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HomeTrust Bancshares, Inc. Reports Fourth Quarter and Fiscal Year 2018 Financial Results

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ASHEVILLE, N.C., July 26, 2018 (GLOBE NEWSWIRE) -- HomeTrust Bancshares, Inc. (NASDAQ:HTBI) ("Company"), the holding company of HomeTrust Bank ("Bank"), today announced preliminary net income of $7.2 million, or $0.38 per diluted share for the quarter ended June 30, 2018, compared to $4.8 million, or $0.25 per diluted share for the same period a year ago. Return on assets was 0.88% for the three months ended June 30, 2018 compared to 0.61% for the same period in fiscal 2017. Net income totaled $8.2 million, or $0.44 per diluted share for the year ended June 30, 2018, compared to $11.8 million, or $0.65 per diluted share for fiscal year 2017. Return on assets was 0.25% for the year ended June 30, 2018, compared to 0.40% in the prior year. Earnings for the year ended June 30, 2018 included a $17.9 million write-down of deferred tax assets following a deferred tax revaluation resulting from enactment of the Tax Cuts and Jobs Act (the "Tax Act") with no comparable charge in fiscal year 2017, which was partially offset by the absence of merger-related expenses, which totaled $7.8 million in fiscal year 2017.

For the quarter ended June 30, 2018 compared to the corresponding quarter in the previous year and before the write-down of deferred tax assets from the change in the federal tax rate, merger-related expenses, and certain state income tax expenses (non-GAAP):

  • net income increased 42.0% to $6.8 million from $4.8 million;
  • diluted earnings per share increased 44.0% to $0.36 from $0.25; and
  • return on assets increased 36.1% to 0.83% from 0.61%.

For the year ended June 30, 2018 compared to the year ended June 30, 2017 and before the write-down of deferred tax assets from the change in the federal tax rate, merger-related expenses, certain state income tax expenses, and gains from the sale of premises and equipment (non-GAAP):

  • net income increased 51.3% to $25.9 million from $17.1 million;
  • diluted earnings per share increased 46.8% to $1.38 from $0.94; and
  • return on assets increased 37.9% to 0.80% from 0.58%.

The reconciliation of non-GAAP measures, which the Company believes facilitates the assessment of its banking operations and peer comparability, is included in tabular form at the end of this release.

For the year ended June 30, 2018 compared to the year ended June 30, 2017:

  • commercial loan portfolio originations increased $49.0 million, or 9.0% from $541.5 million to $590.5 million;
  • retail loan portfolio originations increased $18.2 million, or 5.9% from $305.4 million to $323.6 million;

"Fiscal 2018 was truly an inflection point for our financial performance as evidenced by our core results," said Dana Stonestreet, Chairman, President and CEO. "We continued our focus on organic loan and deposit growth while remixing our balance sheet to maximize earnings. We enhanced our franchise value by hiring numerous high-performing revenue producers throughout key urban markets; fully developing our new SBA and equipment finance lines of business; and through the opening of a commercial loan production office in Greensboro, NC and a de novo full service branch in Cary, NC. As a result, we had a record year of over $1 billion in loan originations and net organic loan growth of 8%; SBA loan sales generated over $1 million in noninterest income during the year; and our brand new equipment finance line of business had $20 million in originations in the past quarter. We will continue to capitalize on this momentum in fiscal 2019 to enhance our financial performance and create additional shareholder value."

Income Statement Review

Net interest income increased to $25.6 million for the quarter ended June 30, 2018 compared to $24.6 million for the comparative quarter in fiscal 2017. The $1.0 million, or 4.2% increase was primarily due to a $3.4 million increase in interest and dividend income driven by an increase in average interest-earning assets, which was partially offset by a $2.4 million increase in interest expense. Average interest-earning assets increased $180.8 million, or 6.3% to $3.0 billion for the quarter ended June 30, 2018 compared to $2.9 billion for the corresponding quarter in fiscal 2017. For the quarter ended June 30, 2018, the average balance of total loans receivable increased $157.5 million, or 6.8% due to organic loan growth. The average balance of all other interest-earning assets increased $43.3 million, or 8.1% primarily due to increases in commercial paper investments. These increases were mainly funded by increases in average interest-bearing deposits of $125.9 million, or 7.2% and average noninterest bearing deposits of $21.6 million, or 7.3% as compared to the same quarter last year. Net interest margin (on a fully taxable-equivalent basis) for the three months ended June 30, 2018 decreased to 3.43% from 3.53% for the same period a year ago. We continue to utilize our leveraging strategy, where designated short-term Federal Home Loan Bank ("FHLB") borrowings are invested in various short-term liquid assets to generate additional net interest income, as well as the required purchase of additional FHLB stock which generates increased dividend income; however, we have reduced the amount of assets purchased and liabilities assumed as part of the leveraging strategy during the past year and expect to continue reducing these amounts commensurate with anticipated organic loan growth. During the three months ended June 30, 2018 our leveraging strategy produced an additional $1.0 million in interest and dividend income at an average yield of 2.58%, while the average cost of the borrowings was 1.91%, resulting in approximately $263,000 in net interest income. During the same quarter in the prior fiscal year, our leveraging strategy produced an additional $848,000 in interest and dividend income at an average yield of 1.38%, while the average cost of the borrowings was 0.95%, resulting in approximately $265,000 in net interest income. Excluding the effects of the leveraging strategy, the tax equivalent net interest margin would be 3.57% and 3.82% for the quarters ended June 30, 2018 and 2017, respectively.

Total interest and dividend income increased $3.4 million, or 12.5% for the three months ended June 30, 2018 as compared to the same period last year, which was primarily driven by a $2.4 million, or 9.5% increase in loan interest income and a $1.1 million, or 125.0% increase in interest income from certificates of deposit and other interest-bearing deposits, partially offset by a $120,000, or 12.0% decrease in interest income from securities available for sale. The additional loan interest income was primarily due to the increase in the average balance of loans receivable and an increase in loan yields. Average loan yields increased seven basis points to 4.48% for the quarter ended June 30, 2018 from 4.41% in the corresponding quarter from last year primarily due to loans recently originated at higher rates and was partially offset by a $710,000, or 54.3% decrease in the accretion of purchase discounts on acquired loans as a result of reduced prepayments as compared to the same quarter last year. For the quarters ended June 30, 2018 and 2017, the average loan yields included 10 and 23 basis points, respectively, from the accretion of purchase discounts on acquired loans.

Total interest expense increased $2.4 million, or 87.3% for the quarter ended June 30, 2018 compared to the same period last year, which primarily related to deposit gathering initiatives along with an 20 basis point increase in the average cost of deposits. The overall average cost of funds increased 36 basis points to 0.82% 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 $9.4 million or 10.4% to $100.6 million for the year ended June 30, 2018 compared to $91.2 million for the year ended June 30, 2017. Average interest-earning assets increased $292.3 million, or 10.9% to $3.0 billion for the year ended June 30, 2018 compared to $2.7 billion in the prior year. The $338.5 million, or 16.3% increase in average balance of total loans receivable for the year ended June 30, 2018 was due to a full year's impact of the TriSummit Bank acquisition and increased organic loan growth. This increase was mainly funded by the cumulative decrease of $46.2 million, or 7.6% in all other average interest-earning assets, an increase in average interest-bearing deposits of $152.2 million, or 9.2%, and an increase in average borrowings, consisting primarily of short-term FHLB advances of $80.4 million, or 13.9%. Net interest margin (on a fully taxable-equivalent basis) for the year ended June 30, 2018 decreased six basis points to 3.43% from 3.49% for last year. For the year ended June 30, 2018, our leveraging strategy produced an additional $4.1 million in interest and dividend income at an average yield of 1.90%, while the average cost of the borrowings was 1.39%, resulting in approximately $1.1 million in net interest income. Our leveraging strategy produced an additional $3.6 million in interest and dividend income at an average yield of 1.14% during fiscal year 2017, while the average cost of the borrowings was 0.58%, resulting in approximately $1.8 million in net interest income. Excluding the effects of the leveraging strategy, the tax equivalent net interest margin would be 3.66% and 3.88% for the years ended June 30, 2018 and 2017, respectively.

Total interest and dividend income increased $17.3 million, or 17.4% for the year ended June 30, 2018 as compared to the year ended June 30, 2017. The increase was primarily driven by a $15.0 million, or 16.7% increase in loan interest income, a $2.2 million, or 59.4% increase in certificates of deposit and other interest-bearing deposits, and a $354,000, or 21.3% increase in other investment income partially offset by a $315,000, or 7.9% decrease in interest income from securities available for sale. The additional loan interest income was primarily due to the increase in the average balance of loans receivable, which was partially offset by a $3.0 million decrease in the accretion of purchase discounts on acquired loans to $3.2 million for the year ended June 30, 2018 from $6.1 million for fiscal year 2017, as a result of full repayments of several loans with large discounts in the previous year. This decrease caused average loan yields to decrease three basis points to 4.41% for the year ended June 30, 2018 from 4.44% in fiscal 2017. Excluding the effects of the accretion on purchase discounts on acquired loans, loan yields increased 13 basis points to 4.28% for the year ended June 30, 2018 compared to 4.15% in fiscal 2017.

Total interest expense increased $7.8 million, or 94.9% for the year ended June 30, 2018 compared to the prior fiscal year. This increase was primarily related to the increase in average interest-bearing deposits and borrowings coupled with the increased cost of nine and 78 basis points for the years ended June 30, 2018 and 2017, respectively. The overall cost of funds increased 28 basis points to 0.65% for the year ended June 30, 2018 compared to 0.37% in the last fiscal year.

Noninterest income increased $1.1 million, or 27.1% to $5.4 million for the three months ended June 30, 2018 from $4.2 million for the same period in the previous year. The leading factors of the increase included a $338,000, or 16.6% increase in service charges on deposit accounts as a result of the increase in deposit accounts and related fees; a $628,000, or 66.0% increase in loan income from the gain on sale of mortgage loans and various commercial loan-related fees driven by the commencing of originations and sales of the guaranteed portion of U.S Small Business Administration ("SBA") commercial loans; and a $215,000, or 30.2% increase in other noninterest income mainly from investments in small business investment companies ("SBIC").

Noninterest income increased $3.6 million, or 22.1% to $19.7 million for the year ended June 30, 2018 from $16.1 million for the year ended June 30, 2017, primarily due to a $1.1 million, or 14.2% increase in service charges on deposit accounts; a $1.8 million, or 49.6% increase in loan income from the gain on sale of mortgage loans and various commercial loan-related fees; and $879,000, or 38.9% increase in other noninterest income. Partially offsetting these increases was a $221,000, or 57.4% decrease in gains from the sale of premises and equipment for the year ended June 30, 2018 compared to last fiscal year.

Noninterest expense for the quarters ended June 30, 2018 and 2017 remained consistent at $21.8 million.

Noninterest expense for the year ended June 30, 2018 decreased $4.9 million, or 5.5% to $85.3 million compared to $90.3 million for the year ended June 30, 2017. The decrease was primarily driven by the absence of the previously mentioned $7.8 million of merger-related expenses; a $192,000, or 11.5% decrease in marketing and advertising; a $210,000, or 3.2% decrease in computer services; and a $222,000, or 15.7% decrease in real estate owned ("REO") related expenses primarily as a result of fewer REO properties held. Partially offsetting these decreases were the additional expenses related to the TriSummit acquisition, a new commercial loan production office in Greensboro, NC, new SBA and equipment finance lines of business, and the opening of a de novo branch in Cary, NC as shown in the cumulative increase of $3.4 million, or 5.0% in salaries and employee benefits; net occupancy expense; telephone, postage, and supplies; and other expenses for the year ended June 30, 2018 compared to last year. Deposit insurance premiums increased $241,000, or 17.5% as the net asset base has increased.

For the quarter ended June 30, 2018, the Company's income tax expense was $2.0 million compared to $2.2 million for the quarter ended June 30, 2017. The decrease was primarily driven by the reduction in the federal corporate tax rate to 27.5% for the quarter ended June 30, 2018 from 34.0% for the quarter ended June 30, 2017. The Company also had a $275,000 benefit related to the revaluation of various state deferred tax assets with no comparable benefit in the corresponding quarter in the prior year. In  addition, as a result of the Tax Act, we incurred an additional $103,000 in income tax expense for the quarter ended June 30, 2018 to adjust the tax valuation allowance on our alternative minimum tax ("AMT") credits in accordance with Internal Revenue Service guidelines.  Our fiscal year end requires the use of a blended federal tax rate as prescribed by the Internal Revenue Code, which is 27.5% and was used through June 30, 2018. Beginning on July 1, 2018, the Company began using the new federal corporate tax rate of 21%.

For the year ended June 30, 2018, the Company's income tax expense was $26.7 million compared to $5.2 million for the year ended June 30, 2017. The increase was mainly driven by the reduction in the federal corporate tax rate, which required the Company to revalue net deferred tax assets and establish the tax valuation allowance on our AMT credits as discussed above, resulting in a $17.9 million adjustment through income tax expense; and to a lesser extent higher pre-tax income. In addition, for the year ended June 30, 2018, the Company had a benefit of $142,000 and a charge of $490,000 for the year ended June 30, 2017 related to revaluation of various state deferred tax assets.

Balance Sheet Review

Total assets increased $97.6 million, or 3.0% to $3.3 billion at June 30, 2018 from $3.2 billion at June 30, 2017. Total liabilities increased $86.0 million, or 3.1% to $2.9 billion at June 30, 2018 from $2.8 billion at June 30, 2017. Deposit growth of $147.8 million, or 7.2% and the cumulative decrease of $126.3 million, or 30.1% in cash and cash equivalents, certificates of deposit in other financial institutions and investment securities during the year ended June 30, 2018 were used to partially fund the $174.4 million, or 7.4% increase in total loans receivable, the $79.2 million, or 52.9% increase in commercial paper, and reduce borrowings by $61.5 million, or 8.8%. The increase in net loans receivable was driven by $170.5 million of organic loan growth. The $24.8 million, or 43.3% decrease in deferred income taxes was driven primarily by the previously mentioned write-down of deferred tax assets and to a lesser extent, the use of net operating losses as our taxable income increased.

Total deposits increased $147.8 million, or 7.2%, during the year ended June 30, 2018 to $2.2 billion. The increase was primarily due to a $93.8 million increase in our core deposits (which exclude certificates of deposit) from growth initiatives and a $54.0 million increase in certificates of deposit, which primarily related to additional brokered deposits.

Stockholders' equity at June 30, 2018 increased $11.2 million, or 2.8% to $409.2 million from $397.6 million at June 30, 2017. The increase was primarily driven by $8.2 million in net income, $3.0 million in 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," partially offset by a $1.9 million decrease in other comprehensive income representing unrealized losses on investment securities, net of tax. As of June 30, 2018, 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 11.70%, 11.70%, 12.45%, and 10.33%, respectively.  In addition, the Company exceeded all regulatory capital requirements as of that date. The $17.9 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 0.83% of total loans, at June 30, 2018 compared to $21.2 million, or 0.90% of total loans, at June 30, 2017. The allowance for loan losses to gross loans, excluding acquired loans, was 0.91% at June 30, 2018,  compared to 1.03% at June 30, 2017.

There was no provision for losses on loans for the three months or year ended June 30, 2018 and 2017 reflecting continued improvements in our asset quality, offset by loan growth. Net loan charge-offs totaled $412,000 for the three months ended June 30, 2018 as compared to $54,000 in net recoveries for the same period during the prior fiscal year. Net loan charge-offs decreased to $91,000 for the year ended June 30, 2018 from $141,000 for fiscal 2017. Net charge-offs as a percentage of average loans were 0.07% for the quarter ended June 30, 2018 compared to net recoveries of (0.01)% for the same period last fiscal year. Net charge-offs as a percentage of average loans decreased to 0.00% for the year ended June 30, 2018 from 0.01% for last fiscal year. Our year over year improvements across all credit metrics continue to demonstrate our commitment to growing and maintaining a high quality loan portfolio.

Nonperforming assets decreased 27.0% to $14.6 million, or 0.44% of total assets, at June 30, 2018, compared to $20.0 million, or 0.62% of total assets, at June 30, 2017. Nonperforming assets included $10.9 million in nonaccruing loans and $3.7 million in REO at June 30, 2018, compared to $13.7 million and $6.3 million, in nonaccruing loans and REO, respectively, at June 30, 2017. Included in nonperforming loans are $4.2 million of loans restructured from their original terms of which $2.6 million were current at June 30, 2018, with respect to their modified payment terms. The decrease in nonaccruing loans was primarily due to continued improvement in credit quality throughout the loan portfolio and loans returning to performing status as payment history and the borrower's financial status improved. At June 30, 2018, $5.6 million, or 51.6%, of nonaccruing loans were current on their required loan payments. Purchased impaired loans aggregating $3.4 million acquired from prior acquisitions are excluded from nonaccruing loans due to the accretion of discounts established in accordance with the acquisition method of accounting for business combinations. Nonperforming loans to total loans decreased to 0.43% at June 30, 2018 from 0.58% at June 30, 2017.

The ratio of classified assets to total assets decreased to 1.00% at June 30, 2018 from 1.57% at June 30, 2017. Classified assets decreased 34.2% to $33.1 million at June 30, 2018 compared to $50.2 million at June 30, 2017.

About HomeTrust Bancshares, Inc.

HomeTrust Bancshares, Inc. is the holding company for HomeTrust Bank. As of June 30, 2018, 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 43 locations as well as online/mobile channels. Locations include: North Carolina (including the Asheville metropolitan area, the "Piedmont" region, Charlotte, Cary, 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) June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017 (2)
Assets                  
Cash $ 45,222     $ 38,100     $ 46,743     $ 38,162     $ 41,982  
Interest-bearing deposits 25,524     41,296     51,922     40,809     45,003  
Cash and cash equivalents 70,746     79,396     98,665     78,971     86,985  
Commercial paper 229,070     239,435     199,722     199,774     149,863  
Certificates of deposit in other financial institutions 66,937     84,218     100,349     110,454     132,274  
Securities available for sale, at fair value 154,993     160,971     167,669     182,053     199,667  
Other investments, at cost 37,214     36,783     38,877     38,651     39,355  
Loans held for sale 5,873     6,071     7,072     7,793     5,607  
Total loans, net of deferred loan fees 2,525,852     2,445,755     2,418,014     2,394,755     2,351,470  
Allowance for loan losses (21,060 )   (21,472 )   (21,090 )   (21,997 )   (21,151 )
Net loans 2,504,792     2,424,283     2,396,924     2,372,758     2,330,319  
Premises and equipment, net 62,537     62,725     62,435     62,614     63,648  
Accrued interest receivable 9,344     9,216     9,371     9,340     8,758  
Real estate owned ("REO") 3,684     5,053     4,818     5,941     6,318  
Deferred income taxes 32,565     34,311     36,526     55,653     57,387  
Bank owned life insurance ("BOLI") 88,028     87,532     86,984     86,561     85,981  
Goodwill 25,638     25,638     25,638     25,638     25,638  
Core deposit intangibles 4,528     5,131     5,773     6,454     7,173  
Other assets 8,220     10,100     9,765     7,343     7,560  
Total Assets $ 3,304,169     $ 3,270,863     $ 3,250,588     $ 3,249,998     $ 3,206,533  
Liabilities and Stockholders' Equity                  
Liabilities                  
Deposits $ 2,196,253     $ 2,180,324     $ 2,108,208     $ 2,100,310     $ 2,048,451  
Borrowings 635,000     625,000     685,000     679,800     696,500  
Capital lease obligations 1,914     1,920     1,925     1,931     1,937  
Other liabilities 61,760     62,066     60,094     62,458     61,998  
Total liabilities 2,894,927     2,869,310     2,855,227     2,844,499     2,808,886  
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) 191     190     190     190     190  
Additional paid in capital 217,480     216,712     215,928     214,827     213,459  
Retained earnings 200,575     193,368     187,241     197,907     191,660  
Unearned Employee Stock Ownership Plan ("ESOP") shares (7,406 )   (7,538 )   (7,670 )   (7,803 )   (7,935 )
Accumulated other comprehensive income (loss) (1,598 )   (1,179 )   (328 )   378     273  
Total stockholders' equity 409,242     401,553     395,361     405,499     397,647  
Total Liabilities and Stockholders' Equity $ 3,304,169     $ 3,270,863     $ 3,250,588     $ 3,249,998     $ 3,206,533  

_________________________________
(1) Shares of common stock issued and outstanding at June 30, 2018 was 19,041,668; March 31, 2018 was 19,034,868; December 31, 2017 was 18,967,175; at September 30, 2017 was 18,968,675; and at June 30, 2017 was 18,967,875.
(2) Derived from audited financial statements.

       
Consolidated Statement of Income (Unaudited)      
  Three Months Ended   Year Ended
  June 30,   March 31,   June 30,   June 30,   June 30,
(Dollars in thousands) 2018   2018   2017   2018   2017 (1)
Interest and Dividend Income                  
Loans $ 27,337     $ 26,355     $ 24,971     $ 105,082     $ 90,069  
Securities available for sale 877     916     997     3,668     3,983  
Certificates of deposit and other interest-bearing deposits 1,969     1,498     875     5,939     3,725  
Other investments 510     496     448     2,013     1,659  
Total interest and dividend income 30,693     29,265     27,291     116,702     99,436  
Interest Expense                  
Deposits 2,249     1,622     1,233     6,758     4,588  
Borrowings 2,854     2,414     1,491     9,314     3,657  
Total interest expense 5,103     4,036     2,724     16,072     8,245  
Net Interest Income 25,590     25,229     24,567     100,630     91,191  
Provision for Loan Losses                  
Net Interest Income after Provision for Loan Losses 25,590     25,229     24,567     100,630     91,191  
Noninterest Income                  
Service charges and fees on deposit accounts 2,376     2,202     2,038     8,802     7,709  
Loan income and fees 1,579     1,410     951     5,452     3,645  
BOLI income 501     536     512     2,117     2,088  
Gain from sale of premises and equipment             164     385  
Gain from sales of securities available for sale         22         22  
Other, net 926     778     711     3,137     2,258  
Total noninterest income 5,382     4,926     4,234     19,672     16,107  
Noninterest Expense                  
Salaries and employee benefits 11,918     11,927     11,725     48,170     46,446  
Net occupancy expense 2,478     2,389     2,583     9,689     9,121  
Marketing and advertising 372     334     407     1,478     1,670  
Telephone, postage, and supplies 777     748     817     2,958     2,732  
Deposit insurance premiums 373     413     493     1,619     1,378  
Computer services 1,700     1,600     1,854     6,440     6,650  
Loss (gain) on sale and impairment of REO (25 )   194     13     127     300  
REO expense 308     311     144     1,065     1,114  
Core deposit intangible amortization 603     642     758     2,645     2,823  
Merger-related expenses         69         7,805  
Other 3,250     2,763     2,972     11,140     10,220  
Total noninterest expense 21,754     21,321     21,835     85,331     90,259  
Income Before Income Taxes 9,218     8,834     6,966     34,971     17,039  
Income Tax Expense 2,011     2,707     2,200     26,736     5,192  
Net Income $ 7,207     $ 6,127     $ 4,766     $ 8,235     $ 11,847  

_________________________________
(1) Derived from audited financial statements.

         
Per Share Data        
    Three Months Ended   Year Ended
    June 30,   March 31,   June 30,   June 30,   June 30,
    2018   2018   2017   2018   2017
Net income per common share:(1)                    
Basic   $ 0.40     $ 0.34     $ 0.26     $ 0.45     $ 0.66  
Diluted   $ 0.38     $ 0.32     $ 0.25     $ 0.44     $ 0.65  
Adjusted net income per common share:(2)                    
Basic   $ 0.38     $ 0.36     $ 0.26     $ 1.44     $ 0.96  
Diluted   $ 0.36     $ 0.34     $ 0.25     $ 1.38     $ 0.94  
Average shares outstanding:                    
Basic   18,121,690     18,052,000     17,936,511     18,028,854     17,379,487  
Diluted   18,847,279     18,761,586     18,568,587     18,726,431     17,956,443  
Book value per share at end of period   $ 21.49     $ 21.10     $ 20.96     $ 21.49     $ 20.96  
Tangible book value per share at end of period (2)   $ 19.96     $ 19.54     $ 19.37     $ 19.96     $ 19.37  
Total shares outstanding at end of period   19,041,668     19,034,868     18,967,875     19,041,668     18,967,875  

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

         
Selected Financial Ratios and Other Data        
    Three Months Ended   Year Ended
    June 30,
2018
  March 31,
2018
  June 30,
2017
  June 30,
2018
  June 30,
2017
Performance ratios:(1)            
Return on assets (ratio of net income to average total assets)   0.88 %   0.76 %   0.61 %   0.25 %   0.40 %
Return on assets - adjusted(2)   0.83     0.80     0.61     0.80     0.58  
Return on equity (ratio of net income to average equity)   7.12     6.16     4.83     2.05     3.14  
Return on equity - adjusted(2)   6.75     6.47     4.88     6.43     4.54  
Tax equivalent yield on earning assets(3)   4.10     3.99     3.91     3.97     3.79  
Rate paid on interest-bearing liabilities   0.82     0.65     0.46     0.65     0.37  
Tax equivalent average interest rate spread(3)   3.28     3.34     3.45     3.32     3.42  
Tax equivalent net interest margin(3) (4)   3.43     3.44     3.53     3.43     3.49  
Tax equivalent net interest margin - adjusted(2)   3.57     3.65     3.82     3.66     3.88  
Average interest-earning assets to average interest-bearing liabilities   121.27     120.71     119.99     120.77     120.26  
Operating expense to average total assets   2.65     2.63     2.79     2.63     3.06  
Efficiency ratio   70.24     70.70     75.81     70.93     84.12  
Efficiency ratio - adjusted(2)   69.36     69.77     74.14     70.12     75.48  

_________________________________
(1) Ratios are annualized where appropriate.
(2) See Non-GAAP reconciliation for adjustments.
(3) For the three months and year ended June 30, 2017 the weighted average rate for municipal leases is adjusted for a 37% combined federal and state tax rate since the interest from these leases is tax exempt. All other periods were at 30%.
(4) Net interest income divided by average interest-earning assets.

     
    At or For the Three Months Ended
    June 30,   March 31,   December 31,   September 30,   June 30,
    2018   2018   2017   2017   2017
Asset quality ratios:                    
Nonperforming assets to total assets(1)   0.44 %   0.54 %   0.59 %   0.62 %   0.62 %
Nonperforming loans to total loans(1)   0.43     0.52     0.59     0.59     0.58  
Total classified assets to total assets   1.00     1.29     1.38     1.50     1.57  
Allowance for loan losses to nonperforming loans(1)   192.96     169.71     146.79     156.17     154.77  
Allowance for loan losses to total loans   0.83     0.88     0.87     0.92     0.90  
Allowance for loan losses to total gross loans excluding acquired loans(2)   0.91     0.97     0.97     1.01     1.03  
Net charge-offs (recoveries) to average loans (annualized)   0.07     (0.06 )   0.15     (0.14 )   (0.01 )
Capital ratios:                    
Equity to total assets at end of period   12.39 %   12.28 %   12.16 %   12.48 %   12.40 %
Tangible equity to total tangible assets(2)   11.61     11.48     11.34     11.67     11.57  
Average equity to average assets   12.31     12.30     12.49     12.55     12.59  

_________________________________
(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 June 30, 2018, there were $4.2 million of restructured loans included in nonaccruing loans and $5.6 million, or 51.6%, 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 for adjustments.

   
Average Balance Sheet Data  
  Three Months Ended June 30,
  2018   2017
(Dollars in thousands) Average
Balance
Outstanding
  Interest
Earned/
Paid(2)
  Yield/
Rate(2)
  Average
Balance
Outstanding
  Interest
Earned/
Paid(2)
  Yield/
Rate(2)
Assets:                      
Interest-earning assets:                      
Loans receivable (1) $ 2,476,524     $ 27,727     4.48 %   $ 2,319,063     $ 25,550     4.41 %
Deposits in other financial institutions 110,819     440     1.59 %   165,702     472     1.14 %
Investment securities 159,667     877     2.20 %   207,561     997     1.92 %
Other interest-earning assets(3) 286,524     2,039     2.85 %   160,409     851     2.12 %
Total interest-earning assets 3,033,534     31,083     4.10 %   2,852,734     27,870     3.91 %
Other assets 255,903             281,264          
Total Assets 3,289,437             3,133,998          
Liabilities and equity:                      
Interest-bearing liabilities:                      
Interest-bearing checking accounts 480,688     282     0.24 %   466,274     211     0.18 %
Money market accounts 670,486     746     0.45 %   565,213     371     0.26 %
Savings accounts 216,058     70     0.13 %   242,241     81     0.13 %
Certificate accounts 509,543     1,151     0.90 %   477,114     571     0.48 %
Total interest-bearing deposits 1,876,775     2,249     0.48 %   1,750,842     1,233     0.28 %
Borrowings 624,725     2,854     1.83 %   626,631     1,491     0.95 %
Total interest-bearing liabilities 2,501,500     5,103     0.82 %   2,377,473     2,724     0.46 %
Noninterest-bearing deposits 317,356             295,763          
Other liabilities 65,678             66,236          
Total liabilities 2,884,534             2,739,471          
Stockholders' equity 404,903             394,527          
Total liabilities and stockholders' equity 3,289,437             3,133,998          
                       
Net earning assets $ 532,034             $ 475,262          
Average interest-earning assets to average interest-bearing liabilities 121.27 %           119.99 %        
Tax-equivalent:                      
Net interest income     $ 25,980             $ 25,146      
Interest rate spread         3.28 %           3.45 %
Net interest margin(4)         3.43 %           3.53 %
Non-tax-equivalent:                      
Net interest income     $ 25,590             $ 24,567      
Interest rate spread         3.23 %           3.37 %
Net interest margin(4)         3.37 %           3.44 %

_________________________________
(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 $390 and $579 for the three months ended June 30, 2018 and 2017, 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 asset.

   
  Years Ended June 30,
  2018   2017  
(Dollars in thousands) Average
Balance
Outstanding
  Interest
Earned/
Paid(2)
  Yield/
Rate(2)
  Average
Balance
Outstanding
  Interest
Earned/
Paid(2)
  Yield/
Rate(2)
 
Assets:                        
Interest-earning assets:                        
Loans receivable (1) $ 2,418,946     $ 106,641     4.41 %   $ 2,080,490     $ 92,423     4.44 %  
Deposits in other financial institutions 137,026     1,934     1.41 %   177,753     1,900     1.07 %  
Investment securities 172,461     3,668     2.13 %   202,866     3,983     1.96 %  
Other interest-earning assets(3) 247,829     6,018     2.43 %   222,847     3,484     1.56 %  
Total interest-earning assets 2,976,262     118,261     3.97 %   2,683,956     101,790     3.79 %  
Other assets 267,399             261,410            
Total Assets 3,243,661             2,945,366            
Liabilities and equity:                        
Interest-bearing liabilities:                        
Interest-bearing checking accounts 473,880     970     0.20 %   430,527     772     0.18 %  
Money market accounts 644,331     2,442     0.38 %   541,030     1,405     0.26 %  
Savings accounts 224,582     295     0.13 %   228,360     308     0.13 %  
Certificate accounts 463,306     3,051     0.66 %   453,994     2,103     0.46 %  
Total interest-bearing deposits 1,806,099     6,758     0.37 %   1,653,911     4,588     0.28 %  
Borrowings 658,240     9,314     1.41 %   577,848     3,657     0.63 %  
Total interest-bearing liabilities 2,464,339     16,072     0.65 %   2,231,759     8,245     0.37 %  
Noninterest-bearing deposits 311,210             271,477            
Other liabilities 65,489             65,160            
Total liabilities 2,841,038             2,568,396            
Stockholders' equity 402,623             376,970            
Total liabilities and stockholders' equity 3,243,661             2,945,366            
                         
Net earning assets $ 511,923             $ 452,197            
Average interest-earning assets to average interest-bearing liabilities 120.77 %           120.26 %          
Tax-equivalent:                        
Net interest income     $ 102,189             $ 93,545        
Interest rate spread         3.32 %           3.42 %  
Net interest margin(4)         3.43 %           3.49 %  
Non-tax-equivalent:                        
Net interest income     $ 100,630             $ 91,191        
Interest rate spread         3.27 %           3.34 %  
Net interest margin(4)         3.38 %           3.40 %  

_________________________________
(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 $1,559 and $2,354 for the year ended June 30, 2018 and 2017, 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) June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
Retail consumer loans:                  
One-to-four family $ 664,289     $ 670,036     $ 686,229     $ 684,956     $ 684,089  
HELOCs - originated 137,564     143,049     150,084     152,979     157,068  
HELOCs - purchased 166,276     165,680     162,181     162,518     162,407  
Construction and land/lots 65,601     68,121     60,805     54,969     50,136  
Indirect auto finance 173,095     160,664     150,042     142,915     140,879  
Consumer 12,379     11,317     9,699     8,814     7,900  
Total retail consumer loans 1,219,204     1,218,867     1,219,040     1,207,151     1,202,479  
Commercial loans:                  
Commercial real estate 857,315     810,332     786,381     753,857     730,408  
Construction and development 192,102     184,179     185,921     209,672     197,966  
Commercial and industrial 148,823     132,337     127,709     124,722     120,387  
Municipal leases 109,172     101,108     100,205     100,638     101,175  
Total commercial loans 1,307,412     1,227,956     1,200,216     1,188,889     1,149,936  
Total loans 2,526,616     2,446,823     2,419,256     2,396,040     2,352,415  
Deferred loan fees, net (764 )   (1,068 )   (1,242 )   (1,285 )   (945 )
Total loans, net of deferred loan fees 2,525,852     2,445,755     2,418,014     2,394,755     2,351,470  
Allowance for loan losses (21,060 )   (21,472 )   (21,090 )   (21,997 )   (21,151 )
Loans, net $ 2,504,792     $ 2,424,283     $ 2,396,924     $ 2,372,758     $ 2,330,319  


                   
Deposits                  
                   
(Dollars in thousands) June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
Core deposits:                  
Noninterest-bearing accounts $ 317,822     $ 303,875     $ 313,493     $ 304,144     $ 310,172  
NOW accounts 471,364     496,934     489,668     464,993     469,377  
Money market accounts 677,665     659,791     638,259     642,351     569,607  
Savings accounts 213,250     220,497     224,732     230,943     237,149  
Total core deposits 1,680,101     1,681,097     1,666,152     1,642,431     1,586,305  
Certificates of deposit 516,152     499,227     442,056     457,879     462,146  
Total $ 2,196,253     $ 2,180,324     $ 2,108,208     $ 2,100,310     $ 2,048,451  

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   Year Ended
(Dollars in thousands)   June 30,   March 31,   June 30,   June 30,
    2018   2018   2017   2018   2017
Noninterest expense   $ 21,754     $ 21,321     $ 21,835     $ 85,331     $ 90,259  
Less merger-related expenses           69         7,805  
Noninterest expense – as adjusted   $ 21,754     $ 21,321     $ 21,766     $ 85,331     $ 82,454  
                     
Net interest income   $ 25,590     $ 25,229     $ 24,567     $ 100,630     $ 91,191  
Plus noninterest income   5,382     4,926     4,234     19,672     16,107  
Plus tax equivalent adjustment   390     406     579     1,559     2,354  
Less realized gain on securities           22         22  
Less gain on sale of fixed assets               164     385  
Net interest income plus noninterest income – as adjusted   $ 31,362     $ 30,561     $ 29,358     $ 121,697     $ 109,245  
Efficiency ratio - adjusted   69.36 %   69.77 %   74.14 %   70.12 %   75.48 %
Efficiency ratio (without adjustments)   70.24 %   70.70 %   75.81 %   70.93 %   84.12 %

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)   June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
Total stockholders' equity   $ 409,242     $ 401,553     $ 395,361     $ 405,499     $ 397,647  
Less: goodwill, core deposits intangibles, net of taxes   29,125     29,589     30,083     29,704     30,157  
Tangible book value (1)   $ 380,117     $ 371,964     $ 365,278     $ 375,795     $ 367,490  
Common shares outstanding   19,041,668     19,034,868     18,967,175     18,968,675     18,967,875  
Tangible book value per share   $ 19.96     $ 19.54     $ 19.26     $ 19.81     $ 19.37  
Book value per share   $ 21.49     $ 21.10     $ 20.84     $ 21.38     $ 20.96  

_________________________________
(1) Tangible book value is equal to total stockholders' equity less goodwill and core deposit intangibles, net of related deferred tax liabilities.

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

     
    As of
    June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
(Dollars in thousands)    
Tangible equity(1)   $ 380,117     $ 371,964     $ 365,278     $ 375,795     $ 367,490  
Total assets   $ 3,304,169     $ 3,270,863     $ 3,250,588     $ 3,249,998     $ 3,206,533  
Less: goodwill and core deposit intangibles, net of taxes   29,125     29,589     30,083     29,704     30,157  
Total tangible assets(2)   $ 3,275,044     $ 3,241,274     $ 3,220,505     $ 3,220,294     $ 3,176,376  
Tangible equity to tangible assets   11.61 %   11.48 %   11.34 %   11.67 %   11.57 %

_________________________________
(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 net interest income and net interest margin as adjusted to exclude additional FHLB borrowings and proceeds from such borrowings:

         
    Three Months Ended June 30, 2018   Three Months Ended June 30, 2017
(Dollars in thousands)   Average
Balance
Outstanding
  Interest
Earned /
Paid
  Yield/
Rate
  Average
Balance
Outstanding
  Interest
Earned /
Paid
  Yield/
Rate
Interest-earning assets   $ 3,033,535     $ 31,083     4.10 %   $ 2,852,735     $ 27,870     3.91 %
Less: Interest-earning assets funded by additional FHLB borrowings (1)   155,000     1,001     2.58 %   245,000     848     1.38 %
Interest-earning assets - adjusted   $ 2,878,535     $ 30,082     4.18 %   $ 2,607,735     $ 27,022     4.15 %
                         
Interest-bearing liabilities   $ 2,501,500     $ 5,103     0.82 %   $ 2,377,473     $ 2,724     0.46 %
Additional FHLB borrowings   155,000     738     1.91 %   245,000     583     0.95 %
Interest-bearing liabilities - adjusted   $ 2,346,500     $ 4,365     0.74 %   $ 2,132,473     $ 2,141     0.40 %
                         
Net interest income and net interest margin       $ 25,980     3.43 %       $ 25,146     3.53 %
Net interest income and net interest margin - adjusted       25,717     3.57 %       24,881     3.82 %
Difference       $ 263     (0.14 )%       $ 265     (0.29 )%


    Year Ended June 30, 2018   Year Ended June 30, 2017
(Dollars in thousands)   Average
Balance
Outstanding
  Interest
Earned /
Paid
  Yield/
Rate
  Average
Balance
Outstanding
  Interest
Earned /
Paid
  Yield/
Rate
Interest-earning assets   $ 2,976,262     $ 118,261     3.97 %   $ 2,683,956     $ 101,790     3.79 %
Less: Interest-earning assets funded by additional FHLB borrowings (1)   213,750     4,069     1.90 %   318,000     3,640     1.14 %
Interest-earning assets - adjusted   $ 2,762,512     $ 114,192     4.13 %   $ 2,365,956     $ 98,150     4.15 %
                         
Interest-bearing liabilities   $ 2,464,339     $ 16,072     0.65 %   $ 2,231,759     $ 8,245     0.37 %
Additional FHLB borrowings   213,750     2,971     1.39 %   318,000     1,856     0.58 %
Interest-bearing liabilities - adjusted   $ 2,250,589     $ 13,101     0.58 %   $ 1,913,759     $ 6,389     0.33 %
                         
Net interest income and net interest margin       $ 102,189     3.43 %       $ 93,545     3.49 %
Net interest income and net interest margin - adjusted       101,091     3.66 %       91,762     3.88 %
Difference       $ 1,098     (0.23 )%       $ 1,783     (0.39 )%

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

Set forth below is a reconciliation to GAAP of net income, ROA, ROE, and EPS as adjusted to exclude merger-related expenses, certain state tax expense, adjustments for the change in federal tax law, and gain on sale of premises and equipment:

         
    Three Months Ended   Year Ended
(Dollars in thousands, except per share data)   June 30,   March 31,   June 30,   June 30,   June 30,
    2018   2018   2017   2018   2017
Merger-related expenses   $     $     $ 69     $     $ 7,805  
State tax expense adjustment (1)   (275 )           (142 )   490  
Change in federal tax law adjustment (2)   (103 )   318         17,908      
Gain on sale of premises and equipment               (164 )   (385 )
Total adjustments   (378 )   318     69     17,602     7,910  
Tax effect (3)           (26 )   49     (2,646 )
Total adjustments, net of tax   (378 )   318     43     17,651     5,264  
                     
Net income (GAAP)   7,207     6,127     4,766     8,235     11,847  
                     
Net income (non-GAAP)   $ 6,829     $ 6,445     $ 4,809     $ 25,886     $ 17,111  
                     
Per Share Data                    
Average shares outstanding - basic   18,121,690     18,052,000     17,936,511     18,028,854     17,379,487  
Average shares outstanding - diluted   18,847,279     18,761,586     18,568,587     18,726,431     17,956,443  
                     
Basic EPS                    
EPS (GAAP)   $ 0.40     $ 0.34     $ 0.26     $ 0.45     $ 0.66  
Non-GAAP adjustment   (0.02 )   0.02         0.99     0.30  
EPS (non-GAAP)   $ 0.38     $ 0.36     $ 0.26     $ 1.44     $ 0.96  
                     
Diluted EPS                    
EPS (GAAP)   $ 0.38     $ 0.32     $ 0.25     $ 0.44     $ 0.65  
Non-GAAP adjustment   (0.02 )   0.02         0.94     0.29  
EPS (non-GAAP)   $ 0.36     $ 0.34     $ 0.25     $ 1.38     $ 0.94  
                     
Average Balances                    
Average assets   $ 3,289,437     $ 3,237,689     $ 3,133,998     $ 3,243,661     $ 2,945,366  
Average equity   $ 404,832     $ 398,174     $ 394,527     $ 402,605     $ 376,970  
                     
ROA                    
ROA (GAAP)   0.88 %   0.76 %   0.61 %   0.25 %   0.40 %
Non-GAAP adjustment   (0.05 )%   0.04 %   %   0.55 %   0.18 %
ROA (non-GAAP)   0.83 %   0.80 %   0.61 %   0.80 %   0.58 %
                     
ROE                    
ROE (GAAP)   7.12 %   6.16 %   4.83 %   2.05 %   3.14 %
Non-GAAP adjustment   (0.37 )%   0.31 %   0.05 %   4.38 %   1.40 %
ROE (non-GAAP)   6.75 %   6.47 %   4.88 %   6.43 %   4.54 %

_________________________________
(1) State tax adjustment is a result of various revaluations of state deferred tax assets.
(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.

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) June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
Total gross loans receivable (GAAP) $ 2,526,616     $ 2,446,823     $ 2,419,256     $ 2,396,040     $ 2,352,415  
Less: acquired loans 271,801     288,847     311,508     338,933     374,538  
Adjusted loans (non-GAAP) $ 2,254,815     $ 2,157,976     $ 2,107,748     $ 2,057,107     $ 1,977,877  
                   
Allowance for loan losses (GAAP) $ 21,060     $ 21,472     $ 21,090     $ 21,997     $ 21,151  
Less: allowance for loan losses on acquired loans 483     459     566     1,197     727  
Adjusted allowance for loan losses $ 20,577     $ 21,013     $ 20,524     $ 20,800     $ 20,424  
Allowance for loan losses / Adjusted loans (non-GAAP) 0.91 %   0.97 %   0.97 %   1.01 %   1.03 %

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