Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion and analysis reviews our consolidated financial statements and other relevant statistical data and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the Consolidated Financial Statements and notes thereto which are included in Item 8 of this Form 10-K. You should read the information in this section in conjunction with the business and financial information regarding us as provided in this Form 10-K.
Financial Highlights
(Dollars in thousands)
December 31, 2025
December 31, 2024
December 31, 2023
June 30, 2023
Selected financial condition data
Total assets
Cash and cash equivalents
Certificates of deposit in other banks
Debt securities available for sale, at fair value
Loans, net of ACL and deferred loan fees and costs
Deposits
Junior subordinated debt
Borrowings
Stockholders’ equity
Year Ended December 31,
Six Months Ended December 31, 2023
Year Ended June 30, 2023
(Dollars in thousands, except per share data)
Selected operations data
Total interest and dividend income
Total interest expense
Net interest income
Provision for credit losses
Net interest income after provision for credit losses
Service charges and fees on deposit accounts
Loan income and fees
Gain on sale of loans held for sale
BOLI income
Operating lease income
Gain on sale of branches
Gain (loss) on sale of premises and equipment
Other
Total noninterest income
Total noninterest expense
Income before income taxes
Income tax expense
Net income
Net income per common share – basic
Net income per common share – diluted
At or For the Year Ended December 31,
At or For the Six Months Ended December 31, 2023
At or For the Year Ended
June 30, 2023
Performance ratios
Return on assets (ratio of net income to average total assets) (1)
Return on equity (ratio of net income to average equity) (1)
Yield on earning assets (1)
Rate paid on interest-bearing liabilities (1)
Average interest rate spread (1)
Net interest margin (1)(2)
Average interest-earning assets to average interest-bearing liabilities
Noninterest expense to average total assets (1)
Efficiency ratio
Efficiency ratio – adjusted (3)
At or For the Year Ended December 31,
At or For the Six Months Ended December 31, 2023
At or For the Year Ended
June 30, 2023
Asset quality ratios
Nonperforming assets to total assets (4)
Nonperforming loans to total loans (4)
Total classified assets to total assets
Allowance for credit losses to nonperforming loans (4)
Allowance for credit losses to total loans
Net charge-offs to average loans (1)
Capital ratios
Equity to total assets at end of period
Tangible equity to total tangible assets (3)
Average equity to average assets
Dividend payout ratio
Dividends declared per common share
(1) Ratio is annualized for the six months ended December 31, 2023.
(2) Net interest income divided by average interest-earning assets.
(3) See "GAAP Reconciliation of Non-GAAP Financial Measures" section below for additional details.
(4) Nonperforming assets and loans include nonaccruing loans and repossessed assets. There were no accruing loans more than 90 days past due at the dates indicated. At December 31, 2025, $10.1 million, or 23.2%, of nonaccruing loans were current on their loan payments.
GAAP Reconciliation of Non-GAAP Financial Measures
We believe the non-GAAP financial measures included above provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with US GAAP; however, we acknowledge that our non-GAAP financial measures have a number of limitations. The following reconciliation tables provide detailed analyses of these non-GAAP financial measures.
Set forth below is a reconciliation to US GAAP of our efficiency ratio:
Year Ended December 31,
Six Months Ended December 31, 2023
Year Ended June 30, 2023
(Dollars in thousands)
Noninterest expense
Less: merger-related expenses
Less: contract renewal consulting fee
Noninterest expense – adjusted
Net interest income
Plus: tax equivalent adjustment
Plus: noninterest income
Less: BOLI death benefit proceeds in excess of cash surrender value
Less: gain on sale of branches
Less: gain on sale of available for sale and equity securities
Less: gain (loss) on sale of premises and equipment
Net interest income plus noninterest income – adjusted
Efficiency ratio
Efficiency ratio – adjusted
Set forth below is a reconciliation to US GAAP of tangible book value and tangible book value per share:
(Dollars in thousands, except per share data)
December 31, 2025
December 31, 2024
December 31, 2023
June 30, 2023
Total stockholders' equity
Less: goodwill, core deposit intangibles, net of taxes
Tangible book value
Common shares outstanding
Book value per share
Tangible book value per share
Set forth below is a reconciliation to US GAAP of tangible equity to tangible assets:
(Dollars in thousands)
December 31, 2025
December 31, 2024
December 31, 2023
June 30, 2023
Tangible equity (1)
Total assets
Less: goodwill, core deposit intangibles, net of taxes
Total tangible assets
Tangible equity to tangible assets
(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.
Overview
The following discussion and analysis presents the more significant factors that affected our financial condition as of December 31, 2025 and 2024 and results of operations for the years ended December 31, 2025 and 2024. Refer to "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K filed with the SEC on March 13, 2025 (the “2024 Form 10-K") for a discussion and analysis of the more significant factors that affected periods prior to the year ended December 31, 2025.
Our primary source of pre-tax income is net interest income. Net interest income is the difference between interest income, which is the income that we earn on our loans and investments, and interest expense, which is the interest that we pay on our deposits and borrowings. Changes in levels of interest rates affect our net interest income. A secondary source of income is noninterest income, which includes revenue we receive from providing products and services including service charges and fees on deposit accounts, loan income and fees, gains on sale of loans held for sale, BOLI income and operating lease income.
An offset to net interest income is the provision for credit losses to establish the ACL at a level that provides for ECLs inherent in our loan portfolio, off balance sheet commitments and available for sale debt securities. See "Note 1 – Summary of Significant Accounting Policies” of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K for further discussion.
Our noninterest expenses consist primarily of salaries and employee benefits, occupancy expenses, computer services, operating lease depreciation, marketing and FDIC deposit insurance premiums. Salaries and benefits consist primarily of the salaries and wages paid to our employees, payroll taxes, expenses for retirement and other employee benefits. Occupancy expenses, which are the fixed and variable costs of buildings and equipment, consist primarily of lease payments, property taxes, depreciation charges, maintenance and costs of utilities.
Critical Accounting Policies and Estimates
Certain of our accounting policies are important to the portrayal of our financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances which could include, but are not limited to, changes in interest rates, changes in the performance of the economy and changes in the financial condition of borrowers. The following represents our critical accounting policy:
Allowance for Credit Losses, or ACL, on Loans. The ACL on loans held for investment reflects our estimate of credit losses that will result from the inability of our borrowers to make required loan payments. We charge off loans against the ACL and subsequent recoveries, if any, increase the ACL when they are recognized. We use a systematic methodology to determine our ACL for loans held for investment and certain off-balance sheet credit exposures. The ACL on loans held for investment is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the loan portfolio. The estimate of our ACL on loans held for investment involves a high degree of judgment including consideration of the effects of past events, current conditions and reasonable and supportable forecasts on the collectability of the loan portfolio. We recognize in net income the amount needed to adjust the ACL on loans held for investment and certain off-balance sheet credit exposures for management’s current estimate of ECLs. Our ACL on loans held for investment is calculated using collectively evaluated and individually evaluated loans.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, see “Note 1 – Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements in Item 8 of this report on Form 10-K for further discussion.
Item(s) of Note – Year Ended December 31, 2025
On May 23, 2025, the Company completed the sale of the Bank's two branches located in Knoxville, Tennessee, to a third party financial institution. Through the transaction, the Company sold $34.3 million of deposits along with $6.3 million in branch premises and equipment, while HomeTrust retained all loans associated with the branches. The Company recorded a $1.4 million pre-tax gain associated with the transaction. The transaction aligns with the Company's strategic plan to tighten its geographic footprint, improve branch efficiencies, and allocate capital to support long-term growth in other core markets.
As noted in the "Item(s) of Note – Year Ended December 31, 2024" section which follows, in an effort to assist customers in their post-Hurricane Helene recovery and clean-up efforts, at the end of the prior calendar year we granted payment deferrals of up to six months to provide short-term relief to impacted customers. The outstanding balance of these deferrals declined from $136.0 million at December 31, 2024 to $318,000 at December 31, 2025. To date, $165,000 in charge-offs have been recognized which were directly related to Hurricane Helene.
Item(s) of Note – Year Ended December 31, 2024
In January 2024, the Company announced the decision to cease indirect auto originations and right-size our mortgage banking line of business. These changes are expected to result in annual cost savings of $800,000.
On September 26, 2024, Hurricane Helene made landfall causing significant property damage across certain parts of the Company's market areas, particularly in Western North Carolina. In an effort to assist customers in their post-Hurricane Helene recovery and clean-up efforts, in the fourth quarter we granted payment deferrals of up to six months to provide short-term relief to impacted customers. The outstanding balance of these deferrals was $136.0 million at December 31, 2024. As of this same date, we retained a $2.2 million qualitative allocation in our ACL for the potential impact of the storm upon our loan portfolio which had been established in the third quarter.
In December 2024, the Company paid a $3.0 million fee to a consulting firm who assisted in negotiating the multiyear renewal of our largest core IT processing contract. The renewal will result both in future cost savings and the expansion of our technology solutions, supporting the Company's growth initiatives and digital strategies all with the goal of enhancing the customer experience.
Comparison of Results of Operations for the Years Ended December 31 , 2025 and December 31, 2024
Net Income. Net income totaled $64.4 million, or $3.72 per diluted share, for the year ended December 31, 2025 compared to $54.8 million, or $3.20 per diluted share, for the year ended December 31, 2024, an increase of $9.6 million, or 17.4%. The results for the year ended December 31, 2025 compared to the prior year were positively impacted by a $7.2 million increase in net interest income, a $2.9 million increase in noninterest income, a $607,000 decrease in the provision for credit losses and a $321,000 decrease in noninterest expense. Details of the changes in the various components of net income are further discussed below.
Net Interest Income. The following table presents the distribution of average assets, liabilities and equity, as well as interest income earned on average interest-earning assets and interest expense paid on average interest-bearing liabilities. All average balances are daily average balances. Nonaccruing loans have been included in the table as loans carrying a zero yield.
Years Ended December 31,
(Dollars in thousands)
Average
Balance
Outstanding
Interest
Earned /
Paid
Yield /
Rate
Average
Balance
Outstanding
Interest
Earned /
Paid
Yield /
Rate
Assets
Interest-earning assets
Loans receivable (1)
Debt securities available for sale
Other interest-earning assets (2)
Total interest-earning assets
Other assets
Total assets
Liabilities and equity
Interest-bearing liabilities
Interest-bearing checking accounts
Money market accounts
Savings accounts
Certificate accounts
Total interest-bearing deposits
Junior subordinated debt
Borrowings
Total interest-bearing liabilities
Noninterest-bearing deposits
Other liabilities
Total liabilities
Stockholders' equity
Total liabilities and stockholders' equity
Net earning assets
Average interest-earning assets to average interest-bearing liabilities
Non-tax-equivalent
Net interest income
Interest rate spread
Net interest margin (3)
Tax-equivalent (4)
Net interest income
Interest rate spread
Net interest margin (3)
(1) Average loans receivable balances include loans held for sale and nonaccruing loans.
(2) Average other interest-earning assets consist of FRB stock, FHLB stock, SBIC investments and deposits in other banks.
(3) Net interest income divided by average interest-earning assets.
(4) Tax-equivalent results include adjustments to interest income of $1,737 and $1,460 for the years ended December 31, 2025 and 2024, respectively, calculated based on a combined federal and state tax rate of 24%.
Total interest and dividend income for the year ended December 31, 2025 decreased $5.5 million, or 2.1%, compared to the year ended December 31, 2024. Regarding the components of this income, loan interest income decreased $7.2 million, or 2.9%, primarily due to an overall decrease in average loan balances and the impact of decreases in the federal funds rate upon loan yields, partially offset by a $1.1 million increase in interest income on other investments and interest-bearing accounts, and a $661,000 increase in interest income on debt securities available for sale. Accretion income on acquired loans of $2.2 million and $3.2 million was recognized during the same periods, respectively, and was included in loan interest income.
Total interest expense for the year ended December 31, 2025 decreased $12.7 million, or 13.8%, compared to the year ended December 31, 2024, the result of a $9.8 million, or 11.2%, decrease in interest expense on deposits and a $2.8 million, or 73.8%, decrease in interest expense on other borrowings. The decrease in interest expense on deposits can primarily be traced to a decrease in the average cost of funds, while the decrease in interest expense on other borrowings was primarily the result of a decline in average borrowings outstanding.
The following table shows the effects that changes in average balances (volume), including differences in the number of days in the periods compared, and average interest rates (rate) had on the interest earned on interest-earning assets and interest paid on interest-bearing liabilities:
Increase / (Decrease)
Due to
Total
Increase /
(Decrease)
(Dollars in thousands)
Volume
Rate
Interest-earning assets
Loans receivable
Debt securities available for sale
Other interest-earning assets
Total interest-earning assets
Interest-bearing liabilities
Interest-bearing checking accounts
Money market accounts
Savings accounts
Certificate accounts
Junior subordinated debt
Borrowings
Total interest-bearing liabilities
Increase in net interest income
Provision for Credit Losses. The provision for credit losses is the amount of expense that, based on our judgment, is required to maintain the ACL at an appropriate level under the CECL model. The determination of the ACL is complex and involves a high degree of judgment and subjectivity. Refer to "Note 1 – Summary of Significant Accounting Policies” of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K for detailed discussion regarding ACL methodologies for available for sale debt securities, loans held for investment and unfunded commitments. The following table presents a breakdown of the components of the provision for credit losses:
Years Ended December 31,
(Dollars in thousands)
$ Change
% Change
Provision for credit losses
Loans
Off-balance sheet credit exposure
Total provision for credit losses
For the year ended December 31 , 2025 , the "loans" portion of the provision for credit losses was the result of the following, offset by net charge-offs of $9.3 million during the period:
• $2.5 million benefit driven by changes in the loan mix.
• $1.5 million benefit due to changes in the projected economic forecast, specifically the national unemployment rate, and changes in qualitative adjustments. Of note, in the quarter ended June 30, 2025, we released the $2.2 million qualitative allocation previously established in the prior year for the potential impact of Hurricane Helene on our loan portfolio. Any residual impact of the Hurricane is believed to have now been reflected elsewhere within the ACL calculation.
• $0.2 million increase in specific reserves on individually evaluated credits.
For the year ended December 31 , 2024 , the "loans" portion of the provision for credit losses was the result of the following, offset by net charge-offs of $10.8 million during the period:
• $1.6 million benefit driven by changes in the loan mix.
• $0.7 million benefit due to changes in the projected economic forecast, specifically the national unemployment rate, and changes in qualitative adjustments. Included in this change was the addition of a $2.2 million qualitative allocation in the quarter ended September 30, 2024 for the potential impact of Hurricane Helene on our loan portfolio.
• $1.0 million decrease in specific reserves on individually evaluated credits.
For the years ended December 31 , 2025 and December 31 , 2024 , the amounts recorded for off-balance sheet credit exposure were the result of changes in the balance of loan commitments, loan mix and the projected economic forecast as outlined above.
See further discussion in the "Comparison of Financial Condition at December 31 , 2025 and December 31 , 2024 – Allowance for Credit Losses on Loans" section below.
Noninterest Income. Noninterest income for the year ended December 31, 2025 increased $2.9 million, or 8.6%, when compared to last year. Changes in the components of noninterest income are discussed below:
Years Ended December 31,
(Dollars in thousands)
$ Change
% Change
Noninterest income
Service charges and fees on deposit accounts
Loan income and fees
Gain on sale of loans held for sale
BOLI income
Operating lease income
Gain on sale of branches
Gain (loss) on sale of premises and equipment
Other
Total noninterest income
• Gain on sale of loans held for sale: The increase was primarily driven by growth in the volume of HELOCs and residential mortgage loans sold during the current period, partially offset by a reduction in the sales volume of the guaranteed portion of SBA commercial loans. During the year ended December 31, 2025, there were $257.2 million of HELOCs sold with gains of $2.4 million compared to $95.4 million sold with gains of $887,000 in the prior year. There were $113.5 million of residential mortgage loans originated for sale which were sold with gains of $2.4 million compared to $82.0 million sold with gains of $1.4 million in the prior year. There were $40.4 million of sales of the guaranteed portion of SBA commercial loans with gains of $3.0 million compared to $48.7 million sold with gains of $3.9 million during the prior year. Lastly, our hedging of mandatory commitments on the residential mortgage loan pipeline resulted in a net loss of $131,000 for the year ended December 31, 2025 versus a net gain of $81,000 in the prior year.
• BOLI income: The decrease was due to a $1.0 million decrease in tax-free gains on death benefit proceeds in excess of the cash surrender value of the policies year-over-year, partially offset by higher yielding policies as a result of restructuring the portfolio at the end of calendar year 2023.
• Gain on sale of branches: During the current year we completed the sale of our two Knoxville, Tennessee branches, recognizing a gain of $1.4 million in the current year, with no similar activity occurring in the prior year.
Noninterest Expense. Noninterest expense for the year ended December 31, 2025 decreased $321,000, or 0.3%, when compared to last year. Changes in the components of noninterest expense are discussed below:
Years Ended December 31,
(Dollars in thousands)
$ Change
% Change
Noninterest expense
Salaries and employee benefits
Occupancy expense, net
Computer services
Operating lease depreciation expense
Telecom, postage and supplies
Marketing and advertising
Deposit insurance premiums
Core deposit intangible amortization
Contract renewal consulting fee
Other
Total noninterest expense
• Salaries and employee benefits: The increase was primarily the result of increases in both pay and incentive compensation.
• Computer services: At the end of 2024, we finalized a multiyear renewal of our largest core processing contract. The decrease in expense year-over-year is a reflection of the improved vendor pricing negotiated through this effort.
• Operating lease depreciation expense: The decrease was due to a decline in the population of operating lease contracts (assets being depreciated) year-over-year.
• Deposit insurance premiums: The decrease year-over-year was the result of higher regulatory capital ratios.
• Core deposit intangible amortization: The intangible recorded associated with the Quantum merger is being amortized on an accelerated basis, so the rate of amortization slowed year-over-year.
• Contract renewal consulting fee: In the prior year we paid a fee to a consultant to negotiate the multiyear renewal of our largest core processing contract, with no similar fee being recognized in the current year.
• Other: The change year-over-year was driven by increases of $415,000 in community association banking deposit line of business referral fees, $285,000 in losses on the sale of repossessed equipment, and $226,000 in other consulting fees.
Income Taxes. The amount of income tax expense is influenced by the amount of pre-tax income, tax-exempt income, changes in the statutory rate and the effect of changes in valuation allowances maintained against deferred tax benefits. The effective tax rate was 20.5% and 21.6% for the years ended December 31, 2025 and 2024, respectively.
Comparison of Financial Condition at December 31, 2025 and December 31, 2024
Assets. Total assets were $4.5 billion and $4.6 billion at December 31, 2025 and 2024, respectively, a decrease of $49.8 million, or 1.1%, the components of which are discussed below.
Debt Securities Available for Sale. Debt securities available for sale decreased $9.5 million, or 6.2%, to $142.5 million at December 31, 2025. Outside of changes in value, the changes between years were the result of $36.6 million in proceeds from the maturity, call and paydown of securities, partially offset by $23.0 million in purchases. All purchases were residential MBS and consistent with the composition of the existing securities held in the portfolio. The following table illustrates the changes in the fair value of the portfolio.
(Dollars in thousands)
December 31, 2025
December 31, 2024
$ Change
% Change
MBS, residential
Municipal bonds
Corporate bonds
Total
The composition and contractual maturities of our debt securities portfolio as of December 31, 2025 is indicated in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. Weighted average yields were calculated using amortized cost on a fully-taxable equivalent basis. The Company did not hold any tax-exempt debt securities as of December 31, 2025.
(Dollars in thousands)
1 year or less
Over 1 to 5 years
Over 5 to 10 years
Over 10 years
Total
MBS, residential
Book value
Fair value
Weighted average yield
Municipal bonds
Book value
Fair value
Weighted average yield
Corporate bonds
Book value
Fair value
Weighted average yield
Total
Book value
Fair value
Weighted average yield
Total Loans, Net of Deferred Loan Fees and Costs. Loans held for investment totaled $3.6 billion at December 31, 2025, a decrease of $70.1 million, or 1.9%, compared to the balance as of December 31, 2024. The following table illustrates the changes within the portfolio.
December 31, 2025
December 31, 2024
Change
% of Total at December 31, 2025
% of Total at December 31, 2024
(Dollars in thousands)
Commercial real estate loans
Construction and land development
Commercial real estate - owner occupied
Commercial real estate - non-owner occupied
Multifamily
Total commercial real estate loans
Commercial loans
Commercial and industrial
Equipment finance
Municipal leases
Total commercial loans
Residential real estate loans
Construction and land development
One-to-four family
HELOCs
Total residential real estate loans
Consumer loans
Loans, net of deferred loan fees and costs
The principal categories of our loan portfolio are discussed below.
Commercial Real Estate – Construction and Land Development . We originate residential construction and development loans for the construction of single-family residences, condominiums, townhouses and residential developments. Our commercial construction development loans are for the development of business properties, including multifamily, retail, office/warehouse and office buildings. Our land, lots and development loans are predominately for the purchase or refinance of unimproved land held for future residential development, improved residential lots held for speculative investment purposes and for the future construction of one-to-four family (speculative and pre-sold) or commercial real estate. Unfunded commitments totaled $111.9 million and $48.1 million at December 31, 2025 and 2024, respectively.
Land acquisition and development loans are included in the construction and land development loan portfolio and include completed residential lots where the borrower was not the developer, commercial improved and raw land for future development and residential development loans. Residential development loans are made to developers for the purpose of acquiring raw land for the subsequent development and sale of residential lots. Such loans typically finance land purchase and infrastructure development of properties (i.e., roads, utilities, etc.) into residential lots for sale. The end buyer for the majority of these lots are local, regional and national builders for the ultimate construction of residential units. The primary source of repayment is the sale of the lots or improved parcels of land, while personal guarantees may serve as secondary sources. These loans are generally secured by property in our primary market areas. In addition, these loans are secured by a first lien on the property, are generally limited to 65% of the lower of the acquisition price or the appraised value of the unimproved land and 75% of the improved land. Residential acquisition and development loans are generally paid out within three years unless there are multiple phases to the development.
The Bank provides funding to a number of builders for the construction of both speculative and pre-sold 1-4 family homes. Speculative construction loans are made to home builders and are termed “speculative” because the home builder does not have, at the time of loan origination, a signed contract with a home buyer who has a commitment for permanent financing with either us or another lender for the finished home. Loans to finance the construction of speculative single-family homes are generally offered to experienced builders with a proven track record of performance. These loans require interest-only payments during the construction phase. Unfunded commitments on these loans were $75.0 million and $67.6 million at December 31, 2025 and 2024, respectively.
Both adjustable and fixed rates are offered on commercial construction loans. Adjustable interest rate loans typically include a floor and ceiling interest rate and are indexed to The Wall Street Journal prime rate, plus or minus an interest rate margin. The initial construction period for owner occupied loans is generally limited to 12 to 24 months from the date of origination versus a construction and stabilization period for non-owner occupied loans of 24 to 36 months, both with amortization terms up to 25 years. Construction-to-permanent loans generally include a balloon maturity of five years or less; however, balloon maturities of greater than five years are allowed on a limited basis depending on factors such as property type, amortization term, lease terms, pricing or the availability of credit enhancements. Construction loan proceeds are disbursed based on the percent completion of budget as documented by periodic third-party inspections. The maximum loan-to-value limit applicable to these loans is generally 80% of the appraised post-construction value.
Commercial Real Estate Lending, including Multifamily . We originate commercial real estate loans, including loans secured by retail/wholesale facilities, hotels, industrial facilities, medical and professional buildings, office buildings, churches and multifamily residential properties located primarily in our market areas. The average outstanding loan balance was $1.0 million as of December 31, 2025. Specific to our non-owner occupied portfolio, the outstanding balance of loans secured by offices totaled $97.0 million and $93.7 million as of December 31, 2025 and 2024, respectively.
We offer both fixed- and adjustable-rate commercial real estate loans. Our commercial real estate mortgage loans generally include a balloon maturity of five years or less. Amortization terms are generally offered up to 25 years. Adjustable rate-based loans typically include a floor and ceiling interest rate and are indexed to The Wall Street Journal prime rate or the one-month term SOFR, plus or minus an interest rate margin and rates generally adjust daily. The maximum loan-to-value ratio for commercial real estate loans is generally up to 85% on purchases and refinances.
Commercial – Commercial and Industrial Loans . Over the last two years, we have intentionally focused on the growth of commercial and industrial loans to businesses located in our primary market areas. These loans are primarily originated as conventional loans to business borrowers, which include lines of credit, term loans and letters of credit. These loans are typically secured by collateral and are used for general business purposes, including working capital financing, equipment financing, capital investment and general investments. Loan terms typically vary from one to five years. The interest rates on such loans are either fixed rate or adjustable rate indexed to The Wall Street Journal prime rate plus a margin.
We originate commercial business loans made under the SBA 7(a) and USDA B&I programs to small businesses located throughout the country. Loans made by the Bank under the SBA 7(a) and USDA B&I programs generally are made to small businesses to provide working capital needs, to refinance existing debt or to provide funding for the purchase of businesses, real estate, machinery and equipment. These loans generally are secured by a combination of assets that may include receivables, inventory, furniture, fixtures, equipment, business real property, commercial real estate and sometimes additional collateral such as an assignment of life insurance and a lien on personal real estate owned by the guarantor(s). Typical maturities for this type of loan vary up to 25 years and can be 30 years in some circumstances. Under the SBA 7(a) and USDA B&I loan program the loans carry a government guaranty up to 90% of the loan in some cases. SBA 7(a) and USDA B&I loans will normally be adjustable rate loans based upon The Wall Street Journal prime lending rate. Under the loan programs, we will typically sell in the secondary market the guaranteed portion of these loans to generate noninterest income and retain the related unguaranteed portion of these loans.
Commercial – Equipment Finance . Our equipment finance line of business offers companies that are purchasing equipment for their business various products to help manage working capital needs, while offering flexible and customizable repayment terms. These products are primarily made up of commercial finance agreements and commercial loans for transportation, construction, healthcare and manufacturing equipment. The loans have terms ranging from 24 to 96 months, with an average of five years, and are secured by the financed equipment. Typical transaction sizes range from $10,000 to $4.0 million, with an average outstanding loan balance of $134,000.
Commercial – Municipal Leases . We offer ground and equipment lease financing to fire departments located primarily throughout North Carolina, South Carolina and, to a lesser extent, Virginia. Municipal leases are secured primarily by a ground lease in our name with a sublease to the borrower for a fire station or an equipment lease for fire trucks and firefighting equipment. We originate and underwrite all leases prior to funding. These leases are at a fixed interest rate and may have a term to maturity of up to 20 years. At December 31, 2025, $105.6 million, or 63.5%, of our municipal leases were secured by fire trucks, $54.3 million, or 32.6%, were secured by fire stations, with the remaining $6.5 million, or 3.9%, secured by miscellaneous firefighting equipment and land. At December 31, 2025, the average outstanding municipal lease balance was $436,000.
Residential Real Estate – Construction and Land Development . We originate construction-to-permanent loans to homeowners building a residence. In addition, we originate land/lot loans predominately for the purchase or refinance of an improved lot for the construction of a residence to be occupied by the borrower. All of our construction and land/lot loans were made on properties located within our market area. Unfunded loan commitments totaled $38.7 million and $29.8 million at December 31, 2025 and 2024, respectively.
Construction-to-permanent loans are made for the construction of a one-to-four family property which is intended to be occupied by the borrower as either a primary or secondary residence. Construction-to-permanent loans are originated to the homeowner rather than the homebuilder and are structured to be converted to a first lien fixed- or adjustable-rate permanent loan at the completion of the construction phase. During the construction phase, which typically lasts six to 12 months, we make periodic inspections of the construction site and loan proceeds are disbursed directly to the contractors or borrowers as construction progresses. Typically, disbursements are made in monthly draws during the construction period. Loan proceeds are disbursed based on a percentage of completion. Construction-to-permanent loans require payment of interest only during the construction phase. Construction loans may be originated up to 90% of the cost or of the appraised value upon completion, whichever is less; however, we generally do not originate conforming construction loans which exceed an 80% loan-to-value without securing adequate private mortgage insurance.
Included in our construction and land/lot loan portfolio are land/lot loans, which are typically loans secured by developed lots in residential subdivisions located in our market areas. We originate these loans to individuals intending to construct their primary or secondary residence on the lot within one year of the origination date. This portfolio may also include loans for the purchase or refinance of unimproved land that is generally less than or equal to five acres and for which the purpose is to commence the improvement of the land and construction of an owner occupied primary or secondary residence within one year of the origination date.
Land/lot loans are typically originated in an amount up to 70% of the lower of the purchase price or appraisal, are secured by a first lien on the property, for up to a 20-year term, require payments of interest only and are structured with an adjustable interest rate on terms similar to our one-to-four family residential mortgage loans.
Residential Real Estate – One-to-Four Family . We originate loans secured by first mortgages on one-to-four family residences typically for the purchase or refinance of owner occupied primary or secondary residences located primarily in our market areas. We originate both fixed-rate loans and adjustable-rate loans. We generally originate fixed rate mortgage loans with terms greater than 10 years for sale to various secondary market investors, currently on a servicing retained basis. We also originate adjustable-rate mortgage, or ARM, loans which have interest rates that adjust to the average 30-day yield on the SOFR plus a margin. Most of our ARM loans are hybrid loans, which after an initial fixed rate period of one, five, seven or 10 years will convert to an annual adjustable interest rate for the remaining term of the loan. Our ARM loans have terms up to 30 years.
Residential Real Estate – Home Equity Lines of Credit . Our HELOCs consist primarily of adjustable-rate lines of credit. The lines of credit may be originated in amounts, together with the amount of the existing first mortgage, typically up to 85% of the value of the property securing the loan (less any prior mortgage loans) with an adjustable-rate based on The Wall Street Journal prime rate plus a margin. HELOCs generally have up to a 10-year draw period and amounts may be reborrowed after payment at any time during the draw period. Once the draw period has lapsed, the payment is amortized over a 15-year period based on the loan balance at that time. Unfunded commitments on these lines of credit, including loans held for sale, totaled $491.2 million and $436.0 million at December 31, 2025 and 2024, respectively.
Consumer Lending . Our consumer loans consist of loans secured by deposit accounts or personal property such as automobiles, boats and motorcycles, as well as unsecured consumer debt. This portfolio includes indirect auto finance installment contracts on new and used vehicles sourced through our relationships with automobile dealerships, both manufacturer franchised dealerships and independent dealerships. As a result of our decision to cease indirect auto finance loan originations as of March 31, 2024, the outstanding balance of the indirect auto portfolio declined to $38.3 million at December 31, 2025, a $30.8 million, or 44.5%, decrease compared to the prior year end.
The following table details the contractual maturity ranges of our loan portfolio without factoring in scheduled payments or potential prepayments. Loan balances do not include undisbursed loan proceeds, unearned discounts, unearned income or the ACL. In addition, we have disclosed those loans with predetermined (fixed) and floating interest rates at December 31, 2025.
(Dollars in thousands)
1 Year or Less
After 1 but Within 5 Years
After 5 but Within 15 Years
Over 15 Years
Total
Commercial real estate loans
Construction and land development
Commercial real estate - owner occupied
Commercial real estate - non-owner occupied
Multifamily
Total commercial real estate loans
Commercial loans
Commercial and industrial
Equipment finance
Municipal leases
Total commercial loans
Residential real estate loans
Construction and land development
One-to-four family
HELOCs
Total residential real estate loans
Consumer loans
Loans, net of deferred loan fees and costs
Commercial real estate loans
Fixed rate loans
Adjustable rate loans
Commercial loans
Fixed rate loans
Adjustable rate loans
Residential real estate loans
Fixed rate loans
Adjustable rate loans
Consumer loans
Fixed rate loans
Adjustable rate loans
Total fixed rate loans
Total adjustable rate loans
Nonperforming Assets. Nonperforming assets include nonaccrual loans and repossessed assets. Loans are placed on nonaccrual status when the collection of principal and/or interest becomes doubtful or other factors involving the loan warrant placing the loan on nonaccrual status. Total nonperforming assets were $44.4 million, or 0.98% of total assets, at December 31, 2025, compared to $28.8 milion, or 0.63% of total assets, at December 31, 2024. The following table sets forth the composition of our nonperforming assets among our different asset categories.
(Dollars in thousands)
December 31, 2025
December 31, 2024
Nonaccruing loans
Commercial real estate
Construction and land development
Commercial real estate - owner occupied
Commercial real estate - non-owner occupied
Multifamily
Total commercial real estate
Commercial
Commercial and industrial
Equipment finance
Municipal leases
Total commercial
Residential real estate
Construction and land development
One-to-four family
HELOCs
Total residential real estate
Consumer
Total nonaccruing loans
Total repossessed assets
Total nonperforming assets
Total nonperforming assets as a percentage of total assets
Total SBA loans included in nonaccrual loans
Portion of SBA loans fully guaranteed by the SBA
Total nonaccruing loans, excluding the balance fully guaranteed by the SBA
Total repossessed assets
Total nonperforming assets, excluding the balance fully guaranteed by the SBA
Total nonperforming assets, excluding the balance fully guaranteed by the SBA, as a percentage of total assets
SBA loans made up the largest portion of nonperforming assets at $20.6 million and $6.6 million at December 31, 2025 and 2024, respectively. The year-over-year increase of $14.0 million was primarily the result of a management decision to accelerate the repurchase of the sold portion of nonperforming SBA loans (fully guaranteed portion) to simplify the workout process. Of the remaining nonperforming assets, equipment finance loans (concentrated in the transportation sector) made up $6.6 million and $4.6 million, respectively, and HELOCs totaled $6.5 million and $4.0 million, respectively, both at these same dates.
The ratio of nonperforming loans to total loans was 1.22% at December 31, 2025 compared to 0.76% at December 31, 2024. When adjusted for the fully guaranteed portion of SBA loans, the ratio of nonperforming loans to total loans was 0.81% at December 31, 2025 compared to 0.67% at December 31, 2024.
Allowance for Credit Losses on Loans . The ACL on loans held for investment is a valuation account that reflects our estimation of the credit losses that will result from the inability of our borrowers to make required loan payments. The ACL is maintained through provisions for credit losses that are charged to earnings in the period they are established. We charge losses on loans against the ACL when we believe the collection of loan principal is unlikely. Recoveries on loans previously charged off are added back to the ACL. See "Note 1 – Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K for discussion of our ACL methodology on loans.
The following table summarizes the distribution of the ACL by loan category at the dates indicated.
December 31, 2025
December 31, 2024
(Dollars in thousands)
Allocated Allowance
% of Loan Portfolio
ACL to Loans
Allocated Allowance
% of Loan Portfolio
ACL to Loans
Commercial real estate
Construction and land development
Commercial real estate - owner occupied
Commercial real estate - non-owner occupied
Multifamily
Total commercial real estate
Commercial
Commercial and industrial
Equipment finance
Municipal leases
Total commercial
Residential real estate
Construction and land development
One-to-four family
HELOCs
Total residential real estate
Consumer
Total loans
December 31, 2025
December 31, 2024
(Dollars in thousands)
Allocated Allowance
ACL to Loans
Allocated Allowance
ACL to Loans
ACL composition
Quantitative allocation
Qualitative allocation
Individual allocation
Total ACL
At or For the Year Ended December 31,
Asset quality ratios
ACL to nonaccruing loans (1)
Net charge-offs to average loans
(1) At December 31, 2025, $10.1 million, or 23.2%, of nonaccruing loans were current on their loan payments. At December 31, 2024, $13.0 million, or 47.1%, of nonaccruing loans were current on their loan payments.
The ACL on loans decreased $3.8 million, or 8.4%, during the year ended December 31, 2025. See further discussion of the drivers of the change in the "Comparison of Results of Operations for the Years Ended December 31, 2025 and December 31, 2024 – Provision for Credit Losses" section above.
In an effort to assist customers in their post-Hurricane Helene recovery and clean-up efforts, in the fourth quarter of 2024 we granted payment deferrals of up to six months to provide short-term relief to impacted customers, the outstanding balance of which was $136.0 million at December 31, 2024. In the same year we established a $2.2 million qualitative allocation to address the potential impact of the Hurricane upon our loan portfolio. As of December 31, 2025, the outstanding balance of loans where payment deferrals had been granted declined to $318,000, while $165,000 in charge-offs were recognized which were directly related to Hurricane Helene. As any residual impact of the Hurricane was believed to have now been reflected elsewhere within the ACL, in 2025 we released the $2.2 million qualitative allocation previously established.
Our individually evaluated loans are comprised of loans meeting certain thresholds including those on nonaccrual status. Individually evaluated loans may be evaluated for ACL purposes using either the cash flow or the collateral valuation method. As of December 31, 2025, there were $11.5 million of loans individually evaluated compared to $13.8 million at December 31, 2024.
The following table summarizes net charge-offs (recoveries) to average loans outstanding by loan category for the years indicated.
Year Ended December 31, 2025
Year Ended December 31, 2024
(Dollars in thousands)
Net Charge-Offs (Recoveries)
Average Loans Outstanding
Net Charge-Off (Recovery) Ratio
Net Charge-Offs (Recoveries)
Average Loans Outstanding
Net Charge-Off (Recovery) Ratio
Commercial real estate
Commercial
Residential real estate
Consumer
Total
Liabilities. Total liabilities were $3.9 billion at December 31, 2025, compared to $4.0 billion at December 31, 2024, a decrease of $98.7 million, or 2.4%, the components of which are discussed below.
Deposits. The following table summarizes the composition of our deposit portfolio as of the dates indicated.
(Dollars in thousands)
December 31, 2025
December 31, 2024
$ Change
% Change
Core deposits
Noninterest-bearing deposits
NOW accounts
Money market accounts
Savings accounts
Total core deposits
Certificates of deposit
Total
The following bullet points provide further information regarding the composition of our deposit portfolio as of December 31, 2025:
• The balance of uninsured deposits was $971.5 million, or 26.2% of total deposits, which included $262.0 million of collateralized deposits to municipalities.
• The balance of brokered deposits was $271.3 million, or 7.3% of total deposits.
• Commercial and consumer depositors represented 56% and 44% of total deposits, respectively.
• The average balance of our deposit accounts was $36,000.
• Our largest 25 depositors made up $534.8 million, or 14.4% of total deposits.
Specific to time deposits, we held approximately $198.5 million in uninsured CDs as of December 31, 2025. The uninsured amount is an estimate consistent with the methodology used for the Company's regulatory reporting disclosures.
The following table indicates the amount of our CDs, both within and in excess of the $250,000 FDIC insurance limit, by time remaining until maturity as of December 31, 2025.
(Dollars in thousands)
3 Months
or Less
Over 3 to 6
Months
Over 6 to 12 Months
Over
12 Months
Total
CDs less than $250,000
CDs of $250,000 or more
Total certificates of deposit
Borrowings. Although deposits are our primary source of funds, we may utilize borrowings to manage interest rate risk or as a cost-effective source of funds. Our borrowings typically consist of advances from the FHLB of Atlanta and FRB. We may obtain advances from the FHLB of Atlanta upon the security of certain of our commercial and residential real estate loans and/or securities as well as obtain advances from the FRB upon the security of certain of our commercial and consumer loans. These advances may be made pursuant to several different credit programs, each of which has its own interest rate, range of maturities and call features.
In addition to borrowings deemed necessary to address funding needs, as a result of our merger with Quantum, we assumed $11.3 million of junior subordinated debentures, which carried a purchase accounting discount of $1.1 million as of December 31, 2025. See "Note 10 – Borrowings" of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K for discussion of the origin and terms of the debt.
The following tables set forth information regarding our borrowings at the end of and during the periods indicated.
Year Ended December 31,
(Dollars in thousands)
Average balances
Junior subordinated debentures
FHLB advances
FRB advances
Revolving lines of credit
Weighted average interest rate
Junior subordinated debentures
FHLB advances
FRB advances
Revolving lines of credit
(Dollars in thousands)
December 31, 2025
December 31, 2024
Balance outstanding at end of period
Junior subordinated debentures
FHLB advances
FRB advances
Revolving lines of credit
Weighted average interest rate
Junior subordinated debentures
FHLB advances
FRB advances
Revolving lines of credit
All qualifying one-to-four family loans, HELOCs, commercial real estate loans, multifamily loans and FHLB of Atlanta stock are pledged as collateral to secure outstanding FHLB advances while commercial construction loans, indirect auto loans, and equipment and municipal leases are pledged as collateral to secure outstanding FRB advances. At December 31, 2025 and 2024, the Company had the ability to borrow $355.3 million and $315.5 million, respectively, through FHLB advances and $66.3 million and $106.6 million, respectively, through the unused portion of a line of credit with the FRB.
At both December 31, 2025 and 2024, the Company maintained revolving lines of credit with four unaffiliated banks, the unused portion of which totaled $165.0 million.
Capital Resources
Stockholders' equity increased $48.9 million, or 8.9%, to $600.7 million at December 31, 2025 as compared to December 31, 2024. Activity within stockholders' equity included $64.4 million in net income and $5.6 million in share-based compensation and stock option exercises, partially offset by $8.4 million in cash dividends declared and $13.6 million in stock repurchases. In addition, accumulated other comprehensive income improved by $2.3 million due to a reduction in the unrealized loss on available for sale securities due to lower market interest rates.
As of December 31, 2025, the Bank was considered "well capitalized" in accordance with its regulatory capital guidelines and exceeded all regulatory capital requirements. See “Business – How We are Regulated” included in Item 1 and “Note 18 – Regulatory Capital Matters” of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K for additional details on our capital requirements.
Liquidity Management
Management maintains a liquidity position that it believes will adequately provide for funding of loan demand and deposit run-off that may occur in the normal course of business. We rely on a number of different sources in order to meet our potential liquidity demands. The primary sources are increases in deposit accounts, wholesale borrowings and cash flows from loan payments and the securities portfolio.
In addition to these primary sources of funds, management has several secondary sources available to meet potential funding requirements as outlined in the "Comparison of Financial Condition at December 31 , 2025 and December 31, 2024 – Borrowings" section above. Additionally, we classify our securities portfolio as available for sale, providing an additional source of liquidity. Management believes that our securities portfolio is of high quality, of short duration, and the securities would therefore be readily marketable. In addition, we have historically sold fixed-rate mortgage loans in the secondary market to reduce interest rate risk and to create still another source of liquidity. From time to time we also utilize brokered time deposits to supplement our other sources of funds. Brokered time deposits are obtained by utilizing an outside broker that is paid a fee. This funding requires advance notification to structure the type of deposit desired by us. Brokered deposits can vary in term from one month to several years and have the benefit of being a source of longer-term funding. We also utilize brokered deposits to help manage interest rate risk by extending the term to repricing of our liabilities, enhance our liquidity and fund asset growth. Brokered deposits are typically from outside our primary market areas, and our brokered deposit levels may vary from time to time depending on competitive interest rate conditions and other factors. At December 31, 2025, brokered deposits totaled $271.3 million, or 7.3% of total deposits.
Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in short-term investments, such as overnight deposits and federal funds. On a longer term basis, we maintain a strategy of investing in various lending
products and debt securities, including MBS. On a stand-alone level we are a separate legal entity from the Bank and must provide for our own liquidity and pay our own operating expenses. Our primary source of funds consists of dividends or capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to pay dividends. At December 31, 2025, we (on an unconsolidated basis) had liquid assets of $8.3 million.
At the Bank level, we use our sources of funds primarily to meet our ongoing commitments, pay maturing deposits and fund withdrawals and to fund loan commitments. At December 31, 2025, the total approved loan commitments and unused lines of credit outstanding amounted to $347.6 million and $831.3 million, respectively, as compared to $230.5 million and $712.3 million as of December 31, 2024. Certificates of deposit scheduled to mature in one year or less at December 31, 2025 totaled $882.2 million. It is management's policy to manage deposit rates that are competitive with other local financial institutions. Based on this strategy, we believe that a majority of maturing deposits will be retained.
Off-Balance Sheet Activities
In the normal course of operations, we engage in a variety of financial transactions that are not recorded in our financial statements, mainly to manage customers' requests for funding. These transactions primarily take the form of loan commitments and lines of credit and involve varying degrees of off-balance sheet credit, interest rate and liquidity risks. For further information, see “Note 17 – Commitments and Contingencies” of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.
Asset/Liability Management and Interest Rate Risk
Our Risk When Interest Rates Change. The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time. Our loans generally have longer maturities than our deposits. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.
How We Measure Our Risk of Interest Rate Changes. As part of our process to manage our exposure to changes in interest rates and comply with applicable regulations, we monitor our interest rate risk. In monitoring interest rate risk we continually analyze and manage assets and liabilities based on market conditions, their payment streams and interest rates, the timing of their maturities, their sensitivity to actual or potential changes in market interest rates and interest rate sensitivities of our non-maturity deposits with respect to interest rates paid and the level of balances. The Board of Directors sets the asset and liability policy of HomeTrust Bank, which is implemented by management and an asset/liability committee whose members include certain members of senior management.
The purpose of this committee is to communicate, coordinate and control asset/liability management consistent with our business plan and Board approved policies. The committee establishes and monitors the volume and mix of assets and funding sources taking into account relative costs and spreads, interest rate sensitivity and liquidity needs. The objectives are to manage assets and funding sources to produce results that are consistent with liquidity, capital adequacy, growth, risk and profitability goals.
The committee generally meets on a quarterly basis to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital position, anticipated changes in the volume and mix of assets and liabilities and interest rate risk exposure limits versus current projections pursuant to net present value of portfolio equity analysis and income simulations. The committee recommends strategy changes based on this review. The committee is responsible for reviewing and reporting on the effects of the policy implementations and strategies to the Asset/Liability Committee of the Board of Directors at least quarterly.
Among the techniques we have used at various times to manage interest rate risk are: (i) increasing our portfolio of hybrid and adjustable-rate one-to-four family residential loans and commercial loans; (ii) maintaining a strong capital position, which provides for a favorable level of interest-earning assets relative to interest-bearing liabilities; and (iii) emphasizing less interest rate sensitive and lower-costing “core deposits.” We also maintain a portfolio of short-term or adjustable-rate assets and use fixed-rate FHLB advances and brokered deposits to extend the term to repricing of our liabilities.
We consider the relatively short duration of our loans and deposits in our overall asset/liability management process. As short-term rates increase, we have assets and liabilities that increase with the market. This is reflected in the change in our PVE when rates increase (see the table below). PVE is defined as the net present value of our existing assets and liabilities. In addition, we have historically demonstrated an ability to maintain retail deposits through various interest rate cycles. If local retail deposit rates increase dramatically, we also have access to wholesale funding through our lines of credit with the FHLB and FRB and the brokered deposit market to replace retail deposits, as needed.
Depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, the committee may in the future determine to increase our interest rate risk position somewhat in order to maintain or increase our net interest margin. In particular, during certain periods of stable or declining interest rates, we believe that the increased net interest income resulting from a mismatch in the maturity of our assets and liabilities portfolios may provide high enough returns to justify increased exposure to sudden and unexpected increases in interest rates. As a result of this philosophy, our results of operations and the economic value of our equity will remain vulnerable to increases in interest rates and to declines due to differences between long- and short-term interest rates.
The committee regularly reviews interest rate risk by forecasting the impact of alternative interest rate environments on net interest income and our PVE. The committee also evaluates these impacts against the potential changes in net interest income and market value of our portfolio equity that are monitored by the Board of Directors of HomeTrust Bank generally on a quarterly basis.
Our asset/liability management strategy sets limits on the change in PVE given certain changes in interest rates. The table presented here, as of December 31, 2025, is forward-looking information about our sensitivity to changes in interest rates. The table incorporates data from an independent service, as it relates to maturity repricing and repayment/withdrawal of interest-earning assets and interest-bearing liabilities. Interest rate risk is measured by changes in PVE for instantaneous parallel shifts in the yield curve up and down 400 basis points. Overall, our interest rate sensitivity is very low with minimal changes to our PVE with rate increases or smaller rate decreases. Loans with interest rate
floors assist in maintaining our net interest income when rates decrease. If larger rate decreases occur, our PVE decreases more as lower rate deposit accounts will not reprice lower than zero, causing our net interest margin to shrink. As of December 31, 2025, our loans with interest rate floors totaled approximately $744.9 million, or 20.8% of our total loan portfolio, and had a weighted average floor rate of 5.03%, of which $155.1 million were at their floor rate.
December 31, 2025
Change in Interest
Rates in Basis Points
Present Value Equity (Dollars in Thousands)
Amount
$ Change
% Change
PVE Ratio
Base
In evaluating our exposure to interest rate movements, certain shortcomings inherent in the method of analysis presented in the foregoing table must be considered. For example, although certain assets and liabilities may have similar maturities or repricing periods, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in interest rates. Additionally, certain assets, such as adjustable rate mortgages, have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a significant change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed above. Finally, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. We consider all of these factors in monitoring our exposure to interest rate risk.
The Board of Directors and management of HomeTrust Bank believe that certain factors afford HomeTrust Bank the ability to operate successfully despite its exposure to interest rate risk. HomeTrust Bank may manage its interest rate risk by originating and retaining adjustable rate loans in its portfolio, by borrowing from the FHLB to match the duration of our funding to the duration of originated fixed rate one-to-four family and commercial loans held in portfolio and by selling on an ongoing basis certain currently originated longer term fixed rate one-to-four family real estate loans.
