HBT Financial, Inc. Announces Fourth Quarter 2023 Financial Results

Quarterly Cash Dividend Increased to $0.19 per Share

Fourth Quarter Highlights

• Net income of $18.4 million, or $0.58 per diluted share; return on average assets (ROAA) of 1.46%; return on average stockholders' equity (ROAE) of 15.68%; and return on average tangible common equity (ROATCE)(1) of 18.96%
• Adjusted net income(1) of $19.3 million; or $0.60 per diluted share; adjusted ROAA(1) of 1.53%; adjusted ROAE(1) of 16.38%; and adjusted ROATCE(1) of 19.81%
• Asset quality remained strong with nonperforming assets to total assets of 0.17%
• Net interest margin of 3.93% and net interest margin (tax-equivalent basis)(1) of 3.99%

BLOOMINGTON, Ill., Jan. 24, 2024 (GLOBE NEWSWIRE) -- HBT Financial, Inc. (NASDAQ: HBT) (the “Company” or “HBT Financial” or “HBT”), the holding company for Heartland Bank and Trust Company, today reported net income of $18.4 million, or $0.58 diluted earnings per share, for the fourth quarter of 2023. This compares to net income of $19.7 million, or $0.62 diluted earnings per share, for the third quarter of 2023, and net income of $13.1 million, or $0.46 diluted earnings per share, for the fourth quarter of 2022.

J. Lance Carter, President and Chief Executive Officer of HBT Financial, said, “We had a very good fourth quarter to complete an excellent year. We continued to produce strong profitability with an adjusted ROAA(1) of 1.53%, an adjusted ROATCE(1) of 19.81% and adjusted diluted earnings per share(1) of $0.60. We were able to improve liquidity and increase deposits, excluding brokered deposits, by 4.2% for the quarter by bringing the majority of our wealth management customers’ deposits onto our balance sheet. Even without our wealth management customers’ deposits, total deposits, excluding brokered deposits, increased by $29.4 million, or 0.7%. Loan growth remained solid at 1.8% for the quarter while we maintained strong credit quality with non-performing assets at only 0.17% of total assets. Although net interest margin (tax-equivalent basis)(1) declined to 3.99% in the quarter, we believe that the pace of net interest margin decreases will moderate in the first quarter of 2024. With the recent drop in interest rates, our accumulated other comprehensive income (loss) increased by $21.3 million, which when coupled with strong earnings retention, drove a 9.3% increase in our tangible book value per share(1). All capital metrics increased and can support continued organic growth or future acquisitions. We believe this quarter continues to demonstrate our ability to produce strong profitability results, maintain a solid balance sheet, and enhance our franchise value.”
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(1) See "Reconciliation of Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures.

Adjusted Net Income

In addition to reporting GAAP results, the Company believes non-GAAP measures such as adjusted net income and adjusted earnings per share, which adjust for acquisition expenses, branch closure expenses, gains (losses) on sale of closed branch premises, net earnings (losses) from closed or sold operations, charges related to termination of certain employee benefit plans, realized gains (losses) on sales of securities, and mortgage servicing rights fair value adjustments, provide investors with additional insight into its operational performance. The Company reported adjusted net income of $19.3 million, or $0.60 adjusted diluted earnings per share, for the fourth quarter of 2023. This compares to adjusted net income of $20.3 million, or $0.63 adjusted diluted earnings per share, for the third quarter of 2023, and adjusted net income of $13.9 million, or $0.48 adjusted diluted earnings per share, for the fourth quarter of 2022 (see "Reconciliation of Non-GAAP Financial Measures" tables below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures).

Cash Dividend

On January 23, 2024, the Company’s Board of Directors declared a quarterly cash dividend of $0.19 per share on the Company’s common stock (the “Dividend”). The Dividend is payable on February 13, 2024 to shareholders of record as of February 6, 2024. This represents an increase of $0.02 from the previous quarterly dividend of $0.17 per share.

Mr. Carter noted, “Our strong financial performance and balance sheet enable us to increase our quarterly dividend by $0.02 per share, or 11.8%, while maintaining sufficient capital to support the continued growth of the Company.”

Net Interest Income and Net Interest Margin

Net interest income for the fourth quarter of 2023 was $47.1 million, a decrease of 2.5% from $48.3 million for the third quarter of 2023. The decrease was primarily attributable to an increase in funding costs which were partially offset by higher yields on loans and a more favorable interest-earning asset mix.

Relative to the fourth quarter of 2022, net interest income increased 11.6% from $42.2 million. The increase was primarily attributable to the increase in average interest-earning assets following the Town and Country Financial Corporation (“Town and Country”) merger completed in the first quarter of 2023 and higher yields on interest-earning assets which were partially offset by an increase in funding costs.

Net interest margin for the fourth quarter of 2023 was 3.93%, compared to 4.07% for the third quarter of 2023, and net interest margin (tax-equivalent basis)(1) for the fourth quarter of 2023 was 3.99% compared to 4.13% for the third quarter of 2023. The decrease was primarily attributable to higher funding costs with the cost of funds increasing to 1.26% for the fourth quarter of 2023, compared to 0.96% for the third quarter of 2023, partially offset by higher yields on loans and a more favorable interest-earning asset mix.

Relative to the fourth quarter of 2022, net interest margin decreased from 4.10%. This decrease was primarily attributable to higher funding costs.
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(1) See "Reconciliation of Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures.

Noninterest Income

Noninterest income for the fourth quarter of 2023 was $9.2 million, a decrease of 3.0% from $9.5 million for the third quarter of 2023. The decrease was primarily attributable to a negative mortgage servicing rights fair value adjustment of $1.2 million during the fourth quarter of 2023, partially offset by the absence of $0.8 million of losses realized on the sale of debt securities during the third quarter of 2023. Additionally, the $0.5 million increase in wealth management fees was primarily due to an increase in farmland brokerage commissions.

Relative to the fourth quarter of 2022, noninterest income increased 16.7% from $7.9 million. The increase was primarily attributable to the Town and Country merger completed in the first quarter of 2023 which contributed to a $0.6 million increase in mortgage servicing income, a $0.4 million increase in wealth management fees, and a $0.1 million increase in card income.

Noninterest Expense

Noninterest expense for the fourth quarter of 2023 was $30.4 million, a 0.9% decrease from $30.7 million for the third quarter of 2023. The decrease was broad-based and the result of continued expense management discipline with a $0.5 million decrease in marketing expenses largely offset by a $0.4 million increase in other noninterest expense.

Relative to the fourth quarter of 2022, noninterest expense decreased 8.2% from $33.1 million, primarily attributable to the absence of $8.2 million of accruals related to settled legal matters previously disclosed and included in the fourth quarter of 2022 results, partially offset by the addition of Town and Country’s operations.

Acquisition-related expenses recognized are summarized below. No acquisition-related expenses were recognized subsequent to the second quarter of 2023, and we do not expect material acquisition-related expenses related to Town and Country in subsequent quarters.

Loan Portfolio

Total loans outstanding, before allowance for credit losses, were $3.40 billion at December 31, 2023, compared with $3.34 billion at September 30, 2023 and $2.62 billion at December 31, 2022. The $61.6 million increase from September 30, 2023 was primarily attributable to higher line usage in our commercial and industrial portfolio as well as one larger new $23.0 million funding in our multifamily portfolio, both of which were partially offset by a reduction in our commercial real estate – non-owner occupied portfolio due to a variety of payoffs from real estate sales. Higher line usage in our commercial and industrial portfolio was driven in part by the seasonal increase in grain elevator line balances as well as $13.2 million drawn on two customers’ lines which were funded shortly before and paid off shortly after year-end.

Deposits

Total deposits were $4.40 billion at December 31, 2023, compared with $4.20 billion at September 30, 2023 and $3.59 billion at December 31, 2022. The $203.4 million increase from September 30, 2023 was primarily attributable to bringing the majority of our wealth management customer deposits on balance sheet, which increased money market deposits by $144.0 million, and a $29.9 million increase in brokered deposits.

Asset Quality

Nonperforming loans totaled $7.9 million, or 0.23% of total loans, at December 31, 2023, compared with $6.7 million, or 0.20% of total loans, at September 30, 2023, and $2.2 million, or 0.08% of total loans, at December 31, 2022. Additionally, of the $7.9 million of nonperforming loans held as of December 31, 2023, $2.6 million is either wholly or partially guaranteed by the U.S. Government. The $1.2 million increase in nonperforming loans from September 30, 2023 was primarily attributable to one commercial real estate - non-owner occupied retail credit moved to nonaccrual, partially offset by a reduction in one-to-four family residential nonaccrual loans.

The Company recorded a provision for credit losses of $1.1 million for the fourth quarter of 2023. The provision for credit losses primarily reflects a $0.9 million increase in required reserves resulting from changes in economic and qualitative factors, a $0.6 million increase in required reserves driven by growth and changes in the loan portfolio, and a $0.4 million decrease in specific reserve.

The Company had net charge-offs of $0.5 million, or 0.06% of average loans on an annualized basis, for the fourth quarter of 2023, compared to net recoveries of $0.1 million, or 0.01% of average loans on an annualized basis, for the third quarter of 2023, and net recoveries of $0.9 million, or 0.14% of average loans on an annualized basis, for the fourth quarter of 2022.

The Company’s allowance for credit losses was 1.18% of total loans and 510% of nonperforming loans at December 31, 2023, compared with 1.16% of total loans and 582% of nonperforming loans at September 30, 2023. In addition, the allowance for credit losses on unfunded lending-related commitments totaled $3.8 million as of December 31, 2023, compared with $4.4 million as of September 30, 2023.

Capital

Tangible common equity to tangible assets(1) increased to 8.19% as of December 31, 2023, from 7.64% as of September 30, 2023, and tangible book value per share(1) increased by $1.10 to $12.90 as of December 31, 2023, when compared to September 30, 2023. These increases were primarily due to an increase in our accumulated other comprehensive income (loss) as a result of the recent drop in interest rates as well as strong earnings retention.

During the fourth quarter of 2023, the Company repurchased 78,312 shares of its common stock at a weighted average price of $17.94 under its stock repurchase program. The Company’s Board of Directors authorized a new stock repurchase program that took effect upon the expiration of the Company’s prior stock repurchase program on January 1, 2024. The new stock repurchase program will be in effect until January 1, 2025 and authorizes the Company to repurchase up to $15 million of its common stock.
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(1) See "Reconciliation of Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures.

January 2024 Bond Sales

In January 2024, the Company recognized $3.4 million of net losses on the sale of $66.8 million of municipal securities with the proceeds used to reduce wholesale funding sources. The book yield of the securities sold was 1.87% and the average life was 6.7 years.

About HBT Financial, Inc.

HBT Financial, Inc., headquartered in Bloomington, Illinois, is the holding company for Heartland Bank and Trust Company, and has banking roots that can be traced back to 1920. HBT provides a comprehensive suite of business, commercial, wealth management, and retail banking products and services to individuals, businesses and municipal entities throughout Illinois and Eastern Iowa through 67 full-service branches. As of December 31, 2023, HBT had total assets of $5.1 billion, total loans of $3.4 billion, and total deposits of $4.4 billion.

Non-GAAP Financial Measures

Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with GAAP. These non-GAAP financial measures include net interest income (tax-equivalent basis), net interest margin (tax-equivalent basis), efficiency ratio (tax-equivalent basis), tangible common equity to tangible assets, tangible book value per share, return on average tangible common equity, adjusted net income, adjusted earnings per share, adjusted return on average assets, adjusted return on average stockholders' equity, and adjusted return on average tangible common equity. Our management uses these non-GAAP financial measures, together with the related GAAP financial measures, in its analysis of our performance and in making business decisions. Management believes that it is a standard practice in the banking industry to present these non-GAAP financial measures, and accordingly believes that providing these measures may be useful for peer comparison purposes. These disclosures should not be viewed as substitutes for the results determined to be in accordance with GAAP; nor are they necessarily comparable to non-GAAP financial measures that may be presented by other companies. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures in the "Reconciliation of Non-GAAP Financial Measures" tables.

Forward-Looking Statements

Readers should note that in addition to the historical information contained herein, this press release contains, and future oral and written statements of the Company and its management may contain, "forward-looking statements" within the meanings of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe," "continue," or “should,” or similar terminology. Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to: (i) the strength of the local, state, national and international economies (including effects of inflationary pressures and supply chain constraints); (ii) the economic impact of any future terrorist threats and attacks, widespread disease or pandemics (including the COVID-19 pandemic in the United States), acts of war or other threats thereof (including the Israeli-Palestinian conflict and the Russian invasion of Ukraine), or other adverse external events that could cause economic deterioration or instability in credit markets, and the response of the local, state and national governments to any such adverse external events; (iii) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies, the FASB or the PCAOB (including the Company’s adoption of the current expected credit losses (“CECL”) methodology); (iv) changes in state and federal laws, regulations and governmental policies concerning the Company’s general business and any changes in response to the recent failures of other banks; (v) changes in interest rates and prepayment rates of the Company’s assets (including the impact of LIBOR phase-out and the recent and potential additional rate increases by the Federal Reserve); (vi) increased competition in the financial services sector, including from non-bank competitors such as credit unions and “fintech” companies, and the inability to attract new customers; (vii) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (viii) unexpected results of acquisitions, which may include failure to realize the anticipated benefits of acquisitions and the possibility that transaction costs may be greater than anticipated; (ix) the loss of key executives or employees; (x) changes in consumer spending; (xi) unexpected outcomes of existing or new litigation involving the Company; (xii) the economic impact of exceptional weather occurrences such as tornadoes, floods and blizzards; (xiii) fluctuations in the value of securities held in our securities portfolio; (xiv) concentrations within our loan portfolio, large loans to certain borrowers, and large deposits from certain clients; (xv) the concentration of large deposits from certain clients who have balances above current FDIC insurance limits and may withdraw deposits to diversify their exposure; (xvi) the level of non-performing assets on our balance sheets; (xvii) interruptions involving our information technology and communications systems or third-party servicers; (xviii) breaches or failures of our information security controls or cybersecurity-related incidents, and (xix) the ability of the Company to manage the risks associated with the foregoing as well as anticipated. Readers should note that the forward-looking statements included in this press release are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements. Additional information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in the Company’s filings with the Securities and Exchange Commission.

CONTACT:
Peter Chapman
HBTIR@hbtbank.com
(309) 664-4556

HBT Financial, Inc.
Unaudited Consolidated Financial Summary

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* Annualized measure.

(1) See "Reconciliation of Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures.
(2) On a tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%.

HBT Financial, Inc.
Unaudited Consolidated Financial Summary
Consolidated Statements of Income

HBT Financial, Inc.
Unaudited Consolidated Financial Summary
Consolidated Balance Sheets

HBT Financial, Inc.
Unaudited Consolidated Financial Summary

HBT Financial, Inc.
Unaudited Consolidated Financial Summary

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* Annualized measure.

(1) Net interest margin represents net interest income divided by average total interest-earning assets.
(2) On a tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%.
(3) See "Reconciliation of Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures.
(4) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(5) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

HBT Financial, Inc.
Unaudited Consolidated Financial Summary

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(1) Net interest margin represents net interest income divided by average total interest-earning assets.
(2) On a tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%.
(3) See "Reconciliation of Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures.
(4) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(5) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

HBT Financial, Inc.
Unaudited Consolidated Financial Summary

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(1) Prior to 2023, excludes loans acquired with deteriorated credit quality that are past due 90 or more days and accruing. Such loans totaled $145 thousand as of December 31, 2022.

HBT Financial, Inc.
Unaudited Consolidated Financial Summary

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* Annualized measure.

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(1) Includes recognition of an allowance for credit losses on non-PCD loans of $5.2 million and an allowance for credit losses on unfunded commitments of $0.7 million in connection with the Town and Country merger during the first quarter of 2023.

Reconciliation of Non-GAAP Financial Measures –
Adjusted Net Income and Adjusted Return on Average Assets

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* Annualized measure.

(1) Includes recognition of an allowance for credit losses on non-PCD loans of $5.2 million and an allowance for credit losses on unfunded commitments of $0.7 million in connection with the Town and Country merger during the first quarter of 2023.

Reconciliation of Non-GAAP Financial Measures –
Adjusted Earnings Per Share

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(1) The Company has granted certain restricted stock units that contain non-forfeitable rights to dividend equivalents. Such restricted stock units are considered participating securities. As such, we have included these restricted stock units in the calculation of basic earnings per share and calculate basic earnings per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings.

Reconciliation of Non-GAAP Financial Measures –
Net Interest Income and Net Interest Margin (Tax-equivalent Basis)

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* Annualized measure.

(1) On a tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%.

Reconciliation of Non-GAAP Financial Measures –
Efficiency Ratio (Tax-equivalent Basis)

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(1) On a tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%.

Reconciliation of Non-GAAP Financial Measures –
Tangible Common Equity to Tangible Assets and Tangible Book Value Per Share

Reconciliation of Non-GAAP Financial Measures –
Return on Average Tangible Common Equity,
Adjusted Return on Average Stockholders' Equity and Adjusted Return on Tangible Common Equity