10-K: HBT Financial Inc. Reports Full Year 2023 Results, Completes Town and Country Acquisition

HBT Financial Inc. reports a significant increase in net income for 2023, driven by strategic acquisitions and higher interest rates, while also navigating increased funding costs.

Summary

• HBT Financial Inc. reported a net income of $65.8 million for the year ended December 31, 2023, a 16.6% increase compared to the previous year.
• The company's net interest income rose by $45.2 million, primarily due to the acquisition of Town and Country Financial Corporation and higher yields on interest-earning assets.
• Total assets reached $5.1 billion, with loans held for investment at $3.4 billion and total deposits at $4.4 billion as of December 31, 2023.
• The acquisition of Town and Country added $937.2 million in total assets, $635.4 million in loans, and $720.4 million in deposits.
• The company realized a net loss of $1.8 million on the sale of $185.3 million in securities to reduce FHLB borrowings and fund loan growth.
• Noninterest expense increased by $19.2 million, excluding acquisition-related expenses, mainly due to the addition of Town and Country's operations.
• The company's net interest margin increased to 4.09% for 2023, up from 3.54% in 2022, driven by higher yields on interest-earning assets.
• The company repurchased 479,005 shares of its common stock at a weighted average price of $18.43 during 2023.
• The company's board of directors approved a new stock repurchase program authorizing the repurchase of up to $15 million of its common stock.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, successful acquisitions, and strategic growth plans. However, it also acknowledges risks and challenges, which tempers the overall sentiment.

Positives

• The company experienced significant growth in net income and net interest income.
• The acquisition of Town and Country expanded the company's footprint and increased its assets and deposits.
• The company's net interest margin improved due to higher yields on interest-earning assets.
• The company has a strong track record of successful organic and acquisitive growth.
• The company maintains a well-diversified portfolio of loans and controls concentrations related to loan types and specific industries or businesses.

Negatives

• The company incurred $1.8 million in losses from the sale of securities.
• Noninterest expenses increased due to the Town and Country acquisition.
• The company experienced increased funding costs due to higher market interest rates.
• The company's mortgage servicing rights fair value adjustment decreased by $3.8 million.

Risks

• The company is exposed to credit risk, interest rate risk, and liquidity risk.
• The company's business is highly dependent on secure and uninterrupted information technology systems.
• The company is subject to extensive regulation, and changes in regulations may adversely impact the company.
• The company's strategy of pursuing growth via acquisitions exposes it to heightened operational risks.
• Adverse changes in economic conditions, particularly in Illinois and Iowa, may negatively impact the company's borrowers and business.
• The company faces strong competition from other financial institutions and fintech companies.
• The company may be adversely affected by changes in the actual or perceived soundness or condition of other financial institutions.

Future Outlook

The company intends to pursue strategies that will continue to drive growth while maintaining high levels of asset quality and profitability, including preserving strong ties to communities, deploying excess deposit funding into loan growth opportunities, maintaining a prudent approach to credit underwriting, and pursuing strategic acquisitions.

Management Comments

• Our community banking approach stems from our Midwestern valueshard work and perseverance.
• We attentively serve our customers and provide development opportunities and rewards to our staff.
• Our senior management team lives and works in the communities we serve, allowing us to deliver banking solutions tailored to our target customers' needs.
• We believe the Chicago MSA provides significant opportunities for loan growth.
• We intend to prudently deploy our excess funding and liquidity into assets that optimize risk-adjusted returns with minimal losses.

Industry Context

The company operates in a highly competitive financial services industry, facing competition from community banks, money center banks, non-bank financial services companies, and fintech companies. The company is also navigating the trend of declining in-person branch traffic and the increasing importance of digital banking.

Comparison to Industry Standards

• HBT Financial's net interest margin of 4.09% is above the average for many community banks, reflecting its ability to generate income from its assets.
• The company's efficiency ratio of 56.49% is comparable to other well-managed community banks, indicating effective cost control.
• The company's loan growth of 29.9% is higher than the industry average, reflecting its successful acquisition strategy and organic growth.
• The company's return on average assets of 1.34% and return on average equity of 14.60% are in line with industry benchmarks for well-performing community banks.
• Compared to larger regional banks, HBT Financial maintains a strong focus on community banking and relationship-based service, which differentiates it from larger, more bureaucratic institutions.

Legal Proceedings

• The company was a defendant in a purported Class Action lawsuit and a Receivers Action lawsuit, which were settled for a total of $13.0 million.
• The company was a defendant in a purported class action lawsuit, DeBaere, et al v. Heartland Bank and Trust Company, and Miller, et al v. State Bank of Lincoln and Heartland Bank and Trust Company, which were settled for a total of $3.4 million.
• The company is a defendant in a purported class action lawsuit, John Pickett v. Town and Country Bank, and has recorded an accrual of $0.2 million related to this matter.

Related Party Transactions

• Loans to related parties totaled $1.1 million as of December 31, 2023.
• Deposits of related parties totaled $4.0 million as of December 31, 2023.

Stakeholder Impact

• Shareholders benefit from increased net income and a new stock repurchase program.
• Customers benefit from the company's expanded footprint and comprehensive suite of financial products and services.
• Employees benefit from development opportunities and rewards.
• Communities benefit from the company's commitment to providing relationship-based, personal banking services.

Next Steps

• The company plans to continue investing in its digital banking platforms.
• The company will continue to opportunistically seek acquisitions that are either located within its market footprint, in adjacent markets or provide a new growth opportunity that is strategically and financially compelling and consistent with its culture.
• The company will continue to monitor and manage its interest rate exposure.

Key Dates

Keywords

acquisitions, net interest income, loan growth, deposit growth, financial results, interest rates, credit risk, regulatory compliance, mortgage servicing, stock repurchase