The increase was a result of additional pretax income and a nonrecurring charge of $526,000 during the first quarter of the fiscal year related to the decrease in value of our deferred tax assets based on recent decreases in North Carolina's corporate tax rate. The rate was reduced to 4.0% in August 2015 with additional reductions possible to 3.0% through 2017 if certain state revenue triggers are achieved. The Company's effective income tax rate for the nine months ended March 31, 2016 was 30.0% compared to 26.8% for the nine months ended March 31, 2015.

Balance Sheet Review

At March 31, 2016, total assets of $2.8 billion and total liabilities of $2.4 billion remained consistent with June 30, 2015. The increase in FHLB borrowing of $32.0 million, or 6.7% and the cumulative decrease of $156.9 million, or 26.9%, in cash and cash equivalents, certificates of deposit in other banks, and securities available for sale for the first nine months in fiscal 2016 were part of our strategy to reduce excess liquidity by funding higher yielding loans, reducing higher cost certificates of deposit as discussed below, and the repurchase of common stock as we continue to focus on increasing shareholder value. The increase in net loans receivable of $129.3 million to $1.8 billion at March 31, 2016 was driven by $43.3 million of organic growth and $85.9 million in purchased HELOCs, net of repayments. The decrease of $3.3 million in loans held for sale was due to seasonal lower volume.

Total deposits decreased $40.1 million, or 2.1%, to $1.8 billion at March 31, 2016 from $1.9 billion at June 30, 2015. The decrease was primarily due to a managed run off of $104.8 million in higher cost certificates of deposit partially offset by a $36.4 million increase in money market accounts and a $35.0 million increase in checking accounts.

Stockholders' equity at March 31, 2016 decreased to $358.8 million from $371.1 million at June 30, 2015. The decrease was primarily a result of 1,316,194 shares of common stock repurchased at an average cost of $18.38, or approximately $24.2 million in total, partially offset by a $1.1 million increase in unrealized gains on securities available for sale and $8.2 million in net income. As of March 31, 2016, HomeTrust Bank was considered "well capitalized" in accordance with its regulatory capital guidelines and exceeded all regulatory capital requirements with Common Equity Tier 1, Tier 1 Risk-Based, Total Risk-Based, and Tier 1 Leverage capital ratios of 12.38%, 12.38%, 13.37%, and 10.32%, respectively. In addition, the Company was categorized as "well capitalized" at March 31, 2016 under applicable regulatory guidelines.

Asset Quality

The allowance for loan losses was $21.8 million, or 1.20% of total loans, at March 31, 2016 compared to $22.4 million, or 1.33% of total loans, at June 30, 2015. The allowance for loan losses was 1.39% of total loans at March 31, 2016, excluding acquired loans.

There was no provision for losses on loans for the three months ended March 31, 2016 or the comparative period in 2015. Net loan charge-offs totaled $216,000 for the three months ended March 31, 2016 compared to net charge-offs of $675,000 for the same period during the prior fiscal year. Net charge-offs as a percentage of average loans decreased to 0.05% for the quarter ended March 31, 2016 from 0.16% for the same period last fiscal year.

There was no provision for losses on loans for the nine months ended March 31, 2016 compared to a $250,000 recovery of loan losses for the same period in the previous year due to our improved credit metrics. Net loan charge-offs increased to $613,000 for the nine months ended March 31, 2016 compared to net charge-offs of $498,000 for the same period during the prior fiscal year. Net charge-offs as a percentage of average loans increased slightly to 0.05% for the nine months ended March 31, 2016 from 0.04% for the same period last fiscal year.

Nonperforming assets decreased $4.1 million to $27.7 million, or 1.01% of total assets, at March 31, 2016, compared to $31.9 million, or 1.15% of total assets, at June 30, 2015. Nonperforming assets included $21.0 million in nonaccruing loans and $6.7 million in REO at March 31, 2016, compared to $24.9 million and $7.0 million, in nonaccruing loans and REO, respectively, at June 30, 2015. Included in nonperforming loans are $5.7 million of loans restructured from their original terms of which $2.2 million were current with respect to their modified payment terms. At March 31, 2016, $6.9 million, or 32.8%, of nonaccruing loans were current on their required loan payments. Purchased impaired loans aggregating $7.1 million acquired from prior acquisitions are excluded from nonaccruing loans due to the accretion of discounts established in accordance with the acquisition method of accounting for business combinations.

The ratio of classified assets to total assets decreased to 2.33% at March 31, 2016 from 2.90% at June 30, 2015. Classified assets decreased 21.0% to $64.1 million at March 31, 2016 compared to $81.1 million at June 30, 2015.

About HomeTrust Bancshares, Inc.

HomeTrust Bancshares, Inc. is the holding company for HomeTrust Bank. As of March 31, 2016, the Company had assets of $2.8 billion. The Bank, founded in 1926, is a North Carolina state chartered, community-focused financial institution committed to providing value added relationship banking through 39 locations as well as online/mobile channels. Locations include: North Carolina (including the Asheville metropolitan area, the "Piedmont" region, Charlotte, and a loan production office in Raleigh), Upstate South Carolina (Greenville), East Tennessee (including Kingsport/Johnson City, Knoxville, and Morristown) and Southwest Virginia (including the Roanoke Valley). In 2016, the Bank is celebrating its 90th Anniversary and nine decades of commitment to our customers, employees and surrounding communities. The Bank is the 5th largest community bank headquartered in North Carolina.

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements often include words such as "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events many, of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially, from those currently expected or projected in these forward-looking statements. Factors that could cause our actual results to differ materially from those described in the forward-looking statements, include expected cost savings, synergies and other financial benefits from our recent acquisitions might not be realized within the expected time frames or at all, and costs or difficulties relating to integration matters might be greater than expected; increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and other factors described in HomeTrust's latest annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other documents filed with or furnished to the Securities and Exchange Commission-which are available on our website at www.hometrustbanking.com and on the SEC's website at www.sec.gov. Any of the forward-looking statements that we make in this press release or the documents we file with or furnish to the SEC are based upon management's beliefs and assumptions at the time they are made and may turn out to be wrong because of inaccurate assumptions we might make, because of the factors described above or because of other factors that we cannot foresee. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for fiscal 2016 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect our operating and stock performance.

WEBSITE: WWW.HOMETRUSTBANCSHARES.COM

Selected Financial Data
At or For the Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2016 2015 2015 2015(1) 2015
(Dollars in thousands)
Financial Condition Data:
Total assets$2,759,801 $2,728,552 $2,726,000 $2,783,114 $2,608,637
Loans held for sale2,537 5,080 4,012 5,874 2,225
Loans receivable, net(2)1,793,256 1,725,790 1,720,178 1,663,333 1,618,376
Allowance for loan losses21,761 21,977 22,112 22,374 22,681
Interest-earning deposits18,212 24,781 12,819 82,269 153,718
Commercial paper275,878 271,856 242,928 256,152 99,953
Certificates of deposit in other banks158,767 177,934 196,386 210,629 204,596
Securities available for sale, at fair value219,498 229,227 249,711 257,606 230,512
Goodwill12,673 12,673 12,673 12,673 12,673
Core deposit intangibles7,815 8,526 9,269 10,043 10,850
Deposits1,831,979 1,829,987 1,819,950 1,872,126 1,913,773
Checking accounts (noninterest and interest)626,432 608,925 582,626 591,429 592,338
Other borrowings507,000 479,000 476,000 475,000 250,000
Stockholders' equity358,843 361,195 368,148 371,050 381,935
Asset quality ratios:
Nonperforming assets to total assets(3)1.01% 1.14% 1.16% 1.15% 1.51%
Nonperforming loans to total loans(3)1.16 1.40 1.43 1.47 1.88
Total classified assets to total assets2.33 2.63 2.72 2.90 3.51
Allowance for loan losses to nonperforming loans(3)103.43 89.97 88.84 90.02 73.42
Allowance for loan losses to total loans1.20 1.26 1.27 1.33 1.38
Allowance for loan losses to total gross loans excluding acquired loans(4)1.39 1.48 1.52 1.58 1.72
Net charge-offs to average loans (annualized)0.05 0.03 0.06 0.17 0.16
Capital ratios:
Equity to total assets at end of period13.00% 13.24% 13.51% 13.33% 14.64%
Tangible equity to total tangible assets(4)12.44 12.66 12.91 12.74 13.96
Average equity to average assets13.19 13.25 13.41 13.56 14.53

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(1) Derived from audited financial statements.
(2) Net of allowances for loan losses, loans in process, and deferred loan fees.
(3) Nonperforming assets include nonaccruing loans, consisting of certain restructured loans, and REO. There were no accruing loans more than 90 days past due at the dates indicated. At March 31, 2016, there were $5.7 million of restructured loans included in nonaccruing loans and $6.9 million, or 32.8%, of nonaccruing loans were current on their loan payments. Purchased impaired loans acquired from BankGreenville, Jefferson, and Bank of Commerce are excluded from nonaccruing loans due to the accretion of discounts in accordance with the acquisition method of accounting for business combinations.
(4) See Non-GAAP reconciliation for adjustments.

Selected Operations Data
Three Months Ended March 31, Nine Months Ended March 31,
2016 2015 Difference 2016 2015 Difference
(Dollars in thousands)
Total interest income $21,797 $21,536 $261 $65,372 $62,959 $2,413
Total interest expense 1,577 1,348 229 4,431 3,981 450
Net interest income 20,220 20,188 32 60,941 58,978 1,963
Recovery of loan losses (250) 250
Net interest income after recovery of loan losses 20,220 20,188 32 60,941 59,228 1,713
Service charges on deposit accounts 1,614 1,732 (118) 4,931 4,111 820
Mortgage banking income and fees 690 672 18 2,008 2,232 (224)
Gain from sales of securities available for sale 61 (61)
Other noninterest income 1,080 909 171 2,819 2,497 322
Total noninterest income 3,384 3,313 71 9,758 8,901 857
Salaries and employee benefits 10,255 10,629 (374) 31,987 30,506 1,481
Net occupancy expense 2,234 2,381 (147) 6,799 6,266 533
REO-related expenses(1) 477 358 119 1,297 910 387
Core deposit intangible amortization 710 842 (132) 2,227 1,740 487
Merger-related expenses 1,686 (1,686) 5,417 (5,417)
Other 5,697 6,129 (432) 16,740 15,818 922
Total noninterest expense 19,373 22,025 (2,652) 59,050 60,657 (1,607)
Income before income taxes 4,231 1,476 2,755 11,649 7,472 4,177
Income tax expense 1,090 314 776 3,495 2,005 1,490
Net income $3,141 $1,162 $1,979 $8,154 $5,467 $2,687

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(1) REO-related expenses include gain/loss on sale and impairment of REO and all other REO-related expenses.

Selected Financial Ratios and Other Data
Three Months Ended Nine Months Ended
March 31, March 31,
2016 2015 2016 2015
Performance ratios: (1)
Return on assets (ratio of net income to average total assets) 0.46% 0.18% 0.40% 0.30%
Return on assets - adjusted(4) 0.46 0.34 0.42 0.48
Return on equity (ratio of net income to average equity) 3.49 1.22 2.98 1.92
Return on equity - adjusted(4) 3.49 2.33 3.18 3.07
Tax equivalent yield on earning assets(2) 3.62 3.75 3.59 3.98
Rate paid on interest-bearing liabilities 0.30 0.27 0.28 0.30
Tax equivalent average interest rate spread (2) 3.32 3.48 3.31 3.68
Tax equivalent net interest margin(2) (3) 3.36 3.52 3.36 3.73
Tax equivalent net interest margin - adjusted(4) 3.91 3.90 3.93 3.97
Average interest-earning assets to average interest-bearing liabilities 119.11 119.58 119.00 121.46
Operating expense to average total assets 2.84 3.35 2.87 3.35
Efficiency ratio(4) 77.89 82.58 79.54 77.76

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(1) Ratios are annualized where appropriate.
(2) The weighted average rate for municipal leases is adjusted for a 34% federal tax rate since the interest from these leases is tax exempt.
(3) Net interest income divided by average interest earning assets.
(4) See Non-GAAP reconciliation for adjustments.

Per Share Data
Three Months Ended Nine Months Ended
March 31, March 31,
2016 2015 2016 2015
Net income per common share:
Basic $0.18 $0.06 $0.46 $0.28
Diluted $0.18 $0.06 $0.46 $0.28
Adjusted net income per common share:(1)
Basic $0.18 $0.12 $0.49 $0.46
Diluted $0.18 $0.12 $0.49 $0.45
Average shares outstanding:
Basic 17,183,894 19,113,387 17,581,833 19,146,025
Diluted 17,369,871 19,192,702 17,762,375 19,232,791
Book value per share at end of period $19.72 $18.78 $19.72 $18.78
Tangible book value per share at end of period (1) $18.76 $17.77 $18.76 $17.77
Total shares outstanding at end of period 18,193,550 20,335,781 18,193,550 20,335,781

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(1) See Non-GAAP reconciliation for adjustments.

Average Balance Sheet Data
For the Three Months Ended March 31,
2016 2015
(Dollars in thousands)
Average
Balance
Yield/ Cost Average
Balance
Yield/ Cost
Loans receivable(1) $1,754,092 4.58% $1,645,993 4.93%
Interest-earning deposits with banks 211,036 0.93 387,264 0.68
Securities available for sale 216,535 1.82 205,447 1.79
Other interest-earning assets 302,351 1.16 131,254 1.16
Total interest-earning assets $2,484,014 3.62 $2,369,958 3.75
Interest-bearing deposits 1,602,221 0.27 1,731,931 0.28
Other borrowings 483,275 0.40 250,000 0.20
Total interest-bearing liabilities $2,085,496 0.30 $1,981,931 0.27
Tax equivalent interest rate spread(1) 3.31% 3.48%
Tax equivalent net interest margin(1) (2) 3.36% 3.52%
For the Nine Months Ended March 31,
2016 2015
(Dollars in thousands)
Average
Balance
Yield/ Cost Average
Balance
Yield/ Cost
Loans receivable(1) $1,744,484 4.61% $1,609,285 4.97%
Interest-earning deposits with banks 223,936 0.91 320,574 0.70
Securities available for sale 238,571 1.80 185,844 1.87
Other interest-earning assets 290,086 1.02 63,251 1.49
Total interest-earning assets $2,497,077 3.59 $2,178,954 3.98
Interest-bearing deposits 1,617,952 0.28 1,619,247 0.31
Other borrowings 480,411 0.28 174,724 0.21
Total interest-bearing liabilities $2,098,363 0.28 $1,793,971 0.30
Tax equivalent interest rate spread(1) 3.31% 3.68%
Tax equivalent net interest margin(1) (2) 3.36% 3.73%

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(1) The weighted average rate for municipal leases is adjusted for a 34% federal tax rate since the interest from these leases is tax exempt.
(2) Net interest income divided by average interest earning assets.

Non-GAAP Reconciliations

In addition to results presented in accordance with generally accepted accounting principles utilized in the United States ("GAAP"), this earnings release contains certain non-GAAP financial measures, which include: the efficiency ratio, tangible book value, tangible book value per share, tangible equity to tangible assets ratio, net income excluding merger-related expenses, nonrecurring state tax expense, and recovery of loan losses, earnings per share excluding merger expenses, nonrecurring state tax expense, and recovery of loan losses, and the ratio of the allowance for loan losses to total loans excluding acquired loans. The Company believes these non-GAAP financial measures and ratios as presented are useful for both investors and management to understand the effects of certain items and provides an alternative view of the Company's performance over time and in comparison to the Company's competitors.

Management elected to obtain additional FHLB borrowings beginning in November 2014 as part of a plan to increase net interest income. The Company believes that showing the effects of the additional borrowings on net interest income and net interest margins is useful to both management and investors as these measures are commonly used to measure financial institutions performance and against peers.

The Company believes these measures facilitate comparison of the quality and composition of the Company's capital and earnings ability 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 our efficiency ratio:

Three Months Ended Nine Months Ended
(Dollars in thousands) March 31, March 31,
2016 2015 2016 2015
Noninterest expense $19,373 $22,025 $59,050 $60,657
Less REO-related expenses 477 358 1,297 910
Less merger-related expenses 1,686 5,417
Noninterest expense – as adjusted $18,896 $19,981 $57,753 $54,330
Net interest income $20,220 $20,188 $60,941 $58,978
Plus noninterest income 3,384 3,313 9,758 8,901
Plus tax equivalent adjustment 655 696 1,911 2,053
Less realized gain on securities 61
Net interest income plus noninterest income – as adjusted $24,259 $24,197 $72,610 $69,871
Efficiency ratio 77.89% 82.58% 79.54% 77.76%
Efficiency ratio (without adjustments) 82.08% 93.72% 83.52% 89.36%

Set forth below is a reconciliation to GAAP of tangible book value and tangible book value per share:

Three Months Ended Nine Months Ended
(Dollars in thousands, except per share data) March 31, March 31,
2016 2015 2016 2015
Total stockholders' equity $358,843 $381,935 $358,843 $381,935
Less: goodwill, core deposit intangibles, net of taxes (17,596) (20,604) (17,596) (20,604)
Tangible book value $341,247 $361,331 $341,247 $361,331
Common shares outstanding 18,193,550 20,335,781 18,193,550 20,335,781
Tangible book value per share(1) $18.76 $17.77 $18.76 $17.77

Set forth below is a reconciliation to GAAP of tangible equity to tangible assets:

At or For the Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2016 2015 2015 2015 2015
(Dollars in thousands)
Tangible book value(1) $341,247 $343,151 $349,636 $352,050 $361,331
Total assets 2,759,801 2,728,552 2,726,000 2,783,114 2,608,637
Less: goodwill, core deposit intangibles, net of taxes (17,596) (18,044) (18,512) (19,000) (20,604)
Total tangible assets(2) $2,742,205 $2,710,508 $2,707,488 $2,764,114 $2,588,033
Tangible equity to tangible assets 12.44% 12.66% 12.91% 12.74% 13.96%

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

Set forth below is a reconciliation to GAAP of net interest income and net interest margin as adjusted to exclude additional FHLB borrowings and proceeds from such borrowings:

Three Months Ended March 31,
2016 2015
Average
Balance
Outstanding
Interest
Earned /
Paid
Yield/ Rate Average
Balance
Outstanding
Interest
Earned /
Paid
Yield/ Rate
Interest-earning assets$2,484,014 $22,452 3.62% $2,369,957 $22,232 3.75%
Less: Interest-earning assets funded by additional FHLB borrowings (1) 402,000 923 0.92% 250,000 367 0.59%
Interest-earning assets - adjusted$2,082,014 $21,529 4.14% $2,119,957 $21,865 4.13%
Interest-bearing liabilities$2,085,496 $1,577 0.30% $1,981,930 $1,348 0.27%
Additional FHLB borrowings402,000 406 0.40% 250,000 128 0.20%
Interest-bearing liabilities - adjusted$1,683,496 $1,171 0.28% $1,731,930 $1,220 0.28%
Net interest income and net interest margin $20,875 3.36% $20,884 3.52%
Net interest income and net interest margin - adjusted 20,358 3.91% 20,645 3.90%
Difference $517 (0.55)% $239 (0.38)%
Nine Months Ended March 31,
2016 2015
Average
Balance
Outstanding
Interest
Earned /
Paid
Yield/ Rate Average
Balance
Outstanding
Interest
Earned /
Paid
Yield/ Rate
Interest-earning assets$2,497,077 $67,283 3.59% $2,178,954 $65,011 3.98%
Less: Interest-earning assets funded by additional FHLB borrowings (1)417,000 2,336 0.75% 137,005 494 1.44%
Interest-earning assets - adjusted$2,080,077 $64,947 4.16% $2,041,949 $64,517 4.21%
Interest-bearing liabilities$2,098,363 $4,431 0.28% $1,793,972 $3,981 0.30%
Additional FHLB borrowings417,000 866 0.28% 137,005 216 0.21%
Interest-bearing liabilities - adjusted$1,681,363 $3,565 0.28% $1,656,967 $3,765 0.30%
Net interest income and net interest margin $62,852 3.36% $61,030 3.73%
Net interest income and net interest margin - adjusted 61,382 3.93% 60,752 3.97%
Difference $1,470 (0.57)% $278 (0.24)%

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(1) Proceeds from the additional borrowings were invested in various interest-earning assets, including: deposits with the Federal Reserve Bank, FHLB stock, certificates of deposit in other banks, and commercial paper.

Set forth below is a reconciliation to GAAP of net income and earnings per share (EPS) as adjusted to exclude merger-related expenses, nonrecurring state tax expense, and the recovery of loan losses:

Three Months Ended Nine Months Ended
(Dollars in thousands, except per share data) March 31, March 31,
2016 2015 2016 2015
Merger-related expenses $ $1,686 $ $5,417
Nonrecurring state tax expense 526
Recovery of loan losses (250)
Total adjustments 1,686 526 5,167
Tax effect (1) (624) (1,897)
Total adjustments, net of tax 1,062 526 3,270
Net income (GAAP) 3,141 1,162 8,154 5,467
Net income (non-GAAP) $3,141 $2,224 $8,680 $8,737
Per Share Data
Average shares outstanding - basic 17,183,894 19,113,387 17,581,833 19,146,025
Average shares outstanding - diluted 17,369,871 19,192,702 17,762,375 19,232,791
Basic EPS
EPS (GAAP) $0.18 $0.06 $0.46 $0.28
Non-GAAP adjustment 0.06 0.03 0.18
EPS (non-GAAP) $0.18 $0.12 $0.49 $0.46
Diluted EPS
EPS (GAAP) $0.18 $0.06 $0.46 $0.28
Non-GAAP adjustment 0.06 0.03 0.17
EPS (non-GAAP) $0.18 $0.12 $0.49 $0.45
Average Balances
Average assets $2,729,814 $2,626,412 $2,743,165 $2,416,864
Average equity 359,939 381,495 364,373 379,585
ROA
ROA (GAAP) 0.46% 0.18% 0.40% 0.30%
Non-GAAP adjustment % 0.16% 0.02% 0.18%
ROA (non-GAAP) 0.46% 0.34% 0.42% 0.48%
ROE
ROE (GAAP) 3.49% 1.22% 2.98% 1.92%
Non-GAAP adjustment % 1.11% 0.20% 1.15%
ROE (non-GAAP) 3.49% 2.33% 3.18% 3.07%

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(1) Tax amounts have been adjusted for certain nondeductible merger-related expenses.

Set forth below is a reconciliation to GAAP of the allowance for loan losses to total loans and the allowance for loan losses as adjusted to exclude acquired loans:

As of
(Dollars in thousands)March 31, December 31, September 30, June 30, March 31,
2016 2015 2015 2015 2015
Loans receivable (GAAP)$1,814,695 $1,747,560 $1,742,114 $1,685,707 $1,642,482
Less: acquired loans(244,549) (263,837) (285,317) (272,754) (325,015)
Adjusted loans (non-GAAP)$1,570,146 $1,483,723 $1,456,797 $1,412,953 $1,317,467
Allowance for loan losses (GAAP)$21,761 $21,977 $22,122 $22,374 $22,681
Allowance for loan losses / Adjusted loans (non-GAAP)1.39% 1.48% 1.52% 1.58% 1.72%

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

Source:HomeTrust Bancshares, Inc.