8-K: HBT Financial Inc. Reports Strong Fourth Quarter and Increased Dividend

HBT Financial Inc. announced solid fourth-quarter results for 2023, highlighted by strong profitability and an increased quarterly cash dividend.

Summary

• HBT Financial Inc. reported a net income of $18.4 million, or $0.58 per diluted share, for the fourth quarter of 2023.
• Adjusted net income for the quarter was $19.3 million, or $0.60 per diluted share.
• The company's return on average assets (ROAA) was 1.46%, and return on average tangible common equity (ROATCE) was 18.96%.
• Adjusted ROAA was 1.53%, and adjusted ROATCE was 19.81%.
• Nonperforming assets remained low at 0.17% of total assets.
• Net interest margin was 3.93%, or 3.99% on a tax-equivalent basis.
• Deposits, excluding brokered deposits, increased by 4.2% for the quarter.
• Total deposits increased by $203.4 million, primarily due to bringing wealth management customer deposits onto the balance sheet.
• Loan growth was solid at 1.8% for the quarter.
• The company's board declared a quarterly cash dividend of $0.19 per share, an increase of $0.02 from the previous quarter.
• Tangible book value per share increased by $1.10 to $12.90 due to a rise in accumulated other comprehensive income and strong earnings retention.
• In January 2024, the company recognized $3.4 million of net losses on the sale of $66.8 million of municipal securities.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook with strong profitability metrics and an increased dividend, but there are some concerns about decreasing net interest margin and noninterest income. The company's strong capital position and strategic approach to growth are encouraging, but the potential risks and challenges need to be monitored.

Positives

• The company demonstrated strong profitability with a high adjusted ROAA of 1.53% and adjusted ROATCE of 19.81%.
• HBT Financial maintained a solid balance sheet with strong credit quality, as evidenced by low non-performing assets.
• The company successfully increased deposits by bringing wealth management customer deposits onto the balance sheet.
• The increase in the quarterly dividend by $0.02 per share reflects the company's strong financial performance.
• The tangible book value per share increased significantly due to a drop in interest rates and strong earnings retention.
• The company has a diversified deposit base with a low cost of deposits.

Negatives

• Net interest margin decreased to 3.93% from 4.07% in the previous quarter due to higher funding costs.
• Net interest income decreased by 2.5% from the previous quarter.
• Noninterest income decreased by 3.0% from the previous quarter, primarily due to a negative mortgage servicing rights fair value adjustment.
• The company recognized a $3.4 million net loss on the sale of municipal securities in January 2024.
• The cost of funds increased to 1.26% for the fourth quarter of 2023, compared to 0.96% for the third quarter of 2023.

Risks

• The company faces risks related to changes in interest rates and prepayment rates of its assets.
• Increased competition in the financial services sector, including from non-bank competitors, could impact the company.
• The company is exposed to risks related to technology changes and the ability to maintain secure electronic systems.
• Unexpected results of acquisitions and the loss of key executives or employees could negatively affect the company.
• Concentrations within the loan portfolio and large deposits from certain clients pose a risk.
• Breaches or failures of information security controls or cybersecurity-related incidents are a potential risk.
• The company's net interest margin is expected to continue to decline modestly during the first quarter of 2024.

Future Outlook

The company expects loan growth to be flat to down slightly in the first quarter of 2024, with low to mid-single-digit growth year-over-year during 2024. Deposit outflows have largely subsided, but movement into higher-cost products is expected to continue. The net interest margin is expected to decline modestly in the first quarter of 2024 and flatten in the second and third quarters. Noninterest income is expected to grow in low single digits from the fourth quarter of 2023. Noninterest expense should remain between $31 million and $32 million per quarter for 2024. The company will continue to use its stock repurchase program opportunistically and is open to M&A opportunities.

Management Comments

• J. Lance Carter, President and Chief Executive Officer of HBT Financial, said, 'We had a very good fourth quarter to complete an excellent year.'
• 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.'

Industry Context

This announcement reflects a trend in the banking industry where institutions are focusing on maintaining strong profitability and balance sheets amidst fluctuating interest rates. The emphasis on deposit growth and asset quality is consistent with the current economic environment, where banks are navigating increased funding costs and potential credit risks. The company's focus on organic growth and potential acquisitions aligns with the broader industry trend of consolidation and strategic expansion.

Comparison to Industry Standards

• HBT Financial's ROAA of 1.46% and adjusted ROAA of 1.53% are strong compared to the industry average, indicating efficient use of assets to generate profit.
• The company's ROATCE of 18.96% and adjusted ROATCE of 19.81% are also high, suggesting strong returns for shareholders compared to peers.
• The net interest margin of 3.93% is competitive, although it has decreased from the previous quarter, which is a common trend in the current interest rate environment.
• HBT Financial's nonperforming assets to total assets ratio of 0.17% is very low, indicating strong credit quality compared to many regional banks.
• The company's cost of deposits at 1.05% is relatively low, which is a competitive advantage compared to peers with higher funding costs.
• Compared to high-performing Midwest banks with $2-10 billion in assets, HBT Financial's cost of deposits remains consistently below the median, indicating a strong deposit base.
• The company's deposit beta of 18.7% is lower than the peer median of 31.9%, suggesting a more stable deposit base during interest rate hikes.

Stakeholder Impact

• Shareholders will benefit from the increased dividend and potential for future growth.
• Employees may experience stability and growth opportunities due to the company's strong performance.
• Customers will continue to receive a comprehensive suite of banking products and services.
• Suppliers and creditors will likely see continued stability in their relationships with the company.

Next Steps

• The company will continue to monitor and manage its net interest margin.
• HBT Financial will continue to use its stock repurchase program opportunistically.
• The company will explore potential M&A opportunities.
• The company will focus on maintaining strong asset quality and managing credit risk.
• HBT Financial will continue to deploy excess deposit funding into attractive loan opportunities.

Key Dates

Keywords

financial results, net income, earnings per share, net interest margin, loan growth, deposit growth, asset quality, cash dividend, tangible book value, nonperforming assets, ROAA, ROATCE, capital metrics, stock repurchase, wealth management