GlobeNewswire Inc | Jan 27, 2022 08:15AM EST

January 27, 2022

ASHEVILLE, N.C., Jan. 27, 2022 (GLOBE NEWSWIRE) -- HomeTrust Bancshares, Inc. (NASDAQ: HTBI) ("Company"), the holding company of HomeTrust Bank ("Bank"), today announced preliminary net income for the second quarter of fiscal 2022 and approval of its quarterly dividend.

For the quarter ended December 31, 2021 compared to the corresponding quarter in the previous year:

-- net income was $11.1 million, compared to $9.5 million; -- diluted earnings per share ("EPS") was $0.68, compared to $0.57; -- annualized return on assets ("ROA") was 1.24%, compared to 1.03%; -- annualized return on equity ("ROE") was 11.02%, compared to 9.41%; -- provision for credit losses was a net benefit of $2.5 million, compared to a net benefit of $3.0 million; -- noninterest income was $10.2 million compared to $9.3 million; -- 299,397 shares of Company common stock were repurchased during the quarter at an average price of $29.96 per share; -- net commercial loan growth, excluding U.S. Small Business Administration's ("SBA") Paycheck Protection Program ("PPP") loans, was $41.9 million, or 8.6% annualized compared to a decline of $44.6 million, or 9.8% annualized, in the prior year; and -- quarterly cash dividends increased $0.01 per share, or 12.5%, to $0.09 per share, totaling $1.4 million.

For the six months ended December 31, 2021 compared to the previous year:

-- net income was $21.6 million, compared to $15.2 million; -- diluted earnings per share ("EPS") was $1.33, compared to $0.92; -- annualized return on assets ("ROA") was 1.21%, compared to 0.83%; -- annualized return on equity ("ROE") was 10.78%, compared to 7.58%; -- provision for credit losses was a net benefit of $4.0 million, compared to a net benefit of $2.1 million; -- noninterest income was $20.5 million compared to $18.0 million; -- 675,832 shares of Company common stock were repurchased during the six months at an average price of $28.71 per share; and -- net commercial loan growth, excluding PPP loans, was $78.9 million, or 8.2% annualized compared to a decline of $11.0 million, or 1.2% annualized in the prior year.

The Company also announced today that its Board of Directors declared a quarterly cash dividend of $0.09 per common share payable on March 3, 2022 to shareholders of record as of the close of business on February 17, 2022.

We continue to be encouraged by the positive trends within our commercial loan portfolio, both in terms of the volume of originations and the performance of the portfolio, said Dana Stonestreet, Chairman and Chief Executive Officer. Our commercial portfolio continues to grow at an annual rate in the mid- to high-single digits which we've maintained for several years. While the main driver of this growth has been our equipment finance portfolio, all commercial lines of business have experienced growth over the past year. In addition, the levels of nonperforming and classified credits remain at historically low levels. As a reflection of both the strong credit quality of our loan portfolio and a continued improvement in forecasted economic conditions, we were again able to release reserves this quarter recording a $2.5 million benefit for credit losses. Going forward we will continue to focus on the asset origination capacity of all of our lines of business, while maintaining the credit culture that has supported our growth in recent years.

Comparison of Results of Operations for the Three Months Ended December 31, 2021 and 2020

Net interest income increased by $1.1 million, or 4.0%, to $27.2 million for the quarter ended December 31, 2021, compared to $26.1 million for the comparative quarter in fiscal 2021. Interest and dividend income decreased by $1.7 million, or 5.5%, primarily driven by lower average balances on interest-earning assets combined with lower loan yields. This decrease was offset by a $2.7 million, or 67.3% decrease in interest expense. Average interest-earning assets decreased $139.2 million, or 4.1%, to $3.3 billion for the quarter ended December 31, 2021. The main drivers of the change were decreases of $103.5 million, or 24.8%, in the average balance of commercial paper and deposits in other banks and $11.9 million, or 8.9%, in debt securities available for sale as the Company continues to use excess liquidity to reduce borrowings, which declined by $417.8 million, or 88.0%, when compared to the prior period. Net interest margin (on a fully taxable-equivalent basis) for the three months ended December 31, 2021 increased to 3.33% from 3.07% for the same period a year ago as all higher rate long-term borrowings were repaid during the quarter ended June 30, 2021.

Total interest and dividend income decreased $1.7 million, or 5.5%, for the quarter ended December 31, 2021 as compared to the same quarter last year, which was primarily a result of a $1.4 million, or 5.0%, decrease in loan interest income, and a $146,000, or 23.8%, decrease in interest income from commercial paper and deposits in other banks. The lower interest income in each category was mainly driven by the overall decrease in average balances as discussed above, in addition to declines in the average yields on loans of 19 basis points, from 4.02% to 3.83%, and debt securities available for sale of 16 basis points, from 1.50% to 1.34%. Loan interest income for the quarter included the amortization of $286,000 of PPP loan origination fees, a decline of $202,000 when compared to the $488,000 recognized in the prior period. The overall average yield on interest-earning assets decreased 5 basis points to 3.49% for the current quarter compared to 3.54% in the same quarter last year primarily due to the change in mix of interest-earning assets, as excess liquidity was used to repay long-term borrowings and reduce short-term interest-earning assets with lower yields.

Total interest expense decreased $2.7 million, or 67.3%, for the quarter ended December 31, 2021 compared to the same period last year. The decrease was driven by a $1.7 million, or 99.1%, decrease in interest expense on borrowings as discussed above and a $1.0 million, or 44.4%, decrease in interest expense on deposits. The average balance of total deposits increased by $296.8 million, or 10.8%, with noninterest-bearing deposits and interest-bearing deposits increasing $212.8 million and $84.0 million, respectively. The increase in interest-bearing deposits was driven by a $149.5 million, or 17.6% increase in money market accounts, partially offset by a $132.5 million, or 23.0%, decrease in certificates of deposit. As stated above, average borrowings for the quarter ended December 31, 2021 decreased $417.8 million, or 88.0%, along with a 130 basis point decrease in the average cost of borrowings compared to the same period last year. The increase in average deposits (interest and noninterest-bearing) was due to successful deposit gathering campaigns and the effect of government stimulus. The decrease in the average cost of borrowings was primarily driven by the early retirement of long-term borrowings reducing the average balance and partially driven by a shift to short-term borrowings at lower rates. The overall average cost of funds decreased 37 basis points to 0.22% for the current quarter compared to 0.59% in the same quarter last year.

Noninterest income increased $0.9 million, or 8.9%, to $10.2 million for the quarter ended December 31, 2021 from $9.3 million for the same period in the previous year. This change was primarily due to a $369,000, or 27.3%, increase in operating lease income, a $236,000, or 41.5%, increase in loan income and fees, and a $197,000, or 5.3%, increase in gain on sale of loans. The increase in operating lease income was driven by increases in loan originations and higher outstanding lease balances during the period. The increase in loan income and fees was largely a result of transitioning SBA loan servicing processes in-house, which began July 1, 2021. During the quarter ended December 31, 2021, $86.9 million of residential mortgage loans originated for sale were sold with gains of $2.2 million compared to $108.9 million sold and gains of $2.8 million in the corresponding period in the prior year. There were $12.6 million of sales of the guaranteed portion of SBA commercial loans with gains of $1.3 million in the current quarter compared to $9.3 million sold and gains of $778,000 million for the same period last year. The Company sold $24.8 million of home equity lines of credit (HELOC) during the quarter for a gain of $159,000 compared to $23.2 million sold and gains of $158,000 in the corresponding period last year. Lastly, $11.5 million of indirect auto finance loans were sold in the current quarter out of the held for investment portfolio for a gain of $205,000. No such sales occurred in the same period in the prior year.

Noninterest expense decreased $534,000, or 2.0%, for the quarter ended December 31, 2021 as compared to the same period last year, which was primarily a result of a decrease of $828,000, or 5.3%, in salaries and benefits expense due to branch closures and lower mortgage banking incentive pay in the period partially offset by an increase of $505,000, or 154.4%, in marketing and advertising expense driven by reduced media advertising in the prior period as a result of the pandemic.

For the quarter ended December 31, 2021, the Company's income tax expense increased $269,000, or 10.4%, to $2.9 million from $2.6 million as a result of higher taxable income. The effective tax rates for the quarters ended December 31, 2021 and 2020 were 20.5% and 21.5%, respectively.

Comparison of Results of Operations for the Six Months Ended December 31, 2021 and 2020

Net interest income increased by $3.2 million, or 6.3%, to $54.9 million for the six months ended December 31, 2021, compared to the same period last year. Interest and dividend income decreased by $2.8 million, or 4.6%, primarily driven by lower average balances on interest-earning assets combined with lower loan yields. This decrease was offset by a $6.1 million, or 67.5%, decrease in interest expense. Average interest-earning assets decreased $163.4 million, or 4.8%, to $3.3 billion for the six months ended December 31, 2021. The biggest reason for the change was a decrease of $125.0 million, or 29.7%, in commercial paper and deposits in other banks, as the Company used excess liquidity to reduce borrowings, where the average balance declined from $475.0 million to $56.4 million. Net interest margin (on a fully taxable-equivalent basis) for the six months ended December 31, 2021 increased to 3.37% from 3.02% for the same period a year ago as all higher rate long-term borrowings were repaid during the quarter ended June 30, 2021.

Total interest and dividend income decreased $2.8 million, or 4.6%, for the six months ended December 31, 2021 as compared to the same period last year, which was primarily a result of a $2.1 million, or 3.7%, decrease in loan interest income and a $696,000, or 46.6%, decrease in interest income from commercial paper and deposits in other banks. The lower interest income in each category was mainly driven by the decrease in average balances as discussed above. In addition, average loan yields decreased 10 basis points to 3.90% for the quarter ended December 31, 2021 from 4.00% in the corresponding quarter last year, average yields on debt securities available for sale decreased 28 basis points to 1.43% from 1.71%, and average yields on commercial paper and deposits in other banks decreased 16 basis points to 0.54% from 0.70%. Loan interest income for the six months included the amortization of $710,000 of PPP loan origination fees, a decline of $32,000 when compared to the $742,000 recognized in the prior period. The overall average yield on interest-earning assets increased one basis point to 3.55% for the six months compared to 3.54% in the same period last year primarily due to the use of excess liquidity to repay long-term borrowings.

Total interest expense decreased $6.1 million, or 67.5%, for the six months ended December 31, 2021 compared to the same period last year. The decrease was driven by a $3.3 million, or 98.8%, decrease in interest expense on borrowings as discussed above and a $2.7 million, or 48.6%, decrease in interest expense on deposits. The average balance of total deposits increased by $272.2 million, or 9.9%, with noninterest-bearing deposits and interest-bearing deposits increasing $215.4 million and $56.8 million, respectively. The increase in interest-bearing deposits was driven by a $62.9 million, or 11.0%, increase in interest-bearing checking accounts and $156.5 million, or 18.7%, increase in money market accounts, partially offset by a $182.2 million, or 28.8%, decrease in certificates of deposit. As stated above average borrowings for the six months ended December 31, 2021 decreased $418.6 million, or 88.1%, along with a 126 basis point decrease in the average cost of borrowings compared to the same period last year. The increase in average deposits (interest and noninterest-bearing) was due to successful deposit gathering campaigns and the effect of government stimulus. The decrease in the average cost of borrowings was primarily driven by the early retirement of long-term borrowings reducing the average balance and partially driven by a shift to short-term borrowings at lower rates. The overall average cost of funds decreased 40 basis points to 0.25% for the six months compared to 0.65% in the same period last year.

Noninterest income increased $2.5 million, or 14.2%, to $20.5 million for the six months ended December 31, 2021 from $18.0 million for the same period in the previous year. This change was due to a $910,000, or 12.9%, increase in the gain on sale of loans, a $741,000, or 71.0%, increase in loan income and fees, a $583,000, or 21.8%, increase in operating lease income, and a $372,000, or 8.2%, increase in service charges and fees on deposit accounts. During the six months ended December 31, 2021, $150.7 million of residential mortgage loans originated for sale were sold with gains of $4.3 million compared to $190.7 million sold and gains of $5.0 million in the corresponding period in the prior year. There were $27.0 million of sales of the guaranteed portion of SBA commercial loans with gains of $3.1 million in the six months compared to $24.5 million sold and gains of $1.8 million for the same period last year. The Company sold $72.2 million of HELOCs during the six months ended December 31, 2021 for a gain of $426,000 compared to $42.1 million sold and gains of $258,000 in the corresponding period last year. Lastly, $11.5 million of indirect auto finance loans were sold out of the held for investment portfolio during the current period for a gain of $205,000. No such sales occurred in the same period in the prior year. The $741,000, or 71.0%, increase in loan income and fees was primarily a result of $536,000 in additional loan servicing fees as a result of bringing the Company's SBA loan servicing process in-house, which began July 1, 2021, and $279,000 in additional prepayment fee income from our equipment finance line of business. The increase in operating lease income was primarily driven by increases in loan originations and higher outstanding lease balances during the period. Lastly, the increase in service charges on deposit accounts was the result of a $290,000 increase in interchange income driven by higher debit card usage.

Noninterest expense decreased $518,000, or 1.0%, for the six months ended December 31, 2021 as compared to the same period last year, which was primarily a result of a decrease of $755,000, or 2.4%, in salaries and benefits expense due to branch closures and lower mortgage banking incentive pay in the period and a reduction of core deposit amortization expense of $282,000, or 64.1%, partially offset by an increase of $885,000, or 135.7%, in marketing and advertising expense driven by reduced media advertising in the prior period as a result of the pandemic.

For the six months ended December 31, 2021, the Company's income tax expense increased $1.8 million, or 44.6%, to $5.8 million from $4.0 million as a result of higher taxable income. The effective tax rates for the six months ended December 31, 2021 and 2020 were 21.3% and 21.0%, respectively.

Balance Sheet Review

Total assets and liabilities decreased by $21.9 million and $27.1 million to $3.5 billion and $3.1 billion, respectively, at December 31, 2021 as compared to June 30, 2021. The decrease in assets was primarily driven by a combined decrease of $56.9 million, or 23.0%, in cash and cash equivalents, certificates of deposit in other banks, and debt securities available for sale, and a $37.2 million, or 1.4%, decrease in loans receivable as the Company redirected its excess liquidity to continue paying down borrowings during the period. These decreases were partially offset by a $64.6 million, or 34.1%, increase in commercial paper and a $8.5 million, or 9.1%, increase in loans held for sale.

Total loans decreased $37.2 million, or 1.4%, to $2.7 billion at December 31, 2021 from the balance at June 30, 2021. The decrease was driven by PPP forgiveness of $27.6 million and an $88.5 million, or 11.6%, decrease in retail consumer loans primarily resulting from a reduction in one-to-four family loans and indirect auto finance loans, partially as a result of the sale of $11.5 million of these loans in November 2021. This decrease was partially offset by a $78.9 million, or 4.1%, increase in commercial loans (excluding PPP loans) as the Company continues its focus on the growth of this loan segment.

Stockholders' equity increased $5.2 million, or 1.3%, to $401.7 million at December 31, 2021 as compared to June 30, 2021. Activity within stockholders' equity included $21.6 million in net income, $4.8 million in stock-based compensation expense, stock repurchases of $19.4 million, and $2.7 million in cash dividends declared. As of December 31, 2021, the Bank was considered "well capitalized" in accordance with its regulatory capital guidelines and exceeded all regulatory capital requirements.

Asset Quality

The allowance for credit losses on loans was $30.9 million, or 1.15%, of total loans at December 31, 2021 compared to $35.5 million, or 1.30%, of total loans at June 30, 2021. The overall decrease was driven by lower expected credit losses estimated by management based on an improving economic outlook.

The provision for credit losses was a net benefit of $4.0 million for the six months ended December 31, 2021, compared to a net benefit of $2.1 million for the corresponding period in fiscal year 2021. Net loan charge-offs totaled $760,000 for the six months ended December 31, 2021, compared to $637,000 for the same period last year. Net charge-offs as a percentage of average loans were 0.05% for the six months ended December 31, 2021 compared to 0.04% for the corresponding period last year.

Nonperforming assets decreased by $6.6 million, or 51.4%, to $6.2 million, or 0.18%, of total assets at December 31, 2021 compared to $12.8 million, or 0.36% of total assets at June 30, 2021. The significant decrease from June 30, 2021 was primarily a result of the payoff of two commercial real estate loan relationships totaling $5.1 million in the prior quarter. Nonperforming assets included $6.2 million in nonaccruing loans and $45,000 in REO at December 31, 2021, compared to $12.6 million and $188,000 in nonaccruing loans and REO, respectively, at June 30, 2021. Nonperforming loans to total loans was 0.23% at December 31, 2021 and 0.46% at June 30, 2021.

As of December 31, 2021, the Company had $652,000 in loans with full principal and interest payment deferrals related to COVID-19 compared to $107,000 at June 30, 2021. Substantially all loans placed on full payment deferral during the pandemic have come out of deferral and borrowers are either making regular loan payments or interest-only payments. As of December 31, 2021, the Company had $15.6 million in commercial loan deferrals on interest-only payments compared to $78.9 million at June 30, 2021.

The ratio of classified assets to total assets decreased to 0.65% at December 31, 2021 from 0.76% at June 30, 2021. Classified assets decreased $3.8 million, or 14.2%, to $22.9 million at December 31, 2021 compared to $26.7 million at June 30, 2021 primarily due to the payoff of two commercial real estate loan relationships discussed above. The Company's overall asset quality metrics continue to demonstrate its commitment to growing and maintaining a loan portfolio with a moderate risk profile; however, the Company will remain diligent in its monitoring of the portfolio during these uncertain times.

About HomeTrust Bancshares, Inc.

HomeTrust Bancshares, Inc. is the holding company for the Bank. As of December 31, 2021, the Company had assets of $3.5 billion. The Bank, founded in 1926, is a North Carolina state chartered, community-focused financial institution committed to providing value added relationship banking with over 30 locations as well as online/mobile channels. Locations include: North Carolina (including the Asheville metropolitan area, the "Piedmont" region, Charlotte, and Raleigh/Cary), Upstate South Carolina (Greenville), East Tennessee (including Kingsport/Johnson City, Knoxville, and Morristown) and Southwest Virginia (including the Roanoke Valley).

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 the Company's control. Actual results may differ, possibly materially, from those currently expected or projected in these forward-looking statements. Factors that could cause the Company's actual results to differ materially from those described in the forward-looking statements include: the effect of the COVID-19 pandemic, including on the Company's credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID-19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate customers, including economic activity, employment levels and market liquidity; increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and other factors described in HomeTrust's latest annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other documents filed with or furnished to the Securities and Exchange Commission - which are available on their website at www.htb.comand on the SEC's website at www.sec.gov. These risks could cause the Company's actual results for fiscal 2022 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, the Company and could negatively affect its operating and stock performance. Any of the forward-looking statements that the Company makes in this press release or the documents they file with or furnish to the SEC are based upon management's beliefs and assumptions at the time they are made and may turn out to be wrong because of inaccurate assumptions they might make, because of the factors described above or because of other factors that they cannot foresee. The Company does not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

WEBSITE: WWW.HTB.COM

Consolidated Balance Sheets (Unaudited)

(Dollars in December 31, September 30, June 30, March 31, December 31,thousands) 2021 2021 2021^(1) 2021 2020Assets Cash $ 20,586 $ 22,431 $ 22,312 $ 24,621 $ 27,365 Interest-bearing 14,240 20,142 28,678 139,474 198,979 depositsCash and cash 34,826 42,573 50,990 164,095 226,344 equivalentsCommercial paper 254,157 196,652 189,596 238,445 183,778 Certificates ofdeposit in other 34,002 35,495 40,122 42,015 48,637 banksDebt securitiesavailable for 121,851 124,576 156,459 162,417 153,540 sale, at fairvalueOtherinvestments, at 22,117 20,891 23,710 28,899 39,572 costLoans held for 102,070 105,161 93,539 86,708 118,439 saleTotal loans, netof deferred loan 2,696,072 2,719,642 2,733,267 2,690,153 2,678,624 fees and costsAllowance forcredit losses - (30,933 ) (34,406 ) (35,468 ) (36,059 ) (39,844 )loansLoans, net 2,665,139 2,685,236 2,697,799 2,654,094 2,638,780 Premises and 69,461 68,568 70,909 70,886 70,104 equipment, netAccrued interest 8,200 8,429 7,933 8,271 9,796 receivableReal estate 45 45 188 143 252 owned ("REO")Deferred income 12,019 15,722 16,901 16,889 18,626 taxes, netBank owned lifeinsurance 94,209 93,679 93,108 93,877 93,326 ("BOLI")Goodwill 25,638 25,638 25,638 25,638 25,638 Core deposit 185 250 343 473 638 intangibles, netOther assets 58,900 58,445 57,488 55,763 52,501 Total assets $ 3,502,819 $ 3,481,360 $ 3,524,723 $ 3,648,613 $ 3,679,971 Liabilities andstockholders' equityLiabilities Deposits $ 2,998,691 $ 2,987,284 $ 2,955,541 $ 2,908,478 $ 2,743,269 Borrowings 48,000 40,000 115,000 275,000 475,000 Other 54,382 57,565 57,663 58,683 56,978 liabilitiesTotal 3,101,073 3,084,849 3,128,204 3,242,161 3,275,247 liabilitiesStockholders' equityPreferred stock,$0.01 par value,10,000,000shares ? ? ? ? ? authorized, noneissued oroutstandingCommon stock,$0.01 par value,60,000,000 163 163 167 167 168 sharesauthorized ^(2)Additional paid 147,552 151,425 160,582 162,010 166,352 in capitalRetained 258,986 249,331 240,075 248,767 242,182 earningsUnearnedEmployee Stock (5,555 ) (5,687 ) (5,819 ) (5,951 ) (6,083 )Ownership Plan("ESOP") sharesAccumulatedother 600 1,279 1,514 1,459 2,105 comprehensiveincomeTotalstockholders' 401,746 396,511 396,519 406,452 404,724 equityTotalliabilities and $ 3,502,819 $ 3,481,360 $ 3,524,723 $ 3,648,613 $ 3,679,971 stockholders'equity

(1) Derived from audited financial statements. Shares of common stock issued and outstanding were 16,303,461 at(2) December 31, 2021; 16,307,658 at September 30, 2021; 16,636,483 at June 30, 2021; 16,655,347 at March 31, 2021; and 16,791,027 at December 31, 2020.

Consolidated Statements of Income (Unaudited)

Three Months Ended Six Months Ended(Dollars in December September December December Decemberthousands) 31, 30, 31, 31, 31, 2021 2021 2020 2021 2020Interest and dividend incomeLoans $ 26,929 $ 27,895 $ 28,343 $ 54,824 $ 56,935 Commercial paperand 468 331 614 $ 799 1,495 interest-bearingdepositsDebt securitiesavailable for 411 524 504 935 1,032 saleOther 680 555 696 1,235 1,144 investmentsTotal interestand dividend 28,488 29,305 30,157 57,793 60,606 incomeInterest expense Deposits 1,305 1,572 2,347 2,877 5,600 Borrowings 15 26 1,688 41 3,375 Total interest 1,320 1,598 4,035 2,918 8,975 expenseNet interest 27,168 27,707 26,122 54,875 51,631 incomeProvision(benefit) for (2,500 ) (1,460 ) (3,030 ) (3,960 ) (2,080 )credit lossesNet interestincome afterprovision 29,668 29,167 29,152 58,835 53,711 (benefit) forcredit lossesNoninterest incomeService chargesand fees on 2,513 2,372 2,416 4,885 4,513 deposit accountsLoan income and 805 979 569 1,784 1,043 feesGain on sale ofloans held for 3,901 4,057 3,704 7,958 7,048 saleBOLI income 490 518 511 1,008 1,043 Operating lease 1,718 1,540 1,349 3,258 2,675 incomeOther 753 886 795 1,639 1,661 Totalnoninterest 10,180 10,352 9,344 20,532 17,983 incomeNoninterest expenseSalaries andemployee 14,872 15,280 15,700 30,152 30,907 benefitsOccupancy 2,401 2,317 2,261 4,718 4,554 expense, netComputer 2,369 2,324 2,220 4,693 4,527 servicesTelephone,postage, and 735 712 871 1,447 1,533 suppliesMarketing and 832 705 327 1,537 652 advertisingDepositinsurance 302 566 487 868 998 premiumsGain on sale of ? (3 ) ? (3 ) (35 )REOREO related 116 145 165 261 413 expenseCore depositintangible 65 93 202 158 440 amortizationOther 4,217 3,877 4,210 8,094 8,454 Totalnoninterest 25,909 26,016 26,443 51,925 52,443 expenseNet incomebefore income 13,939 13,503 12,053 27,442 19,251 taxesIncome tax 2,861 2,976 2,592 5,837 4,037 expenseNet income $ 11,078 $ 10,527 $ 9,461 $ 21,605 $ 15,214

Per Share Data

Three Months Ended Six Months Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020Net incomeper common share:^(1)Basic $ 0.70 $ 0.66 $ 0.58 $ 1.36 $ 0.93Diluted $ 0.68 $ 0.65 $ 0.57 $ 1.33 $ 0.92Averageshares outstanding:Basic 15,632,283 15,761,247 16,202,844 15,696,765 16,216,917Diluted 15,989,606 16,146,611 16,563,359 16,057,607 16,514,831Book valueper share at $ 24.64 $ 24.31 $ 24.10 $ 24.64 $ 24.10end ofperiodTangiblebook valueper share at $ 23.06 $ 22.73 $ 22.55 $ 23.06 $ 22.55end ofperiod ^(2)Cashdividends $ 0.09 $ 0.08 $ 0.08 $ 0.17 $ 0.15declared percommon shareTotal sharesoutstanding 16,303,461 16,307,658 16,791,027 16,303,461 16,791,027at end ofperiod

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

Selected Financial Ratios and Other Data

Three Months Ended Six Months Ended December September December December December 31, 30, 31, 31, 31, 2021 2021 2020 2021 2020Performance ratios: ^(1)Return on assets(ratio of netincome to 1.24 % 1.20 % 1.03 % 1.21 % 0.83 %average totalassets)Return on equity(ratio of net 11.02 10.62 9.41 10.78 7.58 income toaverage equity)Tax equivalentyield on earning 3.49 3.61 3.54 3.55 3.54 assets^(2)Rate paid oninterest-bearing 0.22 0.27 0.59 0.25 0.65 liabilitiesTax equivalentaverage interest 3.27 3.34 2.95 3.30 2.89 rate spread ^(2)Tax equivalentnet interest 3.33 3.41 3.07 3.37 3.02 margin^(2) (3)Averageinterest-earningassets to 139.06 137.94 126.99 138.50 126.09 averageinterest-bearingliabilitiesOperatingexpense to 2.91 2.96 2.88 2.92 2.85 average totalassetsEfficiency ratio 69.37 68.36 74.56 68.86 75.33 Efficiency ratio 68.81 67.80 73.92 68.30 74.67 - adjusted ^(4)

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

Three Months Ended December September June 30, March 31, December 31, 30, 2021 2021 31, 2021 2021 2020Asset quality ratios:Nonperformingassets to total 0.18 % 0.19 % 0.36 % 0.37 % 0.40 %assets^(1)Nonperformingloans to total 0.23 0.25 0.46 0.49 0.54 loans^(1)Total classifiedassets to total 0.65 0.65 0.76 0.76 0.74 assetsAllowance forcredit losses to 500.70 510.63 281.38 272.64 274.05 nonperformingloans^(1)Allowance forcredit losses to 1.15 1.27 1.30 1.34 1.49 total loansAllowance forcredit losses tototal gross loans 1.16 1.28 1.32 1.38 1.52 excluding PPPloans^(2)Net charge-offs(recoveries) to 0.15 (0.04 ) (0.04 ) (0.03 ) (0.01 )average loans(annualized)Capital ratios: Equity to totalassets at end of 11.47 % 11.39 % 11.25 % 11.14 % 11.00 %periodTangible equityto total tangible 10.81 10.73 10.59 10.50 10.36 assets^(2)Average equity to 11.28 11.27 11.06 10.79 10.95 average assets

Nonperforming assets include nonaccruing loans, consisting of certain restructured loans, and REO. There were no accruing loans more than 90(1) days past due at the dates indicated.At December 31, 2021, there were $919,000 of restructured loans included in nonaccruing loans and $2.4 million, or 39.4% of nonaccruing loans were current on their loan payments.(2) See Non-GAAP reconciliation tables below for adjustments.

Average Balance Sheet Data

Three Months Ended(Dollars in December 31, 2021 December 31, 2020thousands) Average Interest Yield/ Average Interest Yield/ Balance Earned/ Rate^ Balance Earned/ Rate^ Outstanding Paid^(2) (2) Outstanding Paid^(2) (2) Assets: Interest-earning assets:Loans receivable^ $ 2,819,262 $ 27,236 3.83 % $ 2,826,133 $ 28,648 4.02 %(1)Commercial paperand deposits in 313,882 468 0.59 % 417,401 614 0.58 %other banksDebt securities 121,987 411 1.34 % 133,856 504 1.50 %available for saleOtherinterest-earning 22,327 680 12.09 % 39,290 696 7.03 %assets^(3)Totalinterest-earning 3,277,458 28,795 3.49 % 3,416,680 30,462 3.54 %assetsOther assets 259,591 257,572 Total assets $ 3,537,049 $ 3,674,252 Liabilities and equity:Interest-bearing deposits:Interest-bearing 635,268 331 0.21 % 584,530 353 0.24 %checking accountsMoney market 998,297 349 0.14 % 848,760 414 0.19 %accountsSavings accounts 222,464 40 0.07 % 206,205 38 0.07 %Certificate 443,546 585 0.52 % 576,078 1,542 1.06 %accountsTotalinterest-bearing 2,299,575 1,305 0.23 % 2,215,573 2,347 0.42 %depositsBorrowings 57,248 15 0.11 % 475,000 1,688 1.41 %Totalinterest-bearing 2,356,823 1,320 0.22 % 2,690,573 4,035 0.59 %liabilitiesNoninterest-bearing 736,271 523,488 depositsOther liabilities 44,974 57,813 Total liabilities 3,138,068 3,271,874 Stockholders' 398,981 402,378 equityTotal liabilitiesand stockholders' $ 3,537,049 $ 3,674,252 equity Net earning assets $ 920,635 $ 726,107 Averageinterest-earningassets to average 139.06 % 126.99 % interest-bearingliabilitiesTax-equivalent: Net interest income $ 27,475 $ 26,427 Interest rate 3.27 % 2.95 %spreadNet interest margin 3.33 % 3.07 %^(4)Non-tax-equivalent: Net interest income $ 27,168 $ 26,122 Interest rate 3.23 % 2.91 %spreadNet interest margin 3.29 % 3.03 %^(4)

(1) The average loans receivable balances include loans held for sale and nonaccruing loans. Interest income used in the average interest earned and yield(2) calculation includes the tax equivalent adjustment of $307 and $305 for the three months ended December 31, 2021 and 2020, respectively, calculated based on a combined federal and state tax rate of 24%.(3) The average other interest-earning assets consist of FRB stock, FHLB stock, and SBIC investments.(4) Net interest income divided by average interest-earning assets.

Six Months Ended(Dollars in December 31, 2021 December 31, 2020thousands) Average Interest Yield/ Average Interest Yield/ Balance Earned/ Rate^ Balance Earned/ Rate^ Outstanding Paid^(2) (2) Outstanding Paid^(2) (2) Assets: Interest-earning assets:Loans receivable^ $ 2,819,482 $ 55,441 3.90 % $ 2,850,783 $ 57,550 4.00 %(1)Commercial paperand deposits in 295,746 799 0.54 % 420,785 1,495 0.70 %other banksDebt securities 130,143 935 1.43 % 120,062 1,032 1.71 %available for saleOtherinterest-earning 22,020 1,235 11.13 % 39,118 1,144 5.80 %assets^(3)Totalinterest-earning 3,267,391 58,410 3.55 % 3,430,748 61,221 3.54 %assetsOther assets 260,288 254,610 Total assets $ 3,527,679 $ 3,685,358 Liabilities and equity:Interest-bearing liabilities:Interest-bearing 635,362 728 0.23 % 572,505 750 0.26 %checking accountsMoney market 993,643 716 0.14 % 837,153 964 0.23 %accountsSavings accounts 223,061 81 0.07 % 203,374 75 0.07 %Certificate 450,706 1,352 0.60 % 632,894 3,811 1.19 %accountsTotalinterest-bearing 2,302,772 2,877 0.25 % 2,245,926 5,600 0.49 %depositsBorrowings 56,356 41 0.15 % 475,000 3,375 1.41 %Totalinterest-bearing 2,359,128 2,918 0.25 % 2,720,926 8,975 0.65 %liabilitiesNoninterest-bearing 722,432 507,087 depositsOther liabilities 48,393 55,699 Total liabilities 3,129,953 3,283,712 Stockholders' 397,726 401,646 equityTotal liabilitiesand stockholders' $ 3,527,679 $ 3,685,358 equity Net earning assets $ 908,263 $ 709,822 Averageinterest-earningassets to average 138.50 % 126.09 % interest-bearingliabilitiesTax-equivalent: Net interest income $ 55,492 $ 52,246 Interest rate 3.30 % 2.89 %spreadNet interest margin 3.37 % 3.02 %^(4)Non-tax-equivalent: Net interest income $ 54,875 $ 51,631 Interest rate 3.26 % 2.85 %spreadNet interest margin 3.33 % 2.99 %^(4)

(1) The average loans receivable balances include loans held for sale and nonaccruing loans. Interest income used in the average interest earned and yield(2) calculation includes the tax equivalent adjustment of $617 and $615 for the six months ended December 31, 2021 and 2020, respectively, calculated based on a combined federal and state tax rate of 24%.(3) The average other interest-earning assets consist of FRB stock, FHLB stock, and SBIC investments.(4) Net interest income divided by average interest-earning assets.

Loans

(Dollars in December 31, September 30, June 30, March 31, December 31,thousands) 2021 2021 2021 2021 2020Commercial loans:Commercial $ 1,113,330 $ 1,132,764 $ 1,142,276 $ 1,088,178 $ 1,056,971 real estateConstructionand 226,439 187,900 179,427 162,820 172,892 developmentCommercialand 162,396 153,612 141,341 140,579 138,761 industrialEquipment 367,008 341,995 317,920 291,950 272,761 financeMunicipal 131,078 142,100 140,421 129,141 128,549 leasesPPP loans 19,044 28,762 46,650 73,090 64,845 Totalcommercial 2,019,295 1,987,133 1,968,035 1,885,758 1,834,779 loansRetailconsumer loansOne-to-four 356,850 384,901 406,549 430,001 452,421 familyHELOCs - 128,189 129,791 130,225 131,867 125,397 originatedHELOCs - 30,795 33,943 38,976 46,086 58,640 purchasedConstructionand land/ 69,253 69,835 66,027 68,118 75,108 lotsIndirect 84,581 106,184 115,093 119,656 122,947 auto financeConsumer 7,109 7,855 8,362 8,667 9,332 Total retailconsumer 676,777 732,509 765,232 804,395 843,845 loansTotal loans,net ofdeferred 2,696,072 2,719,642 2,733,267 2,690,153 2,678,624 loan feesand costsAllowancefor credit (30,933 ) (34,406 ) (35,468 ) (36,059 ) (39,844 )losses -loansLoans, net $ 2,665,139 $ 2,685,236 $ 2,697,799 $ 2,654,094 $ 2,638,780

Deposits

(Dollars in December 31, September June 30, March 31, December 31,thousands) 2021 30, 2021 2021 2020 2021Core deposits: Noninterest-bearing $ 677,159 $ 711,764 $ 636,414 $ 528,711 $ 469,998accountsNOW accounts 644,343 621,675 644,958 727,240 654,960Money market 1,010,901 987,650 975,001 927,519 882,366accountsSavings accounts 224,474 220,614 226,391 221,537 209,699Total core deposits 2,556,877 2,541,703 2,482,764 2,405,007 2,217,023Certificates of 441,814 445,581 472,777 503,471 526,246depositTotal deposits $ 2,998,691 $ 2,987,284 $ 2,955,541 $ 2,908,478 $ 2,743,269

Non-GAAP Reconciliations

In addition to results presented in accordance with generally accepted accounting principles utilized in the United States ("GAAP"), this earnings release contains certain non-GAAP financial measures, which include: the efficiency ratio; tangible book value; tangible book value per share; tangible equity to tangible assets ratio; and the ratio of the allowance for credit losses to total loans excluding PPP loans. The Company believes these non-GAAP financial measures and ratios as presented are useful for both investors and management to understand the effects of certain items and provide an alternative view of its performance over time and in comparison to its competitors. These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for total stockholders' equity or operating results determined in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

Set forth below is a reconciliation to GAAP of the Company's efficiency ratio:

Three Months Ended Six Months Ended(Dollars in December September December December Decemberthousands) 31, 30, 31, 31, 31, 2021 2021 2020 2021 2020Noninterest $ 25,909 $ 26,016 $ 26,443 $ 51,925 $ 52,443 expense Net interest $ 27,168 $ 27,707 $ 26,122 $ 54,875 $ 51,631 incomePlus:noninterest 10,180 10,352 9,344 20,532 17,983 incomePlus: taxequivalent 307 310 305 617 615 adjustmentNet interestincome plusnoninterest $ 37,655 $ 38,369 $ 35,771 $ 76,024 $ 70,229 income ?adjustedEfficiency 69.37 % 68.36 % 74.56 % 68.86 % 75.33 %ratioEfficiencyratio - 68.81 % 67.80 % 73.92 % 68.30 % 74.67 %adjusted

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

(Dollars inthousands, December 31, September 30, June 30, March 31, December 31,except per 2021 2021 2021 2021 2020share data)Totalstockholders' $ 401,746 $ 396,511 $ 396,519 $ 406,452 $ 404,724equityLess:goodwill,core deposit 25,780 25,830 25,902 26,002 26,130intangibles,net of taxesTangible book $ 375,966 $ 370,681 $ 370,617 $ 380,450 $ 378,594valueCommon shares 16,303,461 16,307,658 16,636,483 16,655,347 16,791,027outstandingTangible bookvalue per $ 23.06 $ 22.73 $ 22.28 $ 22.84 $ 22.55shareBook value $ 24.64 $ 24.31 $ 23.83 $ 24.40 $ 24.10per share

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

(Dollars in December 31, September 30, June 30, March 31, December 31,thousands) 2021 2021 2021 2021 2020Tangible $ 375,966 $ 370,681 $ 370,617 $ 380,450 $ 378,594 equity^(1)Total assets 3,502,819 3,481,360 3,524,723 3,648,613 3,679,971 Less:goodwill,core deposit 25,780 25,830 25,902 26,002 26,130 intangibles,net of taxesTotaltangible $ 3,477,039 $ 3,455,530 $ 3,498,821 $ 3,622,611 $ 3,653,841 assetsTangibleequity to 10.81 % 10.73 % 10.59 % 10.50 % 10.36 %tangibleassets

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(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.

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

(Dollars December 31, September 30, June 30, March 31, December 31,in 2021 2021 2021 2021 2020thousands)Totalgross $ 2,696,072 $ 2,719,642 $ 2,733,267 $ 2,690,153 $ 2,678,624 loansreceivableLess: PPP 19,044 28,762 46,650 73,090 64,845 loansAdjusted $ 2,677,028 $ 2,690,880 $ 2,686,617 $ 2,617,063 $ 2,613,779 loans Allowancefor credit $ 30,933 $ 34,406 $ 35,468 $ 36,059 $ 39,844 lossesAllowancefor creditlosses / 1.16 % 1.28 % 1.32 % 1.38 % 1.52 %Adjustedloans

Contact:Dana L. Stonestreet Chairman and Chief Executive OfficerC. Hunter Westbrook President and Chief Operating OfficerTony J. VunCannon Executive Vice President, Chief Financial Officer, Corporate Secretary and Treasurer828-259-3939