(By Rich Bieglmeier) Insider buying always brings up some interesting situations. HomeTrust Bancshares, Inc.
) is such a case.
The regional bank has 20 offices serving nine counties in Western North Carolina with total assets of $1.58 billion, net loans of $1.25 billion, deposits of $1.24 billion and equity of $169.0 million. HTBI is the largest thrift headquartered in North Carolina and the eleventh largest banking institution headquartered in North Carolina based on asset size.
Like most in the industry, the bank has suffered from the subprime mortgage crisis. However, you would never know it the way 10 insiders gobbled up the stock recently. The CEO, CFO, CIO, directors… opened up the checkbook and bought nearly 594,000 of HBTI at $10.
By himself, CEO, Edward F. Broadwell, Jr. purchased $3.3 million in stock as the mutual savings institution's shares were converted to common stock for sale to the public.
HomeTrust Bank's primary federal bank regulator, the Office of the Comptroller of the Currency, (the "OCC") established in February 2012, an Individual Minimum Capital Requirement ("IMCR") for HomeTrust Bank, requiring a core or tier 1 capital requirement of 7.5% and a total risk-based capital requirement of 11.5%. At December 31, 2011, HomeTrust Bank's tier 1 capital and total risk-based capital were at 7.80 % and 11.61%, respectively.
With the conversion, tier 1 capital and total risk-based capital is roughly 11.15% and 16.50%, respectively, significantly in excess of the IMCR's requirements.
The management team plans on using the proceeds to:
• Improving asset quality;
• Continuing to originate residential loans and owner-occupied commercial real estate loans to individuals and businesses in communities served by branch offices, as well as municipal leases to fire companies located in North and South Carolina;
• Expanding presence within existing and nearby market areas by capturing business opportunities resulting from changes in the competitive environment, including through strategic acquisitions;
• Emphasizing lower cost core deposits to maintain low funding costs;
• Improving profitability through disciplined pricing, expense control and balance sheet management while continuing to provide excellent customer service; and
• Hiring and retaining experienced employees with a customer service focus.
Investors will have to wait for the IMCR's OK before HTBI can declare a dividend or buyback shares. However, with their tier 1 capital and total risk-based capital requirements met, iStock believes it's a matter of time before the payouts begin.
Insiders must believe their $5.94 million investment is well spent and a good value. Based on its price-to-book relative to its peer group, they may well be right.
Overall, iStock believes HTBI is appropriate for investors with an above average risk-tolerance. We see potential for 15%-20% gains in the next 12 to 18 months.