UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2020

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

For the transition period from _______ to ________

Commission file number:     001-35593

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

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

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

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

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $.01 per share

HTBI
The NASDAQ Stock Market LLC

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [  ]      
 
 
 
Accelerated filer [X]
 
 
Non-accelerated filer   [  ]
Smaller reporting company [  ]
 
 
Emerging growth company [ ]
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
[ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [  ] No [X]
There were 17,020,081 shares of common stock, par value of $.01 per share, issued and outstanding as of May 6, 2020.




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

1



Glossary of Defined Terms
The following items may be used throughout this Form 10-Q, including the Notes to Consolidated Financial Statements in Item 1 and Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of this Form 10-Q.
Term
 
Definition
AFS
 
Available-For-Sale
ASC
 
Accounting Standard Codification
ASU
 
Accounting Standard Update
BOLI
 
Bank Owned Life Insurance
CARES Act
 
Coronavirus Aid, Relief, and Economic Security Act of 2020
CD
 
Certificates of Deposit
CET1
 
Common Equity Tier 1
COVID-19
 
Coronavirus Disease 2019
CPI
 
Consumer Price Index
EPS
 
Earnings Per Share
ESOP
 
Employee Stock Ownership Plan
FASB
 
Financial Accounting Standards Board
FDIC
 
Federal Deposit Insurance Corporation
FHLB
 
Federal Home Loan Bank
FRB
 
Federal Reserve Bank of Richmond
GAAP
 
Generally Accepted Accounting Principles in the United States
GSE
 
Government-Sponsored Enterprises
HELOC
 
Home Equity Line of Credit
MBS
 
Mortgage-Backed Security
NCCOB
 
North Carolina Office of the Commissioner of Banks
PCI
 
Purchase Credit Impaired
PPP
 
Paycheck Protection Program
PPPLF
 
Paycheck Protection Program Liquidity Facility
REO
 
Real Estate Owned
ROU
 
Right of Use
SEC
 
Securities and Exchange Commission
SBA
 
Small Business Administration
SBIC
 
Small Business Investment Companies
TDR
 
Troubled Debt Restructuring

2



PART I.  FINANCIAL INFORMATION
Item 1.    Financial Statements
HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
 
(Unaudited)
 
 
 
March 31, 2020
 
June 30,
2019 (1)
Assets
 
 
 
Cash
$
41,206

 
$
40,909

Interest-bearing deposits
40,855

 
30,134

Cash and cash equivalents
82,061

 
71,043

Commercial paper
281,955

 
241,446

Certificates of deposit in other banks
57,544

 
52,005

Debt securities available for sale, at fair value
158,621

 
121,786

Other investments, at cost
41,201

 
45,378

Loans held for sale
38,682

 
18,175

Total loans, net of deferred loan costs
2,663,524

 
2,705,190

Allowance for loan losses
(26,850
)
 
(21,429
)
Net loans
2,636,674

 
2,683,761

Premises and equipment, net
58,738

 
61,051

Accrued interest receivable
9,501

 
10,533

REO
1,075

 
2,929

Deferred income taxes
21,750

 
26,523

BOLI
91,612

 
90,254

Goodwill
25,638

 
25,638

Core deposit intangibles
1,381

 
2,499

Other assets
41,600

 
23,157

Total Assets
$
3,548,033

 
$
3,476,178

Liabilities and Stockholders' Equity
 

 
 

Liabilities
 

 
 

Deposits
$
2,554,787

 
$
2,327,257

Borrowings
535,000

 
680,000

Other liabilities
52,806

 
60,025

Total liabilities
3,142,593

 
3,067,282

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, 17,101,954 shares
    issued and outstanding at March 31, 2020; 17,984,105 at June 30, 2019
171

 
180

Additional paid in capital
170,368

 
190,315

Retained earnings
240,325

 
224,545

Unearned ESOP shares
(6,480
)
 
(6,877
)
Accumulated other comprehensive income
1,056

 
733

Total stockholders' equity
405,440

 
408,896

Total Liabilities and Stockholders' Equity
$
3,548,033

 
$
3,476,178

(1)    Derived from audited financial statements.
The accompanying notes are an integral part of these consolidated financial statements.

3



HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Dollars in thousands, except per share data)
 
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
March 31,
 
March 31,
 
2020
 
2019
 
2020
 
2019
Interest and Dividend Income
 
 
 
 
 
 
 
Loans
$
29,781

 
$
30,770

 
$
94,166

 
$
90,042

Commercial paper and interest-bearing deposits in other banks
1,794

 
2,283

 
5,959

 
6,106

Securities available for sale
912

 
850

 
2,901

 
2,582

Other investments
550

 
811

 
2,154

 
2,664

Total interest and dividend income
33,037

 
34,714

 
105,180

 
101,394

Interest Expense
 

 
 

 
 

 
 

Deposits
5,971

 
4,404

 
18,145

 
10,761

Borrowings
1,757

 
3,741

 
7,619

 
10,691

Total interest expense
7,728

 
8,145

 
25,764

 
21,452

Net Interest Income
25,309

 
26,569

 
79,416

 
79,942

Provision for Loan Losses
5,400

 
5,500

 
5,800

 
5,500

Net Interest Income after Provision for Loan Losses
19,909

 
21,069

 
73,616

 
74,442

Noninterest Income
 

 
 

 
 

 
 

Service charges and fees on deposit accounts
2,304

 
2,265

 
7,352

 
7,243

Loan income and fees
294

 
134

 
2,047

 
757

Gain on sale of loans held for sale
1,503

 
1,472

 
7,577

 
4,086

BOLI income
518

 
518

 
1,724

 
1,574

Other, net
1,756

 
1,007

 
4,409

 
2,434

Total noninterest income
6,375

 
5,396

 
23,109

 
16,094

Noninterest Expense
 

 
 

 
 

 
 

Salaries and employee benefits
14,455

 
13,463

 
42,537

 
39,005

Net occupancy expense
2,246

 
2,294

 
6,972

 
7,046

Computer services
2,023

 
1,980

 
6,032

 
5,724

Telephone, postage, and supplies
862

 
698

 
2,462

 
2,210

Marketing and advertising
396

 
400

 
1,716

 
1,219

Deposit insurance premiums
462

 
320

 
474

 
959

Loss (gain) on sale and impairment of REO
(15
)
 
246

 
88

 
500

REO expense
250

 
200

 
746

 
548

Core deposit intangible amortization
334

 
488

 
1,118

 
1,580

Other
3,890

 
2,889

 
10,332

 
7,928

Total noninterest expense
24,903

 
22,978

 
72,477

 
66,719

Income Before Income Taxes
1,381

 
3,487

 
24,248

 
23,817

Income Tax Expense
188

 
185

 
5,060

 
4,684

Net Income
$
1,193

 
$
3,302

 
$
19,188

 
$
19,133

Per Share Data:
 

 
 

 
 

 
 

Net income per common share:
 

 
 

 
 

 
 

Basic
$
0.07

 
$
0.19

 
$
1.12

 
$
1.07

Diluted
$
0.07

 
$
0.18

 
$
1.08

 
$
1.02

Average shares outstanding:
 

 
 

 
 

 
 

Basic
16,688,646

 
17,506,018

 
16,898,391

 
17,811,962

Diluted
17,258,428

 
18,197,429

 
17,524,252

 
18,528,161

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

4



HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
(Dollars in thousands)
 
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
March 31,
 
March 31,
 
2020
 
2019
 
2020
 
2019
Net Income
$
1,193

 
$
3,302

 
$
19,188

 
$
19,133

Other Comprehensive Income
 

 
 

 
 

 
 

  Unrealized holding gains on securities available for sale
 

 
 

 
 

 
 

Gains arising during the period
395

 
992

 
419

 
1,740

Deferred income tax expense
(91
)
 
(228
)
 
(96
)
 
(400
)
Total other comprehensive income
$
304

 
$
764

 
$
323

 
$
1,340

Comprehensive Income
$
1,497

 
$
4,066

 
$
19,511

 
$
20,473

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

5



HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity
(Dollars in thousands)
 
Three Months Ended March 31, 2020
 
Common Stock
 
Additional
Paid In
Capital
 
Retained
Earnings
 
Unearned
ESOP
Shares
 
Accumulated
Other
Comprehensive
Income
 
Total
Stockholders'
Equity
 
Shares
 
Amount
Balance at December 31, 2019
17,664,384

 
$
177

 
$
182,366

 
$
240,312

 
$
(6,612
)
 
$
752

 
$
416,995

Net income

 

 

 
1,193

 

 

 
1,193

Cash dividends declared on common stock, $0.07/common share

 

 

 
(1,180
)
 

 

 
(1,180
)
Stock repurchased
(635,800
)
 
(7
)
 
(12,996
)
 

 

 

 
(13,003
)
Retired stock
(7,950
)
 

 
(215
)
 

 

 

 
(215
)
Granted restricted stock
41,306

 

 

 

 

 

 

Exercised stock options
40,014

 
1

 
577

 

 

 

 
578

Stock option expense

 

 
168

 

 

 

 
168

Restricted stock expense

 

 
290

 

 

 

 
290

ESOP shares allocated

 

 
178

 

 
132

 

 
310

Other comprehensive income

 

 

 

 

 
304

 
304

Balance at March 31, 2020
17,101,954

 
$
171

 
$
170,368

 
$
240,325

 
$
(6,480
)
 
$
1,056

 
$
405,440

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended March 31, 2020
 
Common Stock
 
Additional
Paid In
Capital
 
Retained
Earnings
 
Unearned
ESOP
Shares
 
Accumulated
Other
Comprehensive
Income
 
Total
Stockholders'
Equity
 
Shares
 
Amount
Balance at June 30, 2019
17,984,105

 
$
180

 
$
190,315

 
$
224,545

 
$
(6,877
)
 
$
733

 
$
408,896

Net income

 

 

 
19,188

 

 

 
19,188

Cash dividends declared on common stock, $0.20/common share

 

 

 
(3,408
)
 

 

 
(3,408
)
Stock repurchased
(1,032,221
)
 
(11
)
 
(23,211
)
 

 

 

 
(23,222
)
Forfeited restricted stock
(3,200
)
 

 

 

 

 

 

Retired stock
(7,950
)
 

 
(215
)
 

 

 

 
(215
)
Granted restricted stock
54,306

 

 

 

 

 

 

Exercised stock options
106,914

 
2

 
1,539

 

 

 

 
1,541

Stock option expense

 

 
556

 

 

 

 
556

Restricted stock expense

 

 
785

 

 

 

 
785

ESOP shares allocated

 

 
599

 

 
397

 

 
996

Other comprehensive income

 

 

 

 

 
323

 
323

Balance at March 31, 2020
17,101,954

 
$
171

 
$
170,368

 
$
240,325

 
$
(6,480
)
 
$
1,056

 
$
405,440
















6







HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity (Continued)
(Dollars in thousands)
 
Three Months Ended March 31, 2019
 
Common Stock
 
Additional
Paid In
Capital
 
Retained
Earnings
 
Unearned
ESOP
Shares
 
Accumulated
Other
Comprehensive
Income (loss)
 
Total
Stockholders'
Equity
 
Shares
 
Amount
Balance at December 31, 2018
18,520,825

 
$
185

 
$
203,660

 
$
215,289

 
$
(7,142
)
 
$
(1,022
)
 
$
410,970

Net income

 

 

 
3,302

 

 

 
3,302

Cash dividends declared on common stock, $0.06/common share

 

 

 
(1,101
)
 

 

 
(1,101
)
Stock repurchased
(297,400
)
 
(2
)
 
(7,673
)
 

 

 

 
(7,675
)
Forfeited restricted stock
(1,600
)
 

 

 

 

 

 

Retired stock
(6,826
)
 

 
(188
)
 

 

 

 
(188
)
Granted restricted stock
23,625

 

 

 

 

 

 

Exercised stock options
26,911

 

 
396

 

 

 

 
396

Stock option expense

 

 
181

 

 

 

 
181

Restricted stock expense

 

 
228

 

 

 

 
228

ESOP shares allocated

 

 
220

 

 
133

 

 
353

Other comprehensive income

 

 

 

 

 
764

 
764

Balance at March 31, 2019
18,265,535

 
$
183

 
$
196,824

 
$
217,490

 
$
(7,009
)
 
$
(258
)
 
$
407,230

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended March 31, 2019
 
Common Stock
 
Additional
Paid In
Capital
 
Retained
Earnings
 
Unearned
ESOP
Shares
 
Accumulated
Other
Comprehensive
Income (loss)
 
Total
Stockholders'
Equity
 
Shares
 
Amount
Balance at June 30, 2018
19,041,668

 
$
191

 
$
217,480

 
$
200,575

 
$
(7,406
)
 
$
(1,598
)
 
$
409,242

Net income

 

 

 
19,133

 

 

 
19,133

Cash dividends declared on common stock, $0.12/common share

 

 

 
(2,218
)
 

 

 
(2,218
)
Stock repurchased
(857,155
)
 
(8
)
 
(23,313
)
 

 

 

 
(23,321
)
Forfeited restricted stock
(4,300
)
 

 

 

 

 

 

Retired stock
(7,414
)
 

 
(205
)
 

 

 
 
 
(205
)
Granted restricted stock
23,625

 

 

 

 

 
 
 

Exercised stock options
69,111

 

 
1,004

 

 

 

 
1,004

Stock option expense

 

 
540

 

 

 

 
540

Restricted stock expense

 

 
625

 

 

 

 
625

ESOP shares allocated

 

 
693

 

 
397

 

 
1,090

Other comprehensive income

 

 

 

 

 
1,340

 
1,340

Balance at March 31, 2019
18,265,535

 
$
183

 
$
196,824

 
$
217,490

 
$
(7,009
)
 
$
(258
)
 
$
407,230

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


7



HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Dollars in thousands)
 
(Unaudited)
 
Nine Months Ended March 31,
 
2020
 
2019
Operating Activities:
 
 
 
Net income
$
19,188

 
$
19,133

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

 
 

Provision for loan losses
5,800

 
5,500

Depreciation
4,137

 
3,046

Deferred income tax expense
4,677

 
3,333

Net amortization and accretion
(4,275
)
 
(5,648
)
Loss on sale and impairment of REO
88

 
500

Gain on sale of loans held for sale
(7,577
)
 
(4,086
)
Origination of loans held for sale
(226,834
)
 
(122,763
)
Proceeds from sales of loans held for sale
200,512

 
114,010

Increase in deferred loan costs, net
(1,017
)
 
(389
)
Decrease in accrued interest receivable and other assets
(571
)
 
(4,127
)
Amortization of core deposit intangibles
1,118

 
1,580

BOLI income
(1,724
)
 
(1,574
)
ESOP compensation expense
996

 
1,090

Restricted stock and stock option expense
1,341

 
1,165

Decrease in other liabilities
(12,515
)
 
(1,562
)
Net cash provided by (used in) operating activities
(16,656
)
 
9,208

Investing Activities:
 

 
 

Purchase of securities available for sale
(75,530
)
 
(31,675
)
Proceeds from maturities of securities available for sale
27,823

 
21,400

Net purchases of commercial paper
(35,949
)
 
(12,986
)
Purchase of certificates of deposit in other banks
(24,200
)
 
(15,664
)
Maturities of certificates of deposit in other banks
18,661

 
26,392

Principal repayments of mortgage-backed securities
10,902

 
27,144

Net redemptions (purchases) of other investments
4,177

 
(9,191
)
Proceeds from sale of loans not originated for sale
154,870

 

Net increase in loans
(99,116
)
 
(131,671
)
Purchase of BOLI
(111
)
 
(75
)
Proceeds from redemption of BOLI
477

 
14

Purchase of premises and equipment
(2,321
)
 
(1,068
)
Purchase of operating lease equipment
(11,047
)
 
(7,424
)
Proceeds from sale of REO
1,812

 
759

Net cash used in investing activities
(29,552
)
 
(134,045
)
Financing Activities:
 

 
 

Net increase in deposits
227,530

 
112,142

Net increase (decrease) in other borrowings
(145,000
)
 
45,000

Common stock repurchased
(23,222
)
 
(23,321
)
Cash dividends paid
(3,408
)
 
(2,218
)
Retired stock
(215
)
 
(205
)
Exercised stock options
1,541

 
1,004

Net cash provided by financing activities
57,226

 
132,402

Net Increase in Cash and Cash Equivalents
11,018

 
7,565

Cash and Cash Equivalents at Beginning of Period
71,043

 
70,746

Cash and Cash Equivalents at End of Period
$
82,061

 
$
78,311


8



HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows (continued)
(Dollars in thousands)
 
(Unaudited)
Supplemental Disclosures:
Nine Months Ended March 31,
 
2020
 
2019
Cash paid during the period for:
 
 
 
Interest
$
26,708

 
$
19,907

Income taxes
1,300

 
455

Noncash transactions:
 

 
 

Unrealized gain in value of securities available for sale, net of income taxes
323

 
1,340

Transfer of loans to REO
46

 
578

Transfer of loans held for sale to total loans
96,962

 
5,794

Transfer of one-to-four family loans to held for sale
240,453

 
9,761

Transfer of land from property and equipment to other assets for new finance lease accounting
2,052

 

New ROU asset and lease liabilities from adoption of new lease accounting standard
5,296

 

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

9



HOMETRUST BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
1.
Summary of Significant Accounting Policies
The consolidated financial statements presented in this report include the accounts of HomeTrust Bancshares, Inc., a Maryland corporation ("HomeTrust"), and its wholly-owned subsidiary, HomeTrust Bank (the "Bank"). As used throughout this report, the term the "Company" refers to HomeTrust and the Bank, its consolidated subsidiary, unless the context otherwise requires.
The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the SEC. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. It is recommended that these unaudited interim consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 2019 ("2019 Form 10-K") filed with the SEC on September 13, 2019. The results of operations for the three and nine months ended March 31, 2020 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2020.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements. Various elements of the Company's accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions, and other subjective assessments. In particular, management has identified several accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of the Company's financial statements. These policies relate to (i) the determination of the provision and the allowance for loan losses, (ii) the valuation of goodwill and other intangible assets, and (iii) the valuation of or recognition of deferred tax assets and liabilities. These policies and judgments, estimates and assumptions are described in greater detail in notes to the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations (Critical Accounting Policies) in our 2019 Form 10-K. Management believes that the judgments, estimates and assumptions used in the preparation of the financial statements are appropriate based on the factual circumstances at the time. However, given the sensitivity of the financial statements to these critical accounting policies, the use of other judgments, estimates and assumptions could result in material differences in the Company's results of operations or financial condition. Further, subsequent changes in economic or market conditions could have a material impact on these estimates and the Company's financial condition and operating results in future periods.
Certain amounts reported in prior periods' consolidated financial statements have been reclassified to conform to the current presentation. Such reclassifications had no effect on previously reported cash flows, stockholders' equity or net income.
Operating, Accounting and Reporting Considerations related to COVID-19
The COVID-19 pandemic has negatively impacted the global economy. In response to this crisis, the CARES Act was passed by Congress and signed into law on March 27, 2020. The CARES Act provides an estimated $2.2 trillion to fight the COVID-19 pandemic and stimulate the economy by supporting individuals and businesses through loans, grants, tax changes, and other types of relief. Some of the provisions applicable to the Company include, but are not limited to:
• Accounting for Loan Modifications - The CARES Act provides that a financial institution may elect to suspend (1) the requirements under GAAP for certain loan modifications that would otherwise be categorized as a TDR and (2) any determination that such loan modifications would be considered a TDR, including the related impairment for accounting purposes. The Bank has elected this as a policy change.
• Paycheck Protection Program - The CARES Act established the Paycheck Protection Program, an expansion of the SBA's 7(a) loan program and the Economic Injury Disaster Loan Program, administered directly by the SBA.
Also in response to the COVID-19 pandemic, the Board of Governors of the Federal Reserve System, the FDIC, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau, in consultation with the state financial regulators (collectively, the “agencies”) issued a joint interagency statement (issued March 22, 2020; revised statement issued April 7, 2020). Some of the provisions applicable to the Company include, but are not limited to:
• Accounting for Loan Modifications - Loan modifications that do not meet the conditions of the CARES Act may still qualify as a modification that does not need to be accounted for as a TDR. The agencies confirmed with FASB staff that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or insignificant delays in payment.
• Past Due Reporting - With regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral. A loan’s payment date is governed by the due date stipulated in the legal agreement. If a financial institution agrees to a payment deferral, these loans would not be considered past due during the period of the deferral.

10

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

• Nonaccrual Status and Charge-offs - While short-term COVID-19 modifications are in effect, these loans generally should not be reported as nonaccrual or as classified.
Adoption of Lease Accounting Standard
On July 1, 2019, the Company adopted ASU 2016-02, Leases (“Topic 842”), and subsequent related ASUs. The new leasing standard modifies the accounting, presentation, and disclosures for both lessees and lessors. The Company elected the modified retrospective transition option which allows for application of the Topic 842 guidance at the adoption date. Therefore, comparative prior period financial information was not adjusted and will continue to be reported under the previous accounting guidance of ASC 840, Leases (“ASC 840”). No cumulative-effect adjustment to retained earnings as of July 1, 2019 was necessary as a result of adopting the new standard. The Company elected the “package of practical expedients” permitted under the transition guidance which allows the Company not to reassess its prior conclusions regarding lease identification, classification of existing leases, and treatment of initial direct costs on existing leases. Any lease arrangements and significant modifications entered into subsequent to the adoption date are accounted for in accordance with the new standard.
Lessee Topic 842 Accounting
The new leasing standard requires recognition of operating leases on the consolidated balance sheets as ROU assets and lease liabilities. ROU assets represent our right to use underlying assets for the lease terms and lease liabilities represent our obligation to make lease payments arising from the leases. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. We use our estimated incremental borrowing rate in determining the present value of lease payments for operating leases and the implicit rate in the lease for our one finance lease.
For operating leases, the Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing operating leases longer than twelve months as of July 1, 2019. The ROU assets were adjusted per Topic 842 transition guidance for existing lease-related balances of accrued and prepaid rent, and unamortized lease incentives provided by lessors. As a result, the Company recognized ROU assets of approximately $5.3 million in other assets and corresponding lease liabilities of approximately $5.3 million in other liabilities as of July 1, 2019. The July 1, 2019 incremental borrowing rates determined on a collateralized basis for the remaining lease terms were utilized when determining the present value of lease payments at the date of initial adoption.
For our finance lease, the Company leases land for one of its retail locations. Upon adoption of Topic 842, the Company reclassed $2.1 million from land to ROU assets in other assets. In addition, the corresponding liability of $1.9 million, which was disclosed separately on the balance sheet was reclassified to other liabilities.
The Company elected the lessee practical expedient to not separate lease and non-lease components. The Company also elected the short-term lease recognition exemption and will not recognize ROU assets or lease liabilities for leases with a term less than 12 months.
Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in net occupancy expense. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur.
Finance lease cost is recognized as a single lease cost using the effective interest method and is recorded in net occupancy expense.
Lessee Accounting Prior to Adoption of Topic 842
Prior to the adoption of ASC 842, the Company applied the guidance of ASC 840. Under ASC 840, operating lease arrangements were off-balance sheet and ROU assets and lease liabilities were not recognized. Operating lease rent expense was recognized on a straight-line basis over the lease term and recorded in net occupancy expense. Common area maintenance, property taxes, and other operating expenses related to leased premises were also recognized in net occupancy expenses, consistent with similar costs for owned locations.
Lessor Topic 842 Accounting
Prior to the adoption of Topic 842, we determined the lease classification at commencement date. Leases not classified as sales-type or direct financing leases are classified as operating leases. The primary accounting criteria we use for  lease classification are (i) review to determine if the lease transfers ownership of the underlying asset to the lessee by the end of the lease term, ii) review to determine if the lease grants the lessee a purchase option that the lessee is reasonably certain to exercise, (iii) determine if the lease term is for a major part of the remaining economic life of the underlying asset and (iv) determine if the present value of the sum of the lease payments and any residual value guarantees equals or exceeds substantially all of the fair value of the underlying asset. We do not lease equipment of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.
The Company elected a lessor accounting policy to exclude from revenue and expenses sales taxes and other similar taxes assessed by a governmental authority on lease revenue-producing transactions and collected by the lessor from a lessee.
Operating Leases - Assets leased under an operating lease are carried at cost less accumulated depreciation. These assets are depreciated to their estimated residual value using the straight-line method over the lesser of the lease term or estimated useful life of the asset. Assets received at the end of the lease, which are intended to be sold, are marked to the lower of cost or fair value less selling costs with the adjustment recorded in other noninterest income.

11

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

At the inception of each operating lease, we record a residual value for the leased equipment based on our estimate of the future value of the equipment at the end of the lease term or end of the equipment’s estimated useful life as indicated by industry data. Operating leases have higher risk because a smaller percentage of the equipment's value is covered by contractual cash flows over the term of the lease. If the market value of leased equipment under operating leases decreases at a rate greater than we projected, whether due to rapid technological or economic obsolescence, unusual wear and tear on the equipment, excessive use of the equipment, recession or other adverse economic conditions, or other factors, it could adversely affect the current values or the residual values of such equipment. The Company seeks to mitigate these risks by maintaining a relatively young fleet of leased assets with wide operator bases, which can facilitate attractive lease and utilization rates. The Company manages and evaluates residual values by performing periodic reviews of estimated residual values and monitoring levels of residual realizations. A change in estimated operating lease residual values would result in a change in future depreciation expense. Any impairments are recognized at the time a change is identified.
Rental revenue on operating leases is recognized on a straight-line basis over the lease term and is included in other noninterest income.
Finance Leases - The Company’s finance leases are classified as direct financing leases under ASC 842. The Company’s finance lease activity primarily relates to leasing of new equipment with the equipment purchase price equal to fair value and therefore there is no selling profit or loss at lease commencement. When there is no selling profit or loss, initial direct costs are deferred at the commencement date and included in the measurement of the net investment in the lease.  
A lease receivable is recorded for finance leases at present value discounted using the rate implicit in the lease. The lease receivable includes lease payments not yet paid and the guarantee of the residual value by the lessee or unrelated third party, as applicable. Interest income is recognized over the lease term at a constant periodic discount rate on the remaining balance of the lease net investment using the rate implicit in the lease. After the commencement date, lease payments collected are applied to reduce net investment and recognize interest income.
The recognition of interest income is suspended, and an account is placed on non-accrual status when, in the opinion of management, full collection of all principal and interest due is doubtful. All future interest income accruals, as well as amortization of deferred fees, costs, and purchase premiums or discounts are suspended. Subsequent lease payments received are applied to the outstanding net investment balance until such time as the account is collected, charged-off or returned to accrual status. Finance leases that are nonaccrual do not accrue interest income; however, payments designated by the borrower as interest payments may be recorded as interest income. To qualify for this treatment, the remaining recorded investment in the lease must be deemed fully collectible.
The recognition of interest income on finance leases is suspended, and all previously accrued but uncollected revenue is reversed, when lease payments are contractually delinquent for 90 days or more. Accounts, including accounts that have been modified, are returned to accrual status when, in the opinion of management, collection of remaining lease receivables are reasonably assured, and there is a sustained period of repayment performance, generally for a minimum of six months.
Certain finance leases also have residual values at the inception of the lease which are based on our estimate of the future value of the equipment at the end of the lease term or end of the equipment’s estimated useful life as indicated by industry data. Finance leases bear the least risk because contractual payments usually cover approximately 90% of the equipment's cost at the inception of the lease. A change in estimated finance lease residual values during the lease term may impact the loss allowance as a decrease in the residual value may cause an impairment to be recorded on the finance lease.
Lessor Accounting Prior to Adoption of Topic 842
Lessor accounting was not fundamentally changed by Topic 842 and remains similar to the prior accounting model, with updates to align with certain changes to the lessee model (e.g., certain definitions, such as initial direct costs, have been updated) and the new revenue recognition standard. The new rules did not have a significant impact on our classification of leases as finance or operating. The new lease guidance has a narrower definition of initial direct costs that may be capitalized and allocated internal costs and professional fees to negotiate and arrange the lease agreement that would have been incurred regardless of lease execution no longer qualify as initial direct cost.
2.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The ASU significantly changes the impairment model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model to an expected loss model. This ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted for all entities beginning after December 15, 2018, including interim periods within those fiscal years. The Company has selected a third-party vendor to provide ongoing support under the new methodology. The Bank's project team is evaluating our current expected loss methodology of its loan and investment portfolios to identify the necessary modifications in accordance with this standard and expects a change in the processes and procedures to calculate the allowance for loan losses, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model. The Bank has compiled and uploaded all historical data that will be used to calculate expected credit losses on its loan portfolio and intends to run parallel models during the fourth quarter of 2020 to ensure it is fully compliant with the ASU at the adoption date. The team continues to work with the third-party vendor and is finalizing documentation on the methodologies utilized as well as the controls, processes, policies, and disclosures in preparation for performing the full end-to-end parallel run. A valuation adjustment to our allowance for loan losses or investment portfolio that is identified in this process will be reflected as a one-time adjustment in equity rather than earnings. Once adopted, the Company expects its allowance for loan losses to increase; however, until its evaluation is complete the magnitude of the increase will be unknown.

12

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

In August 2017, FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." This ASU improves the transparency and understandability of disclosures in the financial statements regarding the entities risk management activities and reduces the complexity of hedge accounting. The amendments in this ASU permit hedge accounting for hedging relationships involving nonfinancial risk and interest rate risk by removing certain limitations in cash flow and fair value hedging relationships. In addition, the ASU requires an entity to present the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018 and early adoption is permitted. The Company adopted this ASU on July 1, 2019. The adoption did not have a material effect on the Company's Consolidated Financial Statements.
In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement." The amendments in this ASU remove, modify, and add certain disclosure requirements related to fair value measurements in ASC 820. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019 and early adoption is permitted. The adoption of ASU No. 2018-13 is not expected to have a material impact on the Company's Consolidated Financial Statements.
In November 2018, the FASB issued ASU 2018-19, "Codification Improvements to Topic 326, Financial Instruments—Credit Losses." This update clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The effective date and transition requirements for this ASU are the same as ASU 2016-13. The adoption of ASU No. 2018-19 is not expected to have a material impact on the Company's Consolidated Financial Statements.
In December 2018, the FASB issued ASU 2018-20, "Leases (Topic 842): Narrow-Scope Improvements for Lessors." The amendments in this update permit lessors, as an accounting policy election, to not evaluate whether certain sales taxes and other similar taxes are lessor costs or lessee costs. Instead, those lessors will account for those costs as if they are lessee costs. A lessor making this election will exclude from the consideration in the contract and from variable payments not included in the consideration in the contract all collections from lessees of taxes within the scope of the election and will provide certain disclosures. For certain lessor costs, the lessor must exclude from variable payments, and therefore revenue, lessor costs paid by lessees directly to third parties from variable payments. In addition, the lessor must account for costs excluded from the consideration of a contract that are paid by the lessor and reimbursed by the lessee as variable payments. A lessor will record those reimbursed costs as revenue. The amendments in this ASU related to recognizing variable payments for contracts with lease and nonlease components require lessors to allocate (rather than recognize as currently required) certain variable payments to the lease and nonlease components when the changes in facts and circumstances on which the variable payment is based occur. After the allocation, the amount of variable payments allocated to the lease components will be recognized as income in profit or loss in accordance with Topic 842, while the amount of variable payments allocated to nonlease components will be recognized in accordance with other Topics, such as Topic 606. The Company adopted this ASU on July 1, 2019. The adoption did not have a material effect on the Company's Consolidated Financial Statements.
In March 2019, the FASB issued ASU 2019-01, "Leases (Topic 842): Codification Improvements." The amendments in this update include the following items: i) determining the fair value of the underlying asset by lessors that are not manufacturers or dealers; ii) requiring cash received from lessors from sales-type and direct financing leases to be presented in the cash flow statement within investing activities; and iii) clarifying interim disclosure requirements. The Company adopted this ASU on July 1, 2019. The adoption did not have a material effect on the Company's Consolidated Financial Statements.
In April 2019, the FASB issued ASU 2019-04, "Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments." The amendments in this update are part of the FASB's ongoing project to improve codification and correcting unintended application. The items within this ASU are not expected to have a significant effect on current accounting practice. The effective date and transition requirements for the amendments to Financial Instruments (ASU 2016-01) are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019 and early adoption is permitted. The effective date and transition requirements for the amendments to Financial Instruments-Credit Losses (ASU 2016-13) are the same as ASU 2016-13 noted above. The effective date and transition requirements for the amendments to Derivatives and Hedging (ASU 2017-12) are the same as ASU 2017-12 noted above.The adoption of ASU No. 2019-04 is not expected to have a material impact on the Company's Consolidated Financial Statements.
In May 2019, the FASB issued ASU 2019-05, "Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief." The amendments in this update allow companies to irrevocably elect, upon the adoption of ASU 2016-13, the fair value option for financial instruments that i) were previously recorded at amortized cost and ii) are within the scope of the credit losses guidance in ASC 326-20, iii) are eligible for the fair value option under ASC 825-10, and iv) are not held-to-maturity debt securities. The effective date and transition requirements for this ASU is the same as ASU 2016-13. The adoption of ASU No. 2019-05 is not expected to have a material impact on the Company's Consolidated Financial Statements.
In July 2019, the FASB issued ASU 2019-07, "Codification Updates to SEC Sections." This ASU amends certain paragraphs in the ASC to reflect the issuance of SEC final rules on Disclosure Update and Simplification and Investment Company Reporting Modernization and other miscellaneous updates. The amendments became effective upon issuance. The adoption did not have a material effect on the Company's Consolidated Financial Statements.
In November 2019, the FASB issued ASU 2019-11, "Codification Improvements to Topic 326, Financial Instruments-Credit Losses." This ASU clarifies certain aspects of the amendments in ASU 2016-13 and is part of the FASB's ongoing project to improve codification and correcting

13

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

unintended application. The items within this ASU are not expected to have a significant effect on current accounting practice. The effective date and transition requirements for this ASU is the same as ASU 2016-13. The adoption of ASU No. 2019-11 is not expected to have a material impact on the Company's Consolidated Financial Statements.
In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." This ASU is part of the FASB's simplification initiative to reduce complexity in accounting standards. The items within this ASU are not expected to have a significant effect on current accounting practice. The effective date and transition requirements for the first and second items of this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2020 and early adoption is permitted. The adoption of ASU No. 2019-12 is not expected to have a material impact on the Company's Consolidated Financial Statements.
In January 2020, the FASB issued ASU 2020-01, "Investment—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815." This ASU clarified the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2021 and early adoption is permitted. The adoption of ASU No. 2020-01 is not expected to have a material impact on the Company's Consolidated Financial Statements.
In March 2020, the FASB issued ASU 2020-03, "Codification Improvements to Financial Instruments." This ASU makes certain narrow-scope amendments to the following: i) clarified that all entities are required to provide fair value option disclosures; ii) clarified the applicability of the portfolio exception in ASC 820 to nonfinancial items; iii) aligned disclosures for depository and lending institutions (Topic 942) with guidance in Topic 320; iv) added cross-references to guidance in ASC 470-50 on line-of-credit or revolving-debt arrangements; v) added cross-references to net asset value practical expedient in ASC 820-10; vi) clarified the interaction between ASC 842 and ASC 326; and vii) clarified the interaction between ASC 326 and ASC 860-20. The amendments for issues i, ii, iv, and v became effective upon issuance and did not have a material effect on the Company's Consolidated Financial Statements. The amendment related to issue iii has the same effective date and transition requirements as ASU 2019-04 and is not expected to have a material impact on the Company's Consolidated Financial Statements. The amendments related to issues vi and vii have the same effective date and transition requirements as ASU 2016-13 and is not expected to have a material impact on the Company's Consolidated Financial Statements.


14

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

3.
Debt Securities
Securities available for sale consist of the following at the dates indicated:
 
March 31, 2020
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
U.S. Government Agencies
$
6,645

 
$
197

 
$

 
$
6,842

Residential MBS of U.S. Government Agencies and GSEs
50,290

 
1,561

 
(99
)
 
51,752

Municipal Bonds
21,208

 
503

 
(8
)
 
21,703

Corporate Bonds
79,107

 
37

 
(820
)
 
78,324

Total
$
157,250

 
$
2,298

 
$
(927
)
 
$
158,621

 
June 30, 2019
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
U.S. Government Agencies
$
15,099

 
$
122

 
$
(11
)
 
$
15,210

Residential MBS of U.S. Government Agencies and GSEs
74,778

 
586

 
(184
)
 
75,180

Municipal Bonds
24,896

 
423

 
(7
)
 
25,312

Corporate Bonds
6,061

 
43

 
(20
)
 
6,084

Total
$
120,834

 
$
1,174

 
$
(222
)
 
$
121,786

Debt securities available for sale by contractual maturity at March 31, 2020 are shown below. MBS are not included in the maturity categories because the borrowers in the underlying pools may prepay without penalty; therefore, it is unlikely that the securities will pay at their stated maturity schedule.
 
March 31, 2020
 
Amortized
Cost
 
Estimated
Fair Value
Due within one year
$
41,056

 
$
40,883

Due after one year through five years
59,538

 
59,464

Due after five years through ten years
4,292

 
4,445

Due after ten years
2,074

 
2,077

Mortgage-backed securities
50,290

 
51,752

Total
$
157,250

 
$
158,621

The Company had no sales of securities available for sale during the three and nine months ended March 31, 2020 and 2019. There were no gross realized gains or losses for the three and nine months ended March 31, 2020 and 2019.

Securities available for sale with costs totaling $80,593 and $94,337 and market values of $82,028 and $94,876 at March 31, 2020 and June 30, 2019, respectively, were pledged as collateral to secure various public deposits and other borrowings.
The gross unrealized losses and the fair value for securities available for sale aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2020 and June 30, 2019 were as follows:
 
March 31, 2020
 
Less than 12 Months
 
12 Months or More
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Residential MBS of U.S. Government Agencies and GSEs
$
5,308

 
$
(58
)
 
$
1,982

 
$
(41
)
 
$
7,290

 
$
(99
)
Municipal Bonds
1,744

 
(8
)
 

 

 
1,744

 
(8
)
Corporate Bonds
61,782

 
(820
)
 

 

 
61,782

 
(820
)
Total
$
68,834

 
$
(886
)
 
$
1,982

 
$
(41
)
 
$
70,816

 
$
(927
)

15

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

 
June 30, 2019
 
Less than 12 Months
 
12 Months or More
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
U.S. Government Agencies
$

 
$

 
$
6,988

 
$
(11
)
 
$
6,988

 
$
(11
)
Residential MBS of U.S. Government Agencies and GSEs
1,144

 
(3
)
 
24,242

 
(181
)
 
25,386

 
(184
)
Municipal Bonds

 

 
4,895

 
(7
)
 
4,895

 
(7
)
Corporate Bonds
393

 
(5
)
 
3,630

 
(15
)
 
4,023

 
(20
)
Total
$
1,537

 
$
(8
)
 
$
39,755

 
$
(214
)
 
$
41,292

 
$
(222
)
The total number of securities with unrealized losses at March 31, 2020, and June 30, 2019 were 48 and 100, respectively. Unrealized losses on securities have not been recognized in income because management has the intent and ability to hold the securities for the foreseeable future, and has determined that it is not more likely than not that the Company will be required to sell the securities prior to a recovery in value. The decline in fair value was largely due to increases in market interest rates subsequent to the purchase dates of the securities. The Company had no other-than-temporary impairment losses during the nine months ended March 31, 2020.
4.
Other Investments
Other investments, at cost consist of the following at the dates indicated:
 
March 31, 2020
 
June 30, 2019
FHLB of Atlanta stock
$
25,859

 
$
31,969

FRB stock
7,353

 
7,335

SBIC investments
7,989

 
6,074

Total
$
41,201

 
$
45,378

As a requirement for membership, the Bank invests in the stock of both the FHLB of Atlanta and the FRB. No ready market exists for these securities so carrying value approximates their fair value based on the redemption provisions of the FHLB of Atlanta and the FRB, respectively. SBIC investments are equity securities without a readily determinable fair value.

16

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

5.
Loans
Loans consist of the following at the dates indicated:
 
March 31, 2020
 
June 30, 2019
Retail consumer loans:
 
 
 
One-to-four family
$
487,777

 
$
660,591

HELOCs - originated
144,804

 
139,435

HELOCs - purchased
82,232

 
116,972

Construction and land/lots
80,765

 
80,602

Indirect auto finance
135,449

 
153,448

Consumer
11,576

 
11,416

Total retail consumer loans
942,603

 
1,162,464

Commercial loans:
 
 
 
Commercial real estate
990,693

 
927,261

Construction and development
249,714

 
210,916

Commercial and industrial
164,539

 
160,471

Equipment finance
198,962

 
132,058

Municipal finance
115,992

 
112,016

Total commercial loans
1,719,900

 
1,542,722

Total loans
2,662,503

 
2,705,186

Deferred loan costs, net
1,021

 
4

Total loans, net of deferred loan costs
2,663,524

 
2,705,190

Allowance for loan losses
(26,850
)
 
(21,429
)
Loans, net
$
2,636,674

 
$
2,683,761

All qualifying one-to-four family first mortgage loans, HELOCs, commercial real estate loans, and FHLB Stock are pledged as collateral by a blanket pledge to secure any outstanding FHLB advances.
The Company's total non-purchased and purchased performing loans by segment, class, and risk grade at the dates indicated follows:
 
Pass
 
Special
Mention
 
Substandard
 
Doubtful
 
Loss
 
Total
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
Retail consumer loans:
 
 
 
 
 
 
 
 
 
 
 
One-to-four family
$
473,723

 
$
1,974

 
$
6,984

 
$
258

 
$

 
$
482,939

HELOCs - originated
142,630

 
833

 
1,341

 

 

 
144,804

HELOCs - purchased
81,712

 

 
520

 

 

 
82,232

Construction and land/lots
80,276

 
3

 
147

 

 

 
80,426

Indirect auto finance
134,382

 

 
1,067

 

 

 
135,449

Consumer
11,058

 
5

 
513

 

 

 
11,576

Commercial loans:
 

 
 

 
 

 
 

 
 

 
 
Commercial real estate
963,953

 
8,191

 
12,631

 

 
30

 
984,805

Construction and development
244,801

 
4,055

 
249

 
1

 

 
249,106

Commercial and industrial
154,215

 
6,139

 
2,637

 

 
1

 
162,992

Equipment finance
197,651

 
559

 
752

 

 

 
198,962

Municipal finance
115,709

 
283

 

 

 

 
115,992

Total loans
$
2,600,110

 
$
22,042

 
$
26,841

 
$
259

 
$
31

 
$
2,649,283


17

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

 
Pass
 
Special
Mention
 
Substandard
 
Doubtful
 
Loss
 
Total
June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
Retail consumer loans:
 
 
 
 
 
 
 
 
 
 
 
One-to-four family
$
644,159

 
$
2,089

 
$
8,072

 
$
384

 
$
19

 
$
654,723

HELOCs - originated
137,001

 
766

 
1,434

 

 
9

 
139,210

HELOCs - purchased
116,306

 

 
666

 

 

 
116,972

Construction and land/lots
79,995

 
71

 
164

 

 

 
80,230

Indirect auto finance
152,393

 
13

 
1,042

 

 

 
153,448

Consumer
11,375

 
1

 
33

 
3

 
4

 
11,416

Commercial loans:
 

 
 

 
 

 
 

 
 

 
 

Commercial real estate
901,183

 
8,066

 
10,306

 

 

 
919,555

Construction and development
207,827

 
790

 
1,357

 
1

 

 
209,975

Commercial and industrial
157,325

 
877

 
600

 

 

 
158,802

Equipment finance
131,674

 

 
384

 

 

 
132,058

Municipal finance
111,721

 
295

 

 

 

 
112,016

Total loans
$
2,650,959

 
$
12,968

 
$
24,058

 
$
388

 
$
32

 
$
2,688,405

The Company's total purchased credit impaired ("PCI") loans by segment, class, and risk grade at the dates indicated follows:
 
Pass
 
Special
Mention
 
Substandard
 
Doubtful
 
Loss
 
Total
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
Retail consumer loans:
 
 
 
 
 
 
 
 
 
 
 
One-to-four family
$
3,368

 
$
463

 
$
1,007

 
$

 
$

 
$
4,838

Construction and land/lots
108

 

 
231

 

 

 
339

Commercial loans:
 

 
 

 
 

 
 

 
 

 
 

Commercial real estate
3,191

 
1,790

 
907

 

 

 
5,888

Construction and development
277

 

 
331

 

 

 
608

Commercial and industrial
1,544

 

 

 

 
3

 
1,547

Total loans
$
8,488

 
$
2,253

 
$
2,476

 
$

 
$
3

 
$
13,220

 
Pass
 
Special
Mention
 
Substandard
 
Doubtful
 
Loss
 
Total
June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
Retail consumer loans:
 
 
 
 
 
 
 
 
 
 
 
One-to-four family
$
4,124

 
$
248

 
$
1,496

 
$

 
$

 
$
5,868

HELOCs - originated
225

 

 

 

 

 
225

Construction and land/lots
142

 

 
230

 

 

 
372

Commercial loans:
 

 
 

 
 

 
 

 
 

 
 

Commercial real estate
4,503

 
1,903

 
1,300

 

 

 
7,706

Construction and development
453