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HomeTrust Bancshares, Inc. Reports Financial Results For The Second Quarter Of Fiscal 2018

ASHEVILLE, N.C., Jan. 29, 2018 (GLOBE NEWSWIRE) -- HomeTrust Bancshares, Inc. (NASDAQ:HTBI) ("Company"), the holding company of HomeTrust Bank ("Bank"), today announced a preliminary net loss of $10.7 million for the quarter ended December 31, 2017, driven by an estimated $17.7 million deferred tax revaluation resulting from enactment of the Tax Cuts and Jobs Act (the "Tax Act”), compared to net income of $3.0 million for the same period a year ago. The Company's diluted loss per share was $0.59 for the three months ended December 31, 2017 compared to earnings per share of $0.17 for the same period in fiscal 2017. Loss on assets was 1.31% for the three months ended December 31, 2017 compared to a return on assets of 0.43% for the same period in fiscal 2017. Net loss totaled $5.1 million for the six months ended December 31, 2017, compared to net income of $6.8 million for the same period in fiscal 2017. Diluted loss per share was $0.28 for the six months ended December 31, 2017 compared to earnings per share of $0.39 for the same period last year. Loss on assets was 0.32% for the six months ended December 31, 2017 compared to a return on assets of 0.49% for the same period in fiscal 2017. The Tax Act, which among other things, reduced the federal corporate tax rate to 21% effective January 1, 2018 requiring the Company to revalue net deferred tax assets. The resulting estimated $17.7 million deferred tax revaluation was reflected as an increase to the Company's income tax expense.

For the quarter ended December 31, 2017 compared to the corresponding quarter in the previous year and before the change in the federal tax rate and prior year merger-related expenses:

  • net income increased 134.2% to $7.0 million from $3.0 million;

  • diluted earnings per share increased 123.5% to $0.38 from $0.17; and

  • return on assets increased 100.0% to 0.86% from 0.43%.

For the six months ended December 31, 2017 compared to the same period a year ago and before the change in the federal tax rate, merger-related expenses, certain state income tax expenses, and gains from the sale of premises and equipment:

  • net income increased 72.9% to $12.6 million from $7.3 million;

  • diluted earnings per share increased 58.1% to $0.68 from $0.43; and

  • return on assets increased 47.2% to 0.78% from 0.53%.

"The cumulative impact of our team's work over the past five years continues to position HomeTrust to make fiscal 2018 an inflection point for our financial performance as evidenced by our core results for the quarter end and year-to-date December 2017,” said Dana Stonestreet, Chairman, President, and CEO. "The increase in core earnings continues to reflect the execution of our strategic plan, organic loan growth, and our successful integration of TriSummit Bank ("TriSummit") during 2017. While strategic acquisitions have played a key role in expanding our markets, our continued growth is not dependent on mergers and acquisition activity - we are focused on leveraging our new teams of revenue producers in our expanded footprint to continue our solid growth.  In the past twelve months, we have hired 22 revenue producers and expect to add another 15 in the year ahead.  I could not be more proud of the HomeTrust team that continues to capitalize on the momentum in our new growing urban markets that is transforming HomeTrust from a rural mutual savings bank to a regional commercial bank.”

Income Statement Review

Net interest income was $25.2 million for the quarter ended December 31, 2017 compared to $20.4 million for the comparative quarter in fiscal 2017. The $4.8 million, or 23.6% increase was primarily due to a $6.8 million increase in interest and dividend income driven by an increase in average interest-earning assets. Average interest-earning assets increased $452.9 million, or 18.0% to $3.0 billion for the quarter ended December 31, 2017 compared to $2.5 billion for the corresponding quarter in fiscal 2017. The average balance of loans receivable for the quarter ended December 31, 2017 increased $495.9 million, or 26.0% due to the TriSummit acquisition and organic net loan growth, which was mainly funded by the cumulative decrease of $43.0 million, or 7.0% in average interest-earning deposits with banks, securities available for sale, and other interest-earning assets, an increase in average deposits of $307.9 million, or 17.2%, and an increase in average Federal Home Loan Bank ("FHLB") borrowings of $130.7 million, or 23.9% as compared to the same quarter last year. Net interest margin (on a fully taxable-equivalent basis) for the three months ended December 31, 2017 increased to 3.44% from 3.33% for the same period a year ago. We continue to utilize our leveraging strategy, where designated short-term FHLB borrowings are invested in various short-term liquid assets to generate additional net interest income, as well as the required purchase of additional FHLB stock which generates increased dividend income. During the three months ended December 31, 2017 our leveraging strategy produced an additional $1.1 million in interest and dividend income at an average yield of 1.66%, while the average cost of the borrowings was 1.23%, resulting in approximately $274,000 in net interest income. During the same quarter in the prior fiscal year, our leveraging strategy produced an additional $908,000 in interest and dividend income at an average yield of 1.07%, while the average cost of the borrowings was 0.44%, resulting in approximately $530,000 in net interest income. Excluding the effects of the leveraging strategy, the tax equivalent net interest margin would be 3.73% and 3.75% for the quarters ended December 31, 2017 and 2016, respectively.

Total interest and dividend income increased $6.8 million, or 30.8% for the three months ended December 31, 2017 as compared to the same period last year, which was primarily driven by a $6.3 million, or 31.6% increase in loan interest income, a $364,000, or 38.8% increase in certificates of deposit and other interest-bearing deposits, and a $110,000, or 28.1% increase in other investment income. The additional loan interest income was primarily due to the increase in the average balance of loans receivable as well as an increase in the average loan yields due to increases in the federal funds rate over the past 12 months. Average loan yields increased 13 basis points to 4.41% for the quarter ended December 31, 2017 from 4.28% in the corresponding quarter from last year. In addition, there was a $146,000, or 18.9% increase in the accretion of purchase discounts on acquired loans to $920,000 for the quarter ended December 31, 2017 from $774,000 for the same quarter in fiscal 2017 as a result of prepayments. For the quarters ended December 31, 2017 and 2016, the average loan yields included 15 and 16 basis points, respectively, from the accretion of purchase discounts on acquired loans.

Total interest expense increased $2.0 million, or 119.5% for the quarter ended December 31, 2017 compared to the same period last year. This increase was primarily related to the TriSummit acquisition and recent deposit gathering initiatives contributing to a $250.9 million, or 16.3% increase in the average balance of interest-bearing deposits. In addition, average borrowings, consisting primarily of short-term FHLB advances, increased by $130.7 million to $677.0 million due to funding for loan growth along with a 78 basis point increase in the average cost of such borrowings during the quarter as compared to the same quarter last year. The overall average cost of funds increased 27 basis points to 0.58% for the current quarter as compared to the same quarter last year due primarily to the impact of the recent increases in the federal funds rate on our borrowings.

Net interest income increased $8.3 million or 19.9% to $49.8 million for the six months ended December 31, 2017 compared to $41.6 million for the six months ended December 31, 2016. Average interest-earning assets increased $422.2 million, or 16.7% to $2.9 billion for the six months ended December 31, 2017 compared to $2.5 billion in the same period in 2016. The $504.7 million, or 26.9% increase in average balance of loans receivable for the six months ended December 31, 2017 was due to the TriSummit acquisition and increased organic loan growth, which was mainly funded by the cumulative decrease of $82.4 million, or 12.8% in average interest-earning deposits with banks, securities available for sale, and other interest-earning assets and an increase in average deposits of 282.0 million, or 15.7% and an increase in average FHLB borrowings of $132.4 million, or 24.5%. Net interest margin (on a fully taxable-equivalent basis) for the six months ended December 31, 2017 increased five basis points to 3.43% from 3.38% for last year. For the six months ended December 31, 2017, our leveraging strategy produced an additional $2.0 million in interest and dividend income at an average yield of 1.62%, while the average cost of the borrowings was 1.20%, resulting in approximately $519,000 in net interest income. Our leveraging strategy produced an additional $1.9 million in interest and dividend income at an average yield of 1.04% during the corresponding period in fiscal 2017, while the average cost of the borrowings was 0.43%, resulting in approximately $1.1 million in net interest income. Excluding the effects of the leveraging strategy, the tax equivalent net interest margin would be 3.71% and 3.86% for the six months ended December 31, 2017 and 2016, respectively.

Total interest income increased $11.9 million, or 26.5% for the six months ended December 31, 2017 as compared to the same period last year. The increase was primarily driven by an $11.0 million, or 27.4% increase in loan interest income, a $490,000, or 24.7% increase in certificates of deposit and other interest-bearing deposits, and a $229,000, or 29.4% increase in other investment income. The additional loan interest income was primarily due to the increase in the average balance of loans receivable, which was partially offset by a $908,000 decrease in the accretion of purchase discounts on acquired loans to $1.7 million for the six months ended December 31, 2017 from $2.6 million for the same period in fiscal 2017, as a result of full repayments of several loans with large discounts in the previous year. Overall, average loan yields decreased four basis points to 4.38% for the six months ended December 31, 2017 from 4.42% in fiscal 2017. Excluding the effects of the accretion on purchase discounts on acquired loans, loan yields increased nine basis points to 4.23% for the six months ended December 31, 2017 compared to 4.14% in the same period last year.

Total interest expense increased $3.6 million, or 110.0% for the six months ended December 31, 2017 compared to the same period last year. This increase was primarily related to the increase in average borrowings and the corresponding 77 basis point increase in the average cost of those borrowings, resulting in additional interest expense of $2.9 million for the six months ended December 31, 2017 as compared to the same period in the prior year. The overall increase in average interest-bearing deposits and the seven basis point increase in cost of funds resulted in an additional $747,000 in interest expense for the six months ended December 31, 2017 compared to the corresponding period last year.

Noninterest income increased $846,000, or 21.5% to $4.8 million for the three months ended December 31, 2017 from $3.9 million for the same period in the previous year. The leading factors of the increase included a $299,000, or 15.9% increase in service charges on deposit accounts as a result of the increase in deposit accounts as well as a $424,000, or 45.3% increase in loan income from the gain on sale of mortgage loans and various commercial loan-related fees driven by the new SBA loan line of business.

Noninterest income increased $1.2 million, or 14.4% to $9.4 million for the six months ended December 31, 2017 from $8.2 million for the same period, primarily due to a $424,000, or 11.2% increase in service charges on deposit accounts; a $549,000, or 28.7% increase in loan income from the gain on sale of mortgage loans and various commercial loan-related fees; and $414,000, or 40.6% increase in other income. Partially offsetting these increases was a $221,000, or 57.4% decrease in gains from the sale of fixed assets for the six months ended December 31, 2017 compared to the same period last year.

Noninterest expense for the three months ended December 31, 2017 increased $695,000, or 3.4% to $21.2 million compared to $20.5 million for the three months ended December 31, 2016. The TriSummit acquisition led to additional noninterest expenses as shown in the cumulative increase of $973,000, or 17.4% in net occupancy expense; telephone, postage,and supplies; core deposit intangible amortization; and other expenses. Deposit insurance premiums increased $216,000, or 106.4% as the net asset base has increased. These increases in noninterest expense were partially offset by the absence of $27,000 in merger-related expenses, a $140,000, or 30.5% decrease in marketing and advertising expense, and a $408,000, or 56.9% decrease in real estate owned ("REO") related expenses for the quarter ended December 31, 2017 compared to the same period last year. For the three months ended December 31, 2017, there was a $235,000 decrease on writedowns and losses from REO sales compared to the corresponding quarter last year; and a $173,000 decrease in REO expenses as a result of fewer REO properties held.

Noninterest expense for the six months ended December 31, 2017 increased $2.6 million, or 6.7% to $42.3 million compared to $39.6 million for the six months ended December 31, 2016. Salaries and employee benefits increased $1.8 million, or 8.0% primarily as a result of the TriSummit acquisition. The TriSummit acquisition was the leading factor in the $1.5 million, or 13.0% cumulative increase in net occupancy expense; telephone, postage,and supplies; core deposit intangible amortization; and other expenses. Partially offsetting these increases was the absence of $334,000 in merger-related expenses, and a $587,000, or 59.2% decrease in REO related expenses for the six months ended December 31, 2017 compared to the same period last year, which was driven by a $42,000 gain on the sale of REO compared to a $469,000 loss on the sale of REO in the corresponding period in the prior year.

For the three months ended December 31, 2017, the Company's income tax expense was $19.5 million compared to $893,000 for the three months ended December 31, 2016, which was a direct result of the Tax Act. As previously mentioned, the reduction in the corporate tax rate required the Company to revalue net deferred tax assets, resulting in a $17.7 million adjustment through income tax expense. In addition, our June 30 fiscal year end required the use of a blended rate as prescribed by the Internal Revenue Code. The blended federal rate of 27.5% was effective retroactively to July 1, 2017 and will be used for the entire fiscal year ended June 30, 2018.  As a result of this blended rate, income tax expense for the quarter ended December 31, 2017 includes approximately $418,000 in tax benefit from adjusting the federal income tax rate to 27.5% from 34% for the first quarter of the fiscal year. Excluding the effect of the revaluation of net deferred tax assets, the additional income tax expense was due to higher taxable income.

For the six months ended December 31, 2017, the Company's income tax expense was $22.0 million compared to $3.3 million for the corresponding period last year as a result of the deferred tax revaluation and to a lesser extent, higher taxable income. In addition, for the six months ended December 31, 2017 and 2016, the Company incurred a charge of $133,000 and $490,000, respectively, related to the decrease in value of our deferred tax assets based on decreases in North Carolina's corporate tax rate.

Balance Sheet Review

Total assets increased $44.0 million, or 1.4% to $3.3 billion at December 31, 2017 from $3.2 billion at June 30, 2017. Total liabilities increased $46.3 million, or 1.6% to $2.9 billion at December 31, 2017 from $2.8 billion at June 30, 2017. Deposit growth of $59.8 million, or 2.9% and the cumulative decrease of $63.9 million, or 19.3% in certificates of deposit in other banks and securities available for sale during the first six months of fiscal 2018 were used to partially fund the $66.5 million, or 2.8% increase in total loans, the $49.9 million, or 33.3% increase in commercial paper, and reduce borrowings by $11.5 million, or 1.7%. The increase in net loans receivable was driven by $66.8 million or 6.1% annualized of organic net loan growth. The $11.7 million, or 13.4% increase in cash and cash equivalents was mainly due to the additional funds held at the Federal Reserve Bank. The $20.9 million, or 36.4% decrease in deferred income taxes was driven by the previously mentioned revaluation as a result of the Tax Act and the use of net operating losses as our taxable income continues to increase.

Total deposits increased $59.8 million, or 2.9%, during the six months ended December 31, 2017 to $2.1 billion. The increase was primarily due to an increase of $79.8 million in our core deposits (which excludes certificates of deposit) as a result of recent deposit gathering initiatives, partially offset by a $20.1 million managed run off in our higher costing certificates of deposit and brokered deposits.

Stockholders' equity at December 31, 2017 decreased $2.3 million, or 0.6% to $395.4 million from $397.6 million at June 30, 2017. The decrease was primarily driven by $5.1 million in net losses, and a $601,000 decrease in other comprehensive income, partially offset by $2.0 million representing stock-based compensation, and $680,000 in a cumulative adjustment for the adoption of Accounting Standard Update 2016-09, "Improvements to Employee Share-Based Payment Accounting." As of December 31, 2017, 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 11.72%, 11.72%, 12.51%, and 9.94%, respectively.  In addition, the Company exceeded all regulatory capital requirements as of that date. The estimated $17.7 million deferred tax revaluation did not have a material impact on the Company's regulatory capital ratios.

Asset Quality

The allowance for loan losses was $21.1 million, or 0.87% of total loans, at December 31, 2017 compared to $21.2 million, or 0.90% of total loans, at June 30, 2017. The allowance for loan losses to total gross loans excluding acquired loans was 0.97% at December 31, 2017, compared to 1.03% at June 30, 2017.

There was no provision for losses on loans for the six months ended December 31, 2017 and 2016. Net loan charge-offs totaled $61,000 and $306,000 for the six months ended December 31, 2017 and 2016, respectively. Net charge-offs as a percentage of average loans decreased to 0.01% for the six months ended December 31, 2017 from 0.03% for the same period last fiscal year.

Nonperforming assets decreased $800,000, or 4.1% to $19.2 million, or 0.59% of total assets, at December 31, 2017 compared to $20.0 million, or 0.62% of total assets at June 30, 2017, and were $21.7 million, or 0.78% of total assets, a year ago. Nonperforming assets included $14.4 million in nonaccruing loans and $4.8 million in REO at December 31, 2017, compared to $13.7 million and $6.3 million, in nonaccruing loans and REO, respectively, at June 30, 2017. Included in nonperforming loans are $4.8 million of loans restructured from their original terms of which $2.1 million were current at December 31, 2017, with respect to their modified payment terms. At December 31, 2017, $4.6 million, or 32.1% of nonaccruing loans were current on their required loan payments. Purchased impaired loans aggregating $4.6 million obtained through 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. Nonperforming loans to total loans was 0.59% at December 31, 2017 compared to 0.58% at June 30, 2017, and 0.82% at December 31, 2016.

The ratio of classified assets to total assets decreased to 1.39% at December 31, 2017 from 1.57% at June 30, 2017. Classified assets decreased 10.4% to $45.0 million at December 31, 2017 compared to $50.2 million at June 30, 2017 and were $54.8 million at December 31, 2016. Our overall asset quality metrics continue to demonstrate our commitment to growing and maintaining a high quality loan portfolio.

About HomeTrust Bancshares, Inc.

HomeTrust Bancshares, Inc. is the holding company for HomeTrust Bank. As of December 31, 2017, the Company had assets of $3.3 billion. The Bank, founded in 1926, is a North Carolina state chartered, community-focused financial institution committed to providing value added relationship banking through 42 locations as well as online/mobile channels. Locations include: North Carolina (including the Asheville metropolitan area, the "Piedmont" region, Charlotte, and Raleigh), Upstate South Carolina (Greenville), East Tennessee (including Kingsport/Johnson City/Bristol, Knoxville, and Morristown) and Southwest Virginia (including the Roanoke Valley). The Bank is the 2nd 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 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 2018 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

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



Consolidated Balance Sheets (Unaudited)
 
(Dollars in thousands) December 31,
2017
  September 30, 
2017
  June 30,
 2017
  March 31,
2017
  December 31,
2016
Assets                  
Cash $ 46,743     $ 38,162     $ 41,982     $ 36,978     $ 40,105  
Interest-bearing deposits 51,922     40,809     45,003     43,296     5,044  
Cash and cash equivalents 98,665     78,971     86,985     80,274     45,149  
Commercial paper 199,722     199,774     149,863     169,918     179,939  
Certificates of deposit in other banks 100,349     110,454     132,274     138,646     150,147  
Securities available for sale, at fair value 167,669     182,053     199,667     211,347     181,049  
Other investments, at cost 38,877     38,651     39,355     35,269     32,341  
Loans held for sale 7,072     7,793     5,607     4,328     4,998  
Total loans, net of deferred loan fees 2,418,014     2,394,755     2,351,470     2,281,685     1,955,604  
Allowance for loan losses (21,090 )   (21,997 )   (21,151 )   (21,097 )   (20,986 )
Net loans 2,396,924     2,372,758     2,330,319     2,260,588     1,934,618  
Premises and equipment, net 62,435     62,614     63,648     64,172     54,496  
Accrued interest receivable 9,371     9,340     8,758     8,849     7,792  
Real estate owned ("REO") 4,818     5,941     6,318     6,279     5,648  
Deferred income taxes 36,526     55,653     57,387     59,661     52,259  
Bank owned life insurance ("BOLI") 86,984     86,561     85,981     85,371     81,033  
Goodwill 25,638     25,638     25,638     25,638     13,098  
Core deposit intangibles 5,773     6,454     7,173     7,931     5,868  
Other assets 9,765     7,343     7,560     7,175     25,805  
Total Assets $ 3,250,588     $ 3,249,998     $ 3,206,533     $ 3,165,446     $ 2,774,240  
Liabilities and Stockholders' Equity                  
Liabilities                  
Deposits $ 2,108,208     $ 2,100,310     $ 2,048,451     $ 2,084,759     $ 1,786,165  
Borrowings 685,000     679,800     696,500     626,000     560,000  
Capital lease obligations 1,925     1,931     1,937     1,942     1,947  
Other liabilities 60,094     62,458     61,998     61,999     58,352  
Total liabilities 2,855,227     2,844,499     2,808,886     2,774,700     2,406,464  
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 (1) 190     190     190     189     180  
Additional paid in capital 215,928     214,827     213,459     211,731     189,169  
Retained earnings 187,241     197,907     191,660     186,894     186,620  
Unearned Employee Stock Ownership Plan ("ESOP") shares (7,670 )   (7,803 )   (7,935 )   (8,067 )   (8,199 )
Accumulated other comprehensive income (loss) (328 )   378     273     (1 )   6  
Total stockholders' equity 395,361     405,499     397,647     390,746     367,776  
Total Liabilities and Stockholders' Equity $ 3,250,588     $ 3,249,998     $ 3,206,533     $ 3,165,446     $ 2,774,240  
_________________________________
(1)  Shares of common stock issued and outstanding at December 31, 2017 was 18,967,175; at September 30, 2017 was 18,968,675; at June 30, 2017 was 18,967,875; at March 31, 2017 was 18,947,176; and at December 31, 2016 was 18,000,750.


 
Consolidated Statement of Income (Loss) (Unaudited)
 
  Three Months Ended   Six Months Ended
  December 31,   September 30,   December 31,   December 31,   December 31,
(Dollars in thousands) 2017   2017   2016   2017   2016
Interest and Dividend Income                  
Loans $ 26,140     $ 25,250     $ 19,871     $ 51,390     $ 40,352  
Securities available for sale 904     971     862     1,875     1,742  
Certificates of deposit and other interest-bearing deposits 1,303     1,169     939     2,472     1,982  
Other investments 501     506     391     1,007     778  
Total interest and dividend income 28,848     27,896     22,063     56,744     44,854  
Interest Expense                  
Deposits 1,541     1,346     1,041     2,887     2,140  
Borrowings 2,077     1,969     607     4,046     1,162  
Total interest expense 3,618     3,315     1,648     6,933     3,302  
Net Interest Income 25,230     24,581     20,415     49,811     41,552  
Provision for Loan Losses                  
Net Interest Income after Provision for Loan Losses 25,230     24,581     20,415     49,811     41,552  
Noninterest Income                  
Service charges and fees on deposit accounts 2,185     2,039     1,886     4,224     3,800  
Loan income and fees 1,361     1,102     937     2,463     1,914  
BOLI income 518     562     503     1,080     1,065  
Gain from sale of premises and equipment     164         164     385  
Other, net 723     710     615     1,433     1,019  
Total noninterest income 4,787     4,577     3,941     9,364     8,183  
Noninterest Expense                  
Salaries and employee benefits 11,973     12,352     11,839     24,325     22,530  
Net occupancy expense 2,473     2,349     2,015     4,822     4,076  
Marketing and advertising 319     453     459     772     889  
Telephone, postage, and supplies 748     685     574     1,433     1,187  
Deposit insurance premiums 419     414     203     833     481  
Computer services 1,595     1,545     1,648     3,140     3,075  
Loss (gain) on sale and impairment of REO 104     (146 )   339     (42 )   469  
REO expense 205     241     378     446     522  
Core deposit intangible amortization 681     719     618     1,400     1,268  
Merger-related expenses         27         334  
Other 2,658     2,469     2,380     5,127     4,780  
Total noninterest expense 21,175     21,081     20,480     42,256     39,611  
Income Before Income Taxes 8,842     8,077     3,876     16,919     10,124  
Income Tax Expense 19,508     2,510     893     22,018     3,317  
Net Income (Loss) $ (10,666 )   $ 5,567     $ 2,983     $ (5,099 )   $ 6,807  


 
Per Share Data
 
    Three Months Ended   Six Months Ended
    December 31,   September 30,   December 31,   December 31,   December 31,
    2017   2017   2016   2017   2016
Net income (loss) per common share:                    
Basic   $ (0.59 )   $ 0.31     $ 0.17     $ (0.28 )   $ 0.39  
Diluted   $ (0.59 )   $ 0.30     $ 0.17     $ (0.28 )   $ 0.39  
Adjusted net income per common share: (1)                    
Basic   $ 0.39     $ 0.31     $ 0.18     $ 0.70     $ 0.43  
Diluted   $ 0.38     $ 0.30     $ 0.17     $ 0.68     $ 0.43  
                     
Average shares outstanding:                    
Basic   17,975,883     17,966,994     16,900,387     17,971,439     16,893,775  
Diluted   17,975,883     18,616,452     17,444,144     17,971,439     17,391,404  
Book value per share at end of period   $ 20.84     $ 21.38     $ 20.43     $ 20.84     $ 20.43  
Tangible book value per share at end of period (1)   $ 19.26     $ 19.81     $ 19.50     $ 19.26     $ 19.50  
Total shares outstanding at end of period   18,967,175     18,968,675     18,000,750     18,967,175     18,000,750  
__________________________________________________
(1) See Non-GAAP reconciliation tables below for adjustments.


 
Selected Financial Ratios and Other Data
 
    Three Months Ended   Six Months Ended
    December 31,   September 30,   December 31,   December 31,   December 31,
    2017   2017   2016   2017   2016
Performance ratios: (1)            
Return (loss) on assets (ratio of net income to average total assets)   (1.31 )%   0.70 %   0.43 %   (0.32 )%   0.49 %
Return on assets - adjusted(4)   0.86     0.70     0.43     0.78     0.53  
Return (loss) on equity (ratio of net income to average equity)   (10.51 )   5.55     3.26     (2.53 )   3.74  
Return on equity - adjusted(4)   6.92     5.58     3.28     6.25     4.01  
Tax equivalent yield on earning assets(2)   3.93     3.90     3.59     3.90     3.65  
Rate paid on interest-bearing liabilities   0.58     0.54     0.31     0.56     0.31  
Tax equivalent average interest rate spread (2)   3.35     3.36     3.28     3.34     3.34  
Tax equivalent net interest margin(2) (3)   3.44     3.44     3.33     3.43     3.38  
Tax equivalent net interest margin - adjusted(4)   3.73     3.72     3.75     3.71     3.86  
Average interest-earning assets to average interest-bearing liabilities   120.42     120.67     120.73     120.54     120.60  
Operating expense to average total assets   2.61     2.64     2.96     2.62     2.84  
Efficiency ratio   70.54     72.30     84.09     71.41     79.50  
Efficiency ratio - adjusted (4)   69.67     71.36     82.05     70.69     77.76  
________________________________
(1) Ratios are annualized where appropriate.
(2) For the three and six months ended December 31, 2017 the weighted average rate for municipal leases is adjusted for a 30% combined federal and state tax rate since the interest from these leases is tax exempt. All other periods were at 37%.
(3) Net interest income divided by average interest-earning assets.
(4) See Non-GAAP reconciliation tables below for adjustments.


   
  At or For the Three Months Ended
  December 31,   September 30,   June 30,   March 31,   December 31,
  2017   2017   2017   2017   2016
Asset quality ratios:                  
Nonperforming assets to total assets(1) 0.59 %   0.62 %   0.62 %   0.63 %   0.78 %
Nonperforming loans to total loans(1) 0.59     0.59     0.58     0.61     0.82  
Total classified assets to total assets 1.39     1.50     1.57     1.67     1.97  
Allowance for loan losses to nonperforming loans(1) 146.79     156.17     154.77     152.74     131.11  
Allowance for loan losses to total loans 0.87     0.92     0.90     0.92     1.07  
Allowance for loan losses to total gross loans excluding acquired loans(2) 0.97     1.01     1.03     1.10     1.16  
Net charge-offs (recoveries) to average loans (annualized) 0.15     (0.14 )   (0.01 )   (0.02 )   (0.01 )
Capital ratios:                            
Equity to total assets at end of period 12.16 %   12.48 %   12.40 %   12.34 %   13.26 %
Tangible equity to total tangible assets(2) 11.34     11.67     11.57     11.49     12.73  
Average equity to average assets 12.49     12.55     12.59     12.36     13.23  
__________________________________________                            
(1) 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 December 31, 2017, there were $4.8 million of restructured loans included in nonaccruing loans and $4.6 million, or 32.1% of nonaccruing loans were current on their loan payments. Purchased impaired loans acquired through bank acquisitions are excluded from nonaccruing loans due to the accretion of discounts in accordance with the acquisition method of accounting for business combinations.
(2) See Non-GAAP reconciliation tables below for adjustments.


 
Average Balance Sheet Data
 
  For the Three Months Ended December 31,
  2017   2016
  Average
Balance
Outstanding
  Interest
Earned/
Paid(2)
  Yield/
Rate(2)
  Average
Balance
Outstanding
  Interest
Earned/
Paid(2)
  Yield/
Rate(2)
  (Dollars in thousands)
Assets:                      
Interest-earning assets:                      
Loans receivable(1) $ 2,406,014     $ 26,518     4.41 %   $ 1,910,134     $ 20,444     4.28 %
Deposits in other financial institutions 151,197     517     1.37 %   178,119     478     1.07 %
Investment securities 175,039     903     2.06 %   188,023     862     1.83 %
Other(3) 241,948     1,288     2.13 %   245,035     852     1.39 %
Total interest-earning assets 2,974,198     29,226     3.93 %   2,521,311     22,636     3.59 %
Other assets 275,434             243,736          
Total assets 3,249,632             2,765,047          
Liabilities and equity:                      
Interest-bearing deposits:                      
Interest-bearing checking accounts 471,474     236     0.20 %   405,340     172     0.17 %
Money market accounts 644,928     585     0.36 %   518,095     351     0.27 %
Savings accounts 227,933     76     0.13 %   210,223     70     0.13 %
Certificate accounts 448,507     644     0.57 %   408,314     448     0.44 %
Total interest-bearing deposits 1,792,842     1,541     0.33 %   1,541,972     1,041     0.28 %
Borrowings 677,013     2,077     1.22 %   546,353     607     0.44 %
Total interest-bearing liabilities 2,469,855     3,618     0.58 %   2,088,325     1,648     0.31 %
Noninterest-bearing deposits 307,934             250,914          
Other liabilities 65,850             60,068          
Total liabilities 2,843,639             2,399,307          
Stockholders' equity 405,993             365,740          
Total liabilities and stockholders' equity $ 3,249,632             $ 2,765,047          
                       
Net earning assets $ 504,343             $ 432,986          
Average interest-earning assets to average interest-bearing liabilities 120.42 %           120.73 %        
Tax-equivalent:                      
Net interest income     $ 25,608             $ 20,988      
Interest rate spread         3.35 %           3.28 %
Net interest margin(4)         3.44 %           3.33 %
Non-tax-equivalent:                      
Net interest income     $ 25,230             $ 20,415      
Interest rate spread         3.30 %           3.18 %
Net interest margin(4)         3.39 %           3.24 %
______________________________                          
(1) The average loans receivable, net balances include loans held for sale and nonaccruing loans.
(2) Interest income used in the average interest earned and yield calculation includes the tax equivalent adjustment of $378,000 and $573,000 for the three months ended December 31, 2017 and 2016, respectively, calculated based on a combined federal and state tax rate of 30% and 37%, respectively.
(3) The average other interest-earning assets consists of FRB stock, FHLB stock, and commercial paper.
(4) Net interest income divided by average interest-earning assets.


 
  For the Six Months Ended December 31,
  2017   2016
  Average
Balance
Outstanding
  Interest
Earned/
Paid(2)
  Yield/
Rate(2)
  Average
Balance
Outstanding
  Interest
Earned/
Paid(2)
  Yield/
Rate(2)
(Dollars in thousands)                                          
Assets:                      
Interest-earning assets:                      
Loans receivable(1) $ 2,383,768     $ 52,154     4.38 %   $ 1,879,110     $ 41,515     4.42 %
Deposits in other financial institutions 155,175     1,053     1.36 %   184,918     974     1.05 %
Investment securities 182,479     1,875     2.06 %   192,456     1,742     1.81 %
Other interest-earning assets(3) 225,185     2,426     2.15 %   267,878     1,786     1.33 %
Total interest-earning assets 2,946,607     57,508     3.90 %   2,524,362     46,017     3.65 %
Other assets 277,151             240,623          
Total assets $ 3,223,758             $ 2,764,985          
Liabilities and equity:                      
Interest-bearing liabilities:                      
Interest-bearing checking accounts 467,201     452     0.19 %   404,581     345     0.17 %
Money market accounts 625,095     1,062     0.34 %   518,672     698     0.27 %
Savings accounts 230,436     153     0.13 %   210,201     140     0.13 %
Certificate accounts 449,173     1,220     0.54 %   419,552     957     0.46 %
Total interest-bearing deposits 1,771,905     2,887     0.33 %   1,553,006     2,140     0.27 %
Borrowings 672,552     4,046     1.20 %   540,121     1,162     0.43 %
Total interest-bearing liabilities 2,444,457     6,933     0.56 %   2,093,127     3,302     0.31 %
Noninterest-bearing deposits 309,265             246,212          
Other liabilities 66,328             61,628          
Total liabilities 2,820,050             2,400,967          
Stockholders' equity 403,708             364,018          
Total liabilities and stockholders' equity $ 3,223,758             $ 2,764,985          
                       
Net earning assets $ 502,150             $ 431,235          
Average interest-earning assets to average interest-bearing liabilities 120.54 %           120.60 %        
Tax-equivalent:                      
Net interest income     $ 50,575             $ 42,715      
Interest rate spread         3.34 %           3.34 %
Net interest margin(4)         3.43 %           3.38 %
Non-tax-equivalent:                      
Net interest income     $ 49,811             $ 41,552      
Interest rate spread         3.29 %           3.24 %
Net interest margin(4)         3.38 %           3.29 %
___________________________                          
(1) The average loans receivable, net balances include loans held for sale and nonaccruing loans.
(2) Interest income used in the average interest earned and yield calculation includes the tax equivalent adjustment of $764,000 and $1,163,000 for the six months ended December 31, 2017 and 2016, respectively, calculated based on a combined federal and state tax rate of 30% and 37%, respectively.
(3) The average other interest-earning assets consists of FRB stock, FHLB stock, and commercial paper.
(4) Net interest income divided by average interest-earning assets.


 
Loans
 
(Dollars in thousands) December 31, 2017   September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016
Retail consumer loans:                  
One-to-four family $ 686,229     $ 684,956     $ 684,089     $ 683,383     $ 608,118  
HELOCs - originated 150,084     152,979     157,068     160,083     156,615  
HELOCs - purchased 162,181     162,518     162,407     160,829     173,511  
Construction and land/lots 60,805     54,969     50,136     46,856     42,628  
Indirect auto finance 150,042     142,915     140,879     132,959     129,132  
Consumer 9,699     8,814     7,900     7,729     5,852  
Total retail consumer loans 1,219,040     1,207,151     1,202,479     1,191,839     1,115,856  
Commercial loans:                  
Commercial real estate 786,381     753,857     730,408     706,277     531,321  
Construction and development 185,921     209,672     197,966     177,087     129,370  
Commercial and industrial 127,709     124,722     120,387     105,299     77,352  
Municipal leases 100,205     100,638     101,175     101,776     101,730  
Total commercial loans 1,200,216     1,188,889     1,149,936     1,090,439     839,773  
Total loans 2,419,256     2,396,040     2,352,415     2,282,278     1,955,629  
Deferred loan fees, net (1,242 )   (1,285 )   (945 )   (593 )   (25 )
Total loans, net of deferred loan fees 2,418,014     2,394,755     2,351,470     2,281,685     1,955,604  
Allowance for loan losses (21,090 )   (21,997 )   (21,151 )   (21,097 )   (20,986 )
Loans, net $ 2,396,924     $ 2,372,758     $ 2,330,319     $ 2,260,588     $ 1,934,618  


 
Deposits
 
(Dollars in thousands) December 31, 2017   September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016
Core deposits:                  
Noninterest-bearing accounts $ 313,493     $ 304,144     $ 310,172     $ 301,654     $ 244,148  
NOW accounts 489,668     464,992     469,377     480,405     413,867  
Money market accounts 638,259     642,351     569,607     564,195     520,138  
Savings accounts 224,732     230,944     237,149     249,330     210,283  
Total core deposits 1,666,152     1,642,431     1,586,305     1,595,584     1,388,436  
Certificates of deposit 442,056     457,879     462,146     489,175     397,729  
Total $ 2,108,208     $ 2,100,310     $ 2,048,451     $ 2,084,759     $ 1,786,165  
 

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, certain state income tax expense, adjustments for the change in federal tax law, and gain from the sale of premises and equipment; earnings per share ("EPS"), return on assets ("ROA"), and return on equity ("ROE") excluding merger-related expenses, certain state income tax expense, adjustments for the change in federal tax law, and gain from the sale of premises and equipment; 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 utilize short-term FHLB borrowings beginning in November 2014 as part of a leverage strategy to increase net interest income. The Company believes that showing the effects of these borrowings on net interest income and net interest margin is useful to both management and investors as these measures are commonly used to measure financial institution's 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   Six Months Ended
(Dollars in thousands)   December 31,   September 30,   December 31,   December 31,   December 31,
    2017   2017   2016   2017   2016
Noninterest expense   $ 21,175     $ 21,081     $ 20,480     $ 42,256     $ 39,611  
Less merger-related expenses           27         334  
Noninterest expense – as adjusted   $ 21,175     $ 21,081     $ 20,453     $ 42,256     $ 39,277  
                     
Net interest income   $ 25,230     $ 24,581     $ 20,415     $ 49,811     $ 41,552  
Plus noninterest income   4,787     4,577     3,941     9,364     8,183  
Plus tax equivalent adjustment   378     548     573     764     1,163  
Less realized gain on securities                    
Less gain on sale of premises and equipment       164         164     385  
Net interest income plus noninterest income – as adjusted   $ 30,395     $ 29,542     $ 24,929     $ 59,775     $ 50,513  
Efficiency ratio   69.67 %   71.36 %   82.05 %   70.69 %   77.76 %
Efficiency ratio (without adjustments)   70.54 %   72.30 %   84.09 %   71.41 %   79.64 %
                               

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

     
    As of
(Dollars in thousands, except per share data)   December 31,   September 30,   June 30,   March 31,   December 31,
    2017   2017   2017   2017   2016
Total stockholders' equity   $ 395,361     $ 405,499     $ 397,647     $ 390,746     $ 367,776  
Less: goodwill, core deposit intangibles, net of deferred taxes   30,083     29,704     30,157     30,635     16,795  
Tangible book value   $ 365,278     $ 375,795     $ 367,490     $ 360,111     $ 350,981  
Common shares outstanding   18,967,175     18,968,675     18,967,875     18,947,176     18,000,750  
Tangible book value per share   $ 19.26     $ 19.81     $ 19.37     $ 19.01     $ 19.50  
Book value per share   $ 20.84     $ 21.38     $ 20.96     $ 20.62     $ 20.43  
                                         

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

     
    At or For the Three Months Ended
    December 31,   September 30,   June 30,   March 31,   December 31,
    2017   2017   2017   2017   2016
                                         
    (Dollars in thousands)
Tangible equity(1)   $ 365,278     $ 375,795     $ 367,490     $ 360,111     $ 350,981  
Total assets   3,250,588     3,249,998     3,206,533     3,165,446     2,774,240  
Less: goodwill, core deposit intangibles, net of deferred taxes   30,083     29,704     30,157     30,635     16,795  
Total tangible assets(2)   $ 3,220,505     $ 3,220,294     $ 3,176,376     $ 3,134,811     $ 2,757,445  
Tangible equity to tangible assets   11.34 %   11.67 %   11.57 %   11.49 %   12.73 %
_________________________________________________________________
(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.
(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 FHLB borrowings utilized in the leverage strategy and proceeds from such borrowings:

 
  Three Months Ended December 31,
  2017   2016
  Average Balance Outstanding   Interest Earned / Paid   Yield/ Rate   Average Balance Outstanding   Interest Earned / Paid   Yield/ Rate
Interest-earning assets $ 2,974,198     $ 29,226     3.93 %   $ 2,521,311     $ 22,636     3.59 %
Less: Interest-earning assets funded by additional FHLB borrowings (1) 255,000     1,056     1.66 %   340,000     908     1.07 %
Interest-earning assets - adjusted $ 2,719,198     $ 28,170     4.14 %   $ 2,181,311     $ 21,728     3.98 %
                           
Interest-bearing liabilities $ 2,469,855     $ 3,618     0.58 %   $ 2,088,325     $ 1,648     0.31 %
Additional FHLB borrowings 255,000     782     1.23 %   340,000     378     0.44 %
Interest-bearing liabilities - adjusted $ 2,214,855     $ 2,836     0.51 %   $ 1,748,325     $ 1,270     0.29 %
                           
Tax equivalent net interest income and net interest margin     $ 25,608     3.44 %       $ 20,988     3.33 %
Tax equivalent net interest income and net interest margin - adjusted     25,334     3.73 %       20,458     3.75 %
Difference     $ 274     (0.29 )%       $ 530     (0.42 )%


   
  Six Months Ended December 31,
  2017   2016
  Average Balance Outstanding   Interest Earned / Paid   Yield/ Rate   Average Balance Outstanding   Interest Earned / Paid   Yield/ Rate
Interest-earning assets $ 2,946,607     $ 57,508     3.90 %   $ 2,524,362     $ 46,017     3.65 %
Less: Interest-earning assets funded by additional FHLB borrowings (1) 250,000     2,024     1.62 %   367,500     1,907     1.04 %
Interest-earning assets - adjusted $ 2,696,607     $ 55,484     4.12 %   $ 2,156,862     $ 44,110     4.20 %
                                   
Interest-bearing liabilities $ 2,444,457     $ 6,933     0.56 %   $ 2,093,127     $ 3,302     0.31 %
Less: Additional FHLB borrowings 250,000     1,505     1.20 %     367,500       788     0.43 %
Interest-bearing liabilities - adjusted $ 2,194,457     $ 5,428     0.49 %   $ 1,725,627     $ 2,514     0.29 %
                                   
Tax equivalent net interest income and net interest margin     $ 50,575     3.43 %           $ 42,715     3.38 %
Tax equivalent net interest income and net interest margin - adjusted     50,056     3.71 %       41,596     3.86 %
Difference     $ 519     (0.28 )%       $ 1,119     (0.48 )%
_________________________________________________________________________________
(1) Proceeds from these 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, state tax expense rate change, federal tax law rate change, and gain from sale of premises and equipment:

         
    Three Months Ended   Six Months Ended
(Dollars in thousands, except per share data)   December 31,   September 30,   December 31,   December 31,   December 31,
    2017   2017   2016   2017   2016
Merger-related expenses   $     $     $ 27     $     $ 334  
State tax expense adjustment (1)       133         133     490  
Change in federal tax law adjustment (2)   17,693             17,693      
Gain from sale of premises and equipment       (164 )       (164 )   (385 )
Total adjustments   17,693     (31 )   27     17,662     439  
Tax effect (3)       59     (10 )   49     49  
Total adjustments, net of tax   17,693     28     17     17,711     488  
                     
Net income (loss) (GAAP)   (10,666 )   5,567     2,983     (5,099 )   6,807  
                     
Net income (non-GAAP)   $ 7,027     $ 5,595     $ 3,000     $ 12,612     $ 7,295  
                     
Per Share Data                    
Average shares outstanding - basic   17,975,883     17,966,994     16,900,387     17,971,439     16,893,775  
Average shares outstanding - diluted   17,975,883     18,616,452     17,444,144     17,971,439     17,391,404  
Average shares outstanding - diluted (adjusted) (4)   18,689,894     18,616,452     17,444,144     18,655,048     17,391,404  
                     
Basic EPS                    
EPS (GAAP)   $ (0.59 )   $ 0.31     $ 0.17     $ (0.28 )   $ 0.39  
Non-GAAP adjustment   0.98         0.01     0.98     0.04  
EPS (non-GAAP)   $ 0.39     $ 0.31     $ 0.18     $ 0.70     $ 0.43  
                     
Diluted EPS                    
EPS (GAAP)   $ (0.59 )   $ 0.30     $ 0.17     $ (0.28 )   $ 0.39  
Non-GAAP adjustment   0.97             0.96     0.04  
EPS (non-GAAP)   $ 0.38     $ 0.30     $ 0.17     $ 0.68     $ 0.43  
                     
Average Balances                    
Average assets   $ 3,249,632     $ 3,197,885     $ 2,765,047     $ 3,223,758     $ 2,764,985  
Average equity   405,993     401,422     365,740     403,708     364,018  
                     
ROA                    
ROA (GAAP)   (1.31 )%   0.70 %   0.43 %   (0.32 )%   0.49 %
Non-GAAP adjustment   2.17 %   %   %   1.10 %   0.04 %
ROA (non-GAAP)   0.86 %   0.70 %   0.43 %   0.78 %   0.53 %
                                         
ROE                                        
ROE (GAAP)   (10.51 )%   5.55 %   3.26 %   (2.53 )%   3.74 %
Non-GAAP adjustment   17.43 %   0.03 %   0.02 %   8.78 %   0.27 %
ROE (non-GAAP)   6.92 %   5.58 %   3.28 %   6.25 %   4.01 %
____________________________________________
(1) State tax adjustment is a result of a decrease in value of our deferred tax assets stemming from recent decreases in North Carolina's corporate tax rate.
(2) Revaluation of net deferred tax assets due to the Tax Cuts and Jobs Act.
(3) Tax amounts have been adjusted for certain nondeductible merger-related expenses.
(4) Average shares outstanding - diluted were adjusted for the three and six months ended December 31, 2017 to include potentially dilutive shares not considered due to the corresponding net losses under GAAP.
 

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)   December 31,   September 30,   June 30,   March 31,   December 31,
    2017   2017   2017   2017   2016
Total gross loans receivable (GAAP)   $ 2,419,256     $ 2,396,040     $ 2,352,415     $ 2,282,278     $ 1,955,629  
Less: acquired loans   311,508     338,933     374,538     403,971     169,234  
Adjusted loans (non-GAAP)   $ 2,107,748     $ 2,057,107     $ 1,977,877     $ 1,878,307     $ 1,786,395  
                     
Allowance for loan losses (GAAP)   $ 21,090     $ 21,997     $ 21,151     $ 21,097     $ 20,986  
Less: allowance for loan losses on acquired loans   566     1,197     727     474     336  
Adjusted allowance for loan losses   $ 20,524     $ 20,800     $ 20,424     $ 20,623     $ 20,650  
Adjusted allowance for loan losses / Adjusted loans (non-GAAP)   0.97 %   1.01 %   1.03 %   1.10 %   1.16 %

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