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EX-32 - EXHIBIT 32 - HomeTrust Bancshares, Inc.htbi-2016x12x31x10qxex32.htm
EX-31.2 - EXHIBIT 31.2 - HomeTrust Bancshares, Inc.htbi-2016x12x31x10qxex312.htm
EX-31.1 - EXHIBIT 31.1 - HomeTrust Bancshares, Inc.htbi-2016x12x31x10qxex311.htm


UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


[X]            QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2016

[  ]            TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _______ to ________

Commission file number:     001-35593

HOMETRUST BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Maryland
 
          45-5055422
(State or other jurisdiction of incorporation of organization)
 
(IRS Employer Identification No.)

10 Woodfin Street, Asheville, North Carolina 28801
(Address of principal executive offices; Zip Code)

(828) 259-3939
(Registrant's telephone number, including area code)

None
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 and 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.        Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X]No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [  ]      
 
(Do not check if a smaller reporting company)        
 
Accelerated filer [X]
 
 
 
 
Non-accelerated filer   [  ]
 
 
Smaller reporting company [  ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [  ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS
There were 18,000,750 shares of common stock, par value of $.01 per share, issued and outstanding as of February 3, 2017.




HOMETRUST BANCSHARES, INC. AND SUBSIDIARIES
10-Q
TABLE OF CONTENTS
 
 
 
Page
Number
 
 
 
 
Item 1. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2. 
 
 
 
 
Item 3. 
 
 
 
 
Item 4. 
 
 
 
 
 
 
 
 
 
Item 1. 
 
 
 
 
Item 1A. 
 
 
 
 
Item 2. 
 
 
 
 
Item 3. 
 
 
 
 
Item 4. 
 
 
 
 
Item 5 
 
 
 
 
Item 6. 
 
 
 
 
 
 
 
 

1



PART I.  FINANCIAL INFORMATION
Item 1.    Financial Statements
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
 
(Unaudited)
 
 
 
December 31, 2016
 
June 30,
2016
Assets
 
 
 
Cash
$
40,105

 
$
29,947

Interest-bearing deposits
5,044

 
22,649

Cash and cash equivalents
45,149

 
52,596

Commercial paper
179,939

 
229,859

Certificates of deposit in other banks
150,147

 
161,512

Securities available for sale, at fair value
181,049

 
200,652

Other investments, at cost
32,341

 
29,486

Loans held for sale
4,998

 
5,783

Total loans, net of deferred loan fees
1,955,604

 
1,832,831

Allowance for loan losses
(20,986
)
 
(21,292
)
Net loans
1,934,618

 
1,811,539

Premises and equipment, net
54,496

 
54,231

Accrued interest receivable
7,792

 
7,405

Real estate owned ("REO")
5,648

 
5,956

Deferred income taxes
52,259

 
54,153

Bank owned life insurance
81,033

 
79,858

Goodwill
13,098

 
12,673

Core deposit intangibles
5,868

 
7,136

Other assets
25,805

 
4,838

Total Assets
$
2,774,240

 
$
2,717,677

Liabilities and Stockholders' Equity
 

 
 

Liabilities
 

 
 

Deposits
$
1,786,165

 
$
1,802,696

Borrowings
560,000

 
491,000

Capital lease obligations
1,947

 
1,958

Other liabilities
58,352

 
62,047

Total liabilities
2,406,464

 
2,357,701

Stockholders' Equity
 

 
 

Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued or
    outstanding

 

Common stock, $0.01 par value, 60,000,000 shares authorized, 18,000,750 shares
    issued and outstanding at December 31, 2016; 17,998,750 at June 30, 2016
180

 
180

Additional paid in capital
189,169

 
186,104

Retained earnings
186,620

 
179,813

Unearned Employee Stock Ownership Plan ("ESOP") shares
(8,199
)
 
(8,464
)
Accumulated other comprehensive income
6

 
2,343

Total stockholders' equity
367,776

 
359,976

Total Liabilities and Stockholders' Equity
$
2,774,240

 
$
2,717,677

The accompanying notes are an integral part of these consolidated financial statements.

2



HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Dollars in thousands, except per share data)
 
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
December 31,
 
December 31,
 
2016
 
2015
 
2016
 
2015
Interest and Dividend Income
 
 
 
 
 
 
 
Loans
$
19,871

 
$
19,333

 
$
40,352

 
$
38,968

Securities available for sale
862

 
1,038

 
1,742

 
2,237

Certificates of deposit and other interest-bearing deposits
939

 
851

 
1,982

 
1,681

Other investments
391

 
344

 
778

 
689

Total interest and dividend income
22,063

 
21,566

 
44,854

 
43,575

Interest Expense
 

 
 

 
 

 
 

Deposits
1,041

 
1,141

 
2,140

 
2,332

Other borrowings
607

 
275

 
1,162

 
522

Total interest expense
1,648

 
1,416

 
3,302

 
2,854

Net Interest Income
20,415

 
20,150

 
41,552

 
40,721

Provision for Loan Losses

 

 

 

Net Interest Income after Provision for Loan Losses
20,415

 
20,150

 
41,552

 
40,721

Noninterest Income
 

 
 

 
 

 
 

Service charges on deposit accounts
1,712

 
1,618

 
3,461

 
3,317

Mortgage banking income and fees
937

 
590

 
1,914

 
1,318

Gain from sale of premises and equipment

 

 
385

 

Other, net
1,118

 
797

 
2,084

 
1,739

Total noninterest income
3,767

 
3,005

 
7,844

 
6,374

Noninterest Expense
 

 
 

 
 

 
 

Salaries and employee benefits
11,839

 
10,875

 
22,530

 
21,732

Net occupancy expense
2,015

 
2,306

 
4,076

 
4,565

Marketing and advertising
459

 
499

 
889

 
984

Telephone, postage, and supplies
574

 
842

 
1,187

 
1,672

Deposit insurance premiums
203

 
523

 
481

 
1,048

Computer services
1,648

 
1,406

 
3,075

 
2,990

Loss on sale and impairment of REO
339

 
159

 
469

 
138

REO expense
378

 
327

 
522

 
682

Core deposit intangible amortization
618

 
743

 
1,268

 
1,517

Merger-related expenses
27

 

 
334

 

Other
2,206

 
2,162

 
4,441

 
4,349

Total noninterest expense
20,306

 
19,842

 
39,272

 
39,677

Income Before Income Taxes
3,876

 
3,313

 
10,124

 
7,418

Income Tax Expense
893

 
864

 
3,317

 
2,405

Net Income
$
2,983

 
$
2,449

 
$
6,807

 
$
5,013

Per Share Data:
 

 
 

 
 

 
 

Net income per common share:
 

 
 

 
 

 
 

Basic
$
0.17

 
$
0.14

 
$
0.39

 
$
0.28

Diluted
$
0.17

 
$
0.14

 
$
0.39

 
$
0.28

Average shares outstanding:
 

 
 

 
 

 
 

Basic
16,900,387

 
17,479,150

 
16,893,775

 
17,778,568

Diluted
17,556,587

 
17,810,984

 
17,490,675

 
18,053,187

The accompanying notes are an integral part of these consolidated financial statements.

3



HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
(Dollars in thousands)
 
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
December 31,
 
December 31,
 
2016
 
2015
 
2016
 
2015
Net Income
$
2,983

 
$
2,449

 
$
6,807

 
$
5,013

Other Comprehensive Loss
 

 
 

 
 

 
 

  Unrealized holding losses on securities available for sale
 

 
 

 
 

 
 

Losses arising during the period
(2,955
)
 
(1,691
)
 
(3,540
)
 
(363
)
Deferred income tax benefit
1,005

 
575

 
1,203

 
123

Total other comprehensive loss
$
(1,950
)
 
$
(1,116
)
 
$
(2,337
)
 
$
(240
)
Comprehensive Income
$
1,033

 
$
1,333

 
$
4,470

 
$
4,773

The accompanying notes are an integral part of these consolidated financial statements.

4



HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity
(Dollars in thousands)
 
Common Stock
 
Additional
Paid In
Capital
 
Retained
Earnings
 
Unearned
ESOP
Shares
 
Accumulated
Other
Comprehensive
Income (loss)
 
Total
Stockholders'
Equity
 
Shares
 
Amount
 
 
 
 
 
Balance at June 30, 2015
19,488,449

 
$
195

 
$
210,621

 
$
168,357

 
$
(8,993
)
 
$
870

 
$
371,050

Net income

 

 

 
5,013

 

 

 
5,013

Stock repurchased
(911,427
)
 
(9
)
 
(16,782
)
 

 

 

 
(16,791
)
Forfeited restricted stock
(2,250
)
 

 

 

 

 

 

Exercised stock options
2,200

 

 
32

 

 

 

 
32

Stock option expense

 

 
953

 

 

 

 
953

Restricted stock expense

 

 
684

 

 

 

 
684

ESOP shares allocated

 

 
230

 

 
264

 

 
494

Other comprehensive loss

 

 

 

 

 
(240
)
 
(240
)
Balance at December 31, 2015
18,576,972

 
$
186

 
$
195,738

 
$
173,370

 
$
(8,729
)
 
$
630

 
$
361,195

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at June 30, 2016
17,998,750

 
$
180

 
$
186,104

 
$
179,813

 
$
(8,464
)
 
$
2,343

 
$
359,976

Net income

 

 

 
6,807

 

 

 
6,807

Granted restricted stock
2,000

 

 

 

 

 

 

Stock option expense

 

 
2,034

 

 

 

 
2,034

Restricted stock expense

 

 
758

 

 

 

 
758

ESOP shares allocated

 

 
273

 

 
265

 

 
538

Other comprehensive loss

 

 

 

 

 
(2,337
)
 
(2,337
)
Balance at December 31, 2016
18,000,750

 
$
180

 
$
189,169

 
$
186,620

 
$
(8,199
)
 
$
6

 
$
367,776

The accompanying notes are an integral part of these consolidated financial statements.

5



HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Dollars in thousands)
 
(Unaudited)
 
Six Months Ended December 31,
 
2016
 
2015
Operating Activities:
 
 
 
Net income
$
6,807

 
$
5,013

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 

 
 

Depreciation
1,745

 
2,090

Deferred income tax expense
3,097

 
2,349

Net amortization and accretion
(3,505
)
 
(2,151
)
Gain from sale of premises and equipment
(385
)
 

Loss on sale and impairment of REO
469

 
138

Gain on sale of loans held for sale
(1,444
)
 
(775
)
Origination of loans held for sale
(77,526
)
 
(41,995
)
Proceeds from sales of loans held for sale
79,755

 
43,564

Increase in deferred loan fees, net
(397
)
 
(184
)
Decrease (increase) in accrued interest receivable and other assets
(5,280
)
 
8,072

Amortization of core deposit intangibles
1,268

 
1,517

Earnings from bank owned life insurance
(1,175
)
 
(964
)
ESOP compensation expense
538

 
494

Restricted stock and stock option expense
2,792

 
1,637

Decrease in other liabilities
(3,920
)
 
(6,557
)
Net cash provided by (used in) operating activities
2,839

 
12,248

Investing Activities:
 

 
 

Purchase of securities available for sale
(15,091
)
 
(11,100
)
Proceeds from maturities of securities available for sale
17,795

 
26,060

Net maturities of commercial paper
50,928

 
(15,704
)
Purchase of certificates of deposit in other banks
(24,708
)
 
(14,632
)
Maturities of certificates of deposit in other banks
36,073

 
47,327

Principal repayments of mortgage-backed securities
13,080

 
12,844

Net purchases of other investments
(2,855
)
 
(175
)
Net increase in loans
(121,236
)
 
(61,277
)
Purchase of premises and equipment
(2,020
)
 
(798
)
Proceeds from sale of premises and equipment
395

 

Proceeds from sale of REO
1,169

 
1,540

Acquisition of United Financial of North Carolina Inc.
(200
)
 

Acquisition costs related to TriSummit Bancorp, Inc.
(16,074
)
 

Net cash used in investing activities
(62,744
)
 
(15,915
)
Financing Activities:
 

 
 

Net decrease in deposits
(16,531
)
 
(42,139
)
Net increase in other borrowings
69,000

 
4,000

Common stock repurchased

 
(16,791
)
Exercised stock options

 
32

Decrease in capital lease obligations
(11
)
 
(11
)
Net cash provided by (used in) financing activities
52,458

 
(54,909
)
Net Decrease in Cash and Cash Equivalents
(7,447
)
 
(58,576
)
Cash and Cash Equivalents at Beginning of Period
52,596

 
116,160

Cash and Cash Equivalents at End of Period
$
45,149

 
$
57,584


6



HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows (continued)
(Dollars in thousands)
 
(Unaudited)
Supplemental Disclosures:
Six Months Ended December 31,
 
2016
 
2015
Cash paid during the period for:
 
 
 
Interest
$
3,754

 
$
2,881

Income taxes
170

 
100

Noncash transactions:
 

 
 

Unrealized loss in value of securities available for sale, net of income taxes
(2,337
)
 
(240
)
Transfers of loans to REO
1,330

 
1,367

Payable related to the acquisition of United Financial Inc. of North Carolina
225

 

The accompanying notes are an integral part of these consolidated financial statements.

7


HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
1.
Summary of Significant Accounting Policies
The consolidated financial statements presented in this report include the accounts of HomeTrust Bancshares, Inc., a Maryland corporation ("HomeTrust"), and its wholly-owned subsidiary, HomeTrust Bank (the "Bank"). As used throughout this report, the term the "Company" refers to HomeTrust and the Bank, its consolidated subsidiary, unless the context otherwise requires. Effective December 31, 2015, the Bank converted from a national association to a North Carolina state bank. See Management's Discussion and Analysis of Financial Condition and Results of Operations "Overview" for discussion of charter change.
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. It is recommended that these unaudited interim consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 2016 ("2016 Form 10-K") filed with the SEC on September 13, 2016. The results of operations for the three and six months ended December 31, 2016 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2017.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements. Various elements of the Company's accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions, and other subjective assessments. In particular, management has identified several accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of the Company's financial statements. These policies relate to (i) the determination of the provision and the allowance for loan losses, (ii) business combinations and acquired loans, (iii) the valuation of REO, (iv) the valuation of goodwill and other intangible assets, and (v) the valuation of or recognition of deferred tax assets and liabilities. These policies and judgments, estimates and assumptions are described in greater detail in subsequent notes to the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations (Critical Accounting Policies) in our 2016 Form 10-K. Management believes that the judgments, estimates and assumptions used in the preparation of the financial statements are appropriate based on the factual circumstances at the time. However, given the sensitivity of the financial statements to these critical accounting policies, the use of other judgments, estimates and assumptions could result in material differences in the Company's results of operations or financial condition. Further, subsequent changes in economic or market conditions could have a material impact on these estimates and the Company's financial condition and operating results in future periods.
2.
Recent Accounting Pronouncements
In August 2015, the Financial Accounting Standards Board ("FASB") issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606)”, which defers the effective date of Accounting Standard Update ("ASU") No. 2014-09 one year. ASU No. 2014-09 created Topic 606 and supersedes Topic 605, Revenue Recognition. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In general, the new guidance requires companies to use more judgment and make more estimates than under current guidance, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides clarifying guidance in certain narrow areas and adds some practical expedients, but does not change the core revenue recognition principle in Topic 606. ASU No. 2015-14 is effective for interim and annual periods beginning after December 15, 2017; early adoption is permitted for interim and annual periods beginning after December 15, 2016. For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. We are currently evaluating the impact of this guidance on our financial statements and the timing of adoption.
In January 2016, the FASB issued ASU 2016-01, "Financial Instruments (Subtopic 825-10) Recognition and Measurement of Financial Assets and Financial Liabilities." The ASU amends the guidance in GAAP on the classification and measurement of financial instruments. The ASU includes the following changes: i) equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (ii) requires the use of exit price notion when measuring the fair value of financial instruments for disclosure purposes; (iii) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e. securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; (iv) allows an equity investment that does not have readily determinable fair values, to be measured at cost minus impairment (if any), plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer; (v) eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, and requires a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair

8

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)

value in accordance with the fair value option for financial instruments; (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e. securities or loans and receivables) on the balance sheet or in the accompanying notes to the financial statements; and (vii) clarifies that a valuation allowance on a deferred tax asset related to available-for-sale securities should be evaluated in combination with the organization’s other deferred tax assets. This ASU is effective for interim and annual periods beginning after December 15, 2017. The adoption of ASU No. 2016-01 is not expected to have a material impact on the Company's Consolidated Financial Statements.
In February 2016, the FASB issued ASU 2016-02, "Leases (ASC 842)." The guidance in this ASU requires most leases to be recognized on the balance sheet as a right-of-use asset and a lease liability. It will be critical to identify leases embedded in a contract to avoid misstating the lessee’s balance sheet. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. This ASU is effective for interim and annual periods beginning after December 15, 2018. We are currently evaluating the impact of this guidance on our Consolidated Financial Statements and the timing of adoption. Once adopted, we expect to report higher assets and liabilities as a result of including additional leases on the Consolidated Balance Sheet. We do not expect the guidance to have a material impact on the Consolidated Statements of Income or the Consolidated Statements of Changes in Stockholders' Equity.
In March 2016, the FASB issued ASU 2016-09, "Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." The ASU changes the accounting for certain aspects of share-based payments to employees. The guidance requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools. The guidance also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. This ASU is effective for interim and annual periods beginning after December 15, 2016. We are currently evaluating the impact of this guidance on our Consolidated Financial Statements and the timing of adoption. Once adopted, we will elect to account for forfeitures of stock-based awards as they occur. We expect the adoption of this ASU will create some volatility in our reported income tax expense related to the excess tax benefits for employee stock-based transactions, however, the actual amounts recognized will be dependent on the amount of employee stock-based transactions and the stock price at the time of vesting.
In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The ASU significantly changes the impairment model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model to an expected loss model. This ASU is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for all entities beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact of the pending adoption of the ASU on its Consolidated Financial Statements. Once adopted, we expect our allowance for loan losses to increase, however, until our evaluation is complete the magnitude of the increase will be unknown.
In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments." The ASU amends the guidance on the classification of certain cash receipts and payments in the statement of cash flows and is intended to reduce the diversity in practice. This ASU is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted for all entities beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of the pending adoption of the ASU on its Consolidated Financial Statements.
In December 2016, FASB issued ASU No. 2016-19, "Technical Corrections and Improvements" and ASU 2016-20, "Technical Corrections and Improvements to Topic 606: Revenue from Contracts with Customers." On November 10, 2010 FASB added a standing project that will facilitate the FASB Accounting Standards Codification ("Codification”) updates for technical corrections, clarifications, and improvements. These amendments are referred to as Technical Corrections and Improvements. Maintenance updates include non-substantive corrections to the Codification, such as editorial corrections, various link-related changes, and changes to source fragment information. These updates contain amendments that will affect a wide variety of Topics in the Codification. The amendments in these ASUs will apply to all reporting entities within the scope of the affected accounting guidance and generally fall into one of four categories: amendments related to differences between original guidance and the Codification, guidance clarification and reference corrections, simplification, and minor improvements. In summary, the amendments represent changes to clarify the Codification, correct unintended application of guidance, or make minor improvements to the Codification that are not expected to have a significant effect on current accounting practice. Transition guidance varies based on the amendments in the ASUs. The amendments that require transition guidance are effective for fiscal years and interim reporting periods after December 15, 2016. Early adoption is permitted including adoption in an interim period. All other amendments are effective upon the issuance of these ASUs. Neither ASU 2016-19 nor ASU 2016-20 had a material impact on the Company's Consolidated Financial Statements.
In January 2017, FASB issued ASU 2017-03, "Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323)." The ASU amends the Codification for SEC staff announcements made at recent Emerging Issues Task Force (EITF) meetings. The SEC guidance that specifically relates to our Consolidate Financial Statement was from the September 2016 meeting, where the SEC staff expressed their expectations about the extent of disclosures registrants should make about the effects of the new FASB guidance as well as any amendments issued prior to adoption, on revenue (ASU 2014-09), leases (ASU 2016-02) and credit losses on financial instruments (ASU 2016-13) in accordance with SAB Topic 11.M. Registrants are required to disclose the effect that recently issued accounting standards will have on their financial statements when adopted in a future period. In cases where a registrant cannot reasonably estimate the impact of the adoption, then additional qualitative disclosures should be considered. The ASU incorporates these SEC staff views into ASC 250 and adds references to that guidance in the transition paragraphs of each of the three new standards. The adoption of this ASU did not have a material effect on the Company's Consolidated Financial Statements.

9

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)

3.
Business Combinations
All business combinations are accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged are recorded at acquisition date fair values. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values becomes available.
United Financial of North Carolina, Inc.

On December 31, 2016, the Bank acquired United Financial of North Carolina, Inc. ("United Financial"), a municipal lease company headquartered in Fletcher, North Carolina that specializes in providing financing for fire departments and municipalities for the purchase of fire trucks and related equipment as well as the construction of fire stations and other municipal buildings across the Carolinas and other southeastern states. United Financial underwrites and originates these municipal leases and then sells them to HomeTrust and other financial institutions. Beginning January 1, 2017, United Financial has conducted business under the name United Financial, a division of HomeTrust Bank.

The total consideration paid by the Bank in the United Financial acquisition approximates $425. Per the merger agreement, a cash payment of $200 was paid on the acquisition date with an additional $225 due in third quarter of fiscal 2018; all of which was allocated to goodwill.

TriSummit Bancorp. Inc.

On January 1, 2017, HomeTrust completed its acquisition of TriSummit Bancorp, Inc., (“TriSummit”) pursuant to an Agreement and Plan of Merger, dated as of September 20, 2016, under which TriSummit merged with and into HomeTrust (the “Merger”) with HomeTrust as the surviving corporation in the Merger. Immediately following the Merger, TriSummit's wholly owned subsidiary bank, TriSummit Bank, merged with and into the Bank (together with the Merger, the “TriSummit Merger”).

Pursuant to the Merger Agreement, each share of the common stock of TriSummit and each share of Series A Preferred Stock of TriSummit issued and outstanding immediately prior to the Merger (on an as converted basis to a share of TriSummit common stock) was converted into the right to receive $4.40 in cash and .2099 shares of HomeTrust common stock, with cash paid in lieu of fractional share interests. At the Merger date, 50% of outstanding options granted by TriSummit were canceled. The remaining options were assumed by HomeTrust and converted into options to purchase 86,185 shares of HomeTrust Common Stock. In addition, TriSummit’s $7,140 Series B, Series C and Series D TARP preferred stock (all held by private shareholders) was redeemed in connection with the closing of the merger.
The total consideration paid by HomeTrust in the TriSummit Merger approximates $36,127. The total number of HomeTrust shares issued was 765,277 shares. HomeTrust paid aggregate cash consideration of approximately $16,083. HomeTrust has paid $220, net of tax in merger expenses through December 31, 2016 and anticipates approximately $5,300, net of tax in additional merger expenses in the third quarter of fiscal 2017.
As of the filing of this report, HomeTrust has not completed the fair value measurements of the TriSummit assets and liabilities. The table below presents TriSummit's unaudited condensed balance sheet as of December 31, 2016.
 
 
December 31, 2016
Assets:
 
 
Cash and cash equivalents
 
$
5,282

Investment securities
 
58,728

Loans, net
 
261,964

Other assets
 
34,064

Total assets
 
$
360,038

 
 
 
Liabilities and Stockholders' Equity
 
 
Deposits
 
$
277,302

Borrowings
 
50,199

Other liabilities
 
447

Total liabilities
 
327,948

Stockholders' Equity
 
32,090

Total liabilities and stockholders' equity
 
$
360,038


10

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)

4.
Securities Available for Sale
Securities available for sale consist of the following at the dates indicated:
 
December 31, 2016
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
U.S. Government Agencies
$
72,885

 
$
221

 
$
(419
)
 
$
72,687

Residential Mortgage-backed Securities of U.S. Government
 

 
 

 
 

 
 

Agencies and Government-Sponsored Enterprises
82,420

 
283

 
(421
)
 
82,282

Municipal Bonds
17,953

 
431

 
(59
)
 
18,325

Corporate Bonds
7,719

 
100

 
(127
)
 
7,692

Equity Securities
63

 

 

 
63

Total
$
181,040

 
$
1,035

 
$
(1,026
)
 
$
181,049

 
June 30, 2016
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
U.S. Government Agencies
$
77,356

 
$
624

 
$

 
$
77,980

Residential Mortgage-backed Securities of U.S. Government
 

 
 

 
 

 
 

Agencies and Government-Sponsored Enterprises
95,668

 
1,824

 
(84
)
 
97,408

Municipal Bonds
16,242

 
992

 

 
17,234

Corporate Bonds
7,773

 
194

 

 
7,967

Equity Securities
63

 

 

 
63

Total
$
197,102

 
$
3,634

 
$
(84
)
 
$
200,652

Debt securities available for sale by contractual maturity at the dates indicated are shown below. Mortgage-backed securities are not included in the maturity categories because the borrowers in the underlying pools may prepay without penalty; therefore, it is unlikely that the securities will pay at their stated maturity schedule.
 
December 31, 2016
 
Amortized
Cost
 
Estimated
Fair Value
Due within one year
$
903

 
$
904

Due after one year through five years
75,809

 
75,663

Due after five years through ten years
18,013

 
18,276

Due after ten years
3,832

 
3,861

Mortgage-backed securities
82,420

 
82,282

Total
$
180,977

 
$
180,986

The Company had no sales of securities available for sale during the three and six months ended December 31, 2016 and 2015.
Securities available for sale with costs totaling $135,556 and $151,359 with market values of $135,733 and $154,132 at December 31, 2016 and June 30, 2016, respectively, were pledged as collateral to secure various public deposits and other borrowings.

11

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)

The gross unrealized losses and the fair value for securities available for sale aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2016 and June 30, 2016 were as follows:
 
December 31, 2016
 
Less than 12 Months
 
12 Months or More
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
U.S. Government Agencies
$
48,047

 
$
(419
)
 
$

 
$

 
$
48,047

 
$
(419
)
Residential Mortgage-backed Securities of U.S. Government Agencies and Government-Sponsored Enterprises
44,958

 
(358
)
 
4,156

 
(63
)
 
49,114

 
(421
)
Municipal Bonds
5,042

 
(59
)
 

 

 
5,042

 
(59
)
Corporate Bonds

 

 
3,738

 
(127
)
 
3,738

 
(127
)
Total
$
98,047

 
$
(836
)
 
$
7,894

 
$
(190
)
 
$
105,941

 
$
(1,026
)
 
June 30, 2016
 
Less than 12 Months
 
12 Months or More
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Residential Mortgage-backed Securities of U.S. Government Agencies and Government-Sponsored Enterprises
$
1,970

 
$
(20
)
 
$
6,040

 
$
(64
)
 
$
8,010

 
$
(84
)
Total
$
1,970

 
$
(20
)
 
$
6,040

 
$
(64
)
 
$
8,010

 
$
(84
)
The total number of securities with unrealized losses at December 31, 2016, and June 30, 2016 were 131 and 44, respectively. Unrealized losses on securities have not been recognized in income because management has the intent and ability to hold the securities for the foreseeable future, and has determined that it is not more likely than not that the Company will be required to sell the securities prior to a recovery in value. The decline in fair value was largely due to increases in market interest rates. The Company had no other than temporary impairment losses during the three and six months ended December 31, 2016 or the year ended June 30, 2016.
As a requirement for membership, the Bank invests in stock of the FHLB of Atlanta and the Federal Reserve Bank of Richmond ("FRB"). No ready market exists for this stock and the carrying value approximates its fair value based on the redemption provisions of the FHLB of Atlanta and the FRB.

12

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)

5.
Loans
Loans consist of the following at the dates indicated:
 
December 31, 2016
 
June 30, 2016
Retail consumer loans:
 
 
 
One-to-four family
$
608,118

 
$
623,701

HELOCs - originated
156,615

 
163,293

HELOCs - purchased
173,511

 
144,377

Construction and land/lots
42,628

 
38,102

Indirect auto finance
129,132

 
108,478

Consumer
5,852

 
4,635

Total retail consumer loans
1,115,856

 
1,082,586

Commercial loans:
 

 
 

Commercial real estate
531,321

 
486,561

Construction and development
129,370

 
86,840

Commercial and industrial
77,352

 
73,289

Municipal leases
101,730

 
103,183

Total commercial loans
839,773

 
749,873

Total loans
1,955,629

 
1,832,459

Deferred loan costs (fees), net
(25
)
 
372

Total loans, net of deferred loan fees
1,955,604

 
1,832,831

Allowance for loan and lease losses
(20,986
)
 
(21,292
)
Loans, net
$
1,934,618

 
$
1,811,539

All the qualifying one-to-four family first mortgage loans, HELOCs, and FHLB Stock are pledged as collateral by a blanket pledge to secure any outstanding FHLB advances.
The Company's total non-purchased and purchased performing loans by segment, class, and risk grade at the dates indicated follow:
 
Pass
 
Special
Mention
 
Substandard
 
Doubtful
 
Loss
 
Total
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Retail consumer loans:
 
 
 
 
 
 
 
 
 
 
 
One-to-four family
$
575,429

 
$
8,320

 
$
17,898

 
$
1,239

 
$
48

 
$
602,934

HELOCs - originated
152,810

 
944

 
2,514

 
55

 
9

 
156,332

HELOCs - purchased
173,511

 

 

 

 

 
173,511

Construction and land/lots
40,774

 
696

 
590

 
32

 

 
42,092

Indirect auto finance
128,903

 
25

 
203

 

 
1

 
129,132

Consumer
5,617

 
1

 
215

 
3

 
10

 
5,846

Commercial loans:
 

 
 

 
 

 
 

 
 

 
 
Commercial real estate
498,507

 
6,445

 
9,847

 
1

 

 
514,800

Construction and development
121,946

 
819

 
3,824

 

 

 
126,589

Commercial and industrial
69,119

 
850

 
4,264

 

 
1

 
74,234

Municipal leases
100,129

 
963

 
638

 

 

 
101,730

Total loans
$
1,866,745

 
$
19,063

 
$
39,993

 
$
1,330

 
$
69

 
$
1,927,200


13

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)

 
Pass
 
Special
Mention
 
Substandard
 
Doubtful
 
Loss
 
Total
June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
Retail consumer loans:
 
 
 
 
 
 
 
 
 
 
 
One-to-four family
$
587,440

 
$
7,800

 
$
20,129

 
$
1,283

 
$
11

 
$
616,663

HELOCs - originated
159,275

 
678

 
2,997

 
55

 
10

 
163,015

HELOCs - purchased
144,377

 

 

 

 

 
144,377

Construction and land/lots
36,298

 
542

 
679

 
9

 

 
37,528

Indirect auto finance
108,432

 
14

 
21

 
11

 

 
108,478

Consumer
4,390

 
1

 
224

 
2

 
9

 
4,626

Commercial loans:
 

 
 

 
 

 
 

 
 

 
 

Commercial real estate
448,188

 
7,817

 
9,232

 
1

 

 
465,238

Construction and development
79,005

 
480

 
4,208

 

 

 
83,693

Commercial and industrial
63,299

 
1,032

 
5,361

 

 
2

 
69,694

Municipal leases
100,867

 
1,651

 
665

 

 

 
103,183

Total loans
$
1,731,571

 
$
20,015

 
$
43,516

 
$
1,361

 
$
32

 
$
1,796,495

The Company's total PCI loans by segment, class, and risk grade at the dates indicated follow:
 
Pass
 
Special
Mention
 
Substandard
 
Doubtful
 
Loss
 
Total
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Retail consumer loans:
 
 
 
 
 
 
 
 
 
 
 
One-to-four family
$
3,175

 
$
471

 
$
1,358

 
$
180

 
$

 
$
5,184

HELOCs - originated
257

 

 
26

 

 

 
283

Construction and land/lots
494

 

 
42

 

 

 
536

Consumer
6

 

 

 

 

 
6

Commercial loans:
 

 
 

 
 

 
 

 
 

 
 

Commercial real estate
8,800

 
3,612

 
4,109

 

 

 
16,521

Construction and development
812

 

 
1,969

 

 

 
2,781

Commercial and industrial
2,989

 
84

 
45

 

 

 
3,118

Total loans
$
16,533

 
$
4,167

 
$
7,549

 
$
180

 
$

 
$
28,429

 
Pass
 
Special
Mention
 
Substandard
 
Doubtful
 
Loss
 
Total
June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
Retail consumer loans:
 
 
 
 
 
 
 
 
 
 
 
One-to-four family
$
5,039

 
$
377

 
$
1,593

 
$
14

 
$
15

 
$
7,038

HELOCs - originated
258

 

 
20

 

 

 
278

Construction and land/lots
522

 

 
52

 

 

 
574

Consumer
8

 

 

 

 
1

 
9

Commercial loans:
 

 
 

 
 

 
 

 
 

 
 

Commercial real estate
12,594

 
4,266

 
4,463

 

 

 
21,323

Construction and development
1,136

 
292

 
1,719

 

 

 
3,147

Commercial and industrial
3,234

 
194

 
167

 

 

 
3,595

Total loans
$
22,791

 
$
5,129

 
$
8,014

 
$
14

 
$
16

 
$
35,964


14

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)


The Company's total loans by segment, class, and delinquency status at the dates indicated follows:
 
Past Due
 
 
 
Total
 
30-89 Days
 
90 Days+
 
Total
 
Current
 
Loans
December 31, 2016
 
 
 
 
 
 
 
 
 
Retail consumer loans:
 
 
 
 
 
 
 
 
 
One-to-four family
$
3,733

 
$
3,728

 
$
7,461

 
$
600,657

 
$
608,118

HELOCs - originated
569

 
354

 
923

 
155,692

 
156,615

HELOCs - purchased

 

 

 
173,511

 
173,511

Construction and land/lots
116

 
83

 
199

 
42,429

 
42,628

Indirect auto finance
353

 
30

 
383

 
128,749

 
129,132

Consumer
45

 
13

 
58

 
5,794

 
5,852

Commercial loans:
 
 
 
 
 
 
 
 
 
Commercial real estate
128

 
4,486

 
4,614

 
526,707

 
531,321

Construction and development
638

 
1,222

 
1,860

 
127,510

 
129,370

Commercial and industrial
575

 
1,714

 
2,289

 
75,063

 
77,352

Municipal leases
114

 

 
114

 
101,616

 
101,730

Total loans
$
6,271

 
$
11,630

 
$
17,901

 
$
1,937,728

 
$
1,955,629

The table above includes PCI loans of $214 30-89 days past due and $5,382 90 days or more past due as of December 31, 2016.
 
Past Due
 
 
 
Total
 
30-89 Days
 
90 Days+
 
Total
 
Current
 
Loans
June 30, 2016
 
 
 
 
 
 
 
 
 
Retail consumer loans:
 
 
 
 
 
 
 
 
 
One-to-four family
$
3,514

 
$
5,476

 
$
8,990

 
$
614,711

 
$
623,701

HELOCs - originated
220

 
377

 
597

 
162,696

 
163,293

HELOCs - purchased

 

 

 
144,377

 
144,377

Construction and land/lots
100

 
119

 
219

 
37,883

 
38,102

Indirect auto finance
182

 

 
182

 
108,296

 
108,478

Consumer
4

 
4

 
8

 
4,627

 
4,635

Commercial loans:
 

 
 

 
 

 
 

 
 

Commercial real estate
1,436

 
3,353

 
4,789

 
481,772

 
486,561

Construction and development
371

 
1,296

 
1,667

 
85,173

 
86,840

Commercial and industrial
216

 
2,819

 
3,035

 
70,254

 
73,289

Municipal leases

 

 

 
103,183

 
103,183

Total loans
$
6,043

 
$
13,444

 
$
19,487

 
$
1,812,972

 
$
1,832,459

The table above includes PCI loans of $1,596 30-89 days past due and $5,776 90 days or more past due as of June 30, 2016.

15

HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)

The Company's recorded investment in loans, by segment and class, that are not accruing interest or are 90 days or more past due and still accruing interest at the dates indicated follow:
 
December 31, 2016
 
June 30, 2016
 
Nonaccruing
 
90 Days + &
still accruing
 
Nonaccruing
 
90 Days + &
still accruing
Retail consumer loans:
 
 
 
 
 
 
 
One-to-four family
$
7,361

 
$

 
$
9,192

 
$

HELOCs - originated
654

 

 
1,026

 

Construction and land/lots
173

 

 
188

 

Indirect auto finance
176

 

 
20

 

Consumer
31

 

 
15

 

Commercial loans:
 

 
 

 
 

 
 

Commercial real estate
3,374

 

 
3,222

 

Construction and development
1,759

 

 
1,417

 

Commercial and industrial
2,070

 

 
3,019

 

Municipal leases
408

 

 
419

 

Total loans
$
16,006

 
$

 
$
18,518

 
$

PCI loans totaling $6,228 at December 31, 2016 and $6,607 at June 30, 2016 are excluded from nonaccruing loans due to the accretion of discounts established in accordance with the acquisition method of accounting for business combinations.
Troubled debt restructurings ("TDRs") are loans which have renegotiated loan terms to assist borrowers who are unable to meet the original terms of their loans. Such modifications to loan terms may include a lower interest rate, a reduction in principal, or a longer term to maturity. Additionally, all TDRs are considered impaired. The Company had no commitments to lend additional funds on these TDR loans at December 31, 2016.
The Company's loans that were performing under the payment terms of TDRs that were excluded from nonaccruing loans above at the dates indicated follow:
 
December 31, 2016
 
June 30, 2016
Performing TDRs included in impaired loans
$
27,448

 
$
28,263

An analysis of the allowance for loan losses by segment for the periods shown is as follows:
 
Three Months Ended December 31, 2016
 
Three Months Ended December 31, 2015
 
PCI
 
Retail
Consumer
 
Commercial
 
Total
 
PCI
 
Retail
Consumer
 
Commercial
 
Total
Balance at beginning of period
$
356

 
$
10,446

 
$
10,149

 
$
20,951

 
$
328

 
$
12,426

 
$
9,358

 
$
22,112

Provision for (recovery of) loan losses
(20
)
 
(609
)
 
629

 

 
27

 
(553
)
 
526

 

Charge-offs

 
(155
)
 
(67
)
 
(222
)
 

 
(306
)
 
(543
)
 
(849
)
Recoveries

 
131

 
126

 
257

 

 
503

 
211

 
714

Balance at end of period
$
336

 
$
9,813

 
$
10,837

 
$
20,986