10-K: HBT Financial Reports FY2024 Results: Strategic Growth and Community Focus Highlighted in Annual Filing

HBT Financial's 2024 10-K filing reveals a year of strategic growth, community commitment, and adaptation to evolving economic conditions.

Summary

• HBT Financial, Inc., a bank holding company headquartered in Bloomington, Illinois, filed its Form 10-K for the fiscal year ended December 31, 2024.
• The company reported total assets of $5.0 billion, loans held for investment of $3.5 billion, and total deposits of $4.3 billion as of December 31, 2024.
• Net income for 2024 was $71.8 million, a 9.0% increase compared to $65.8 million in 2023.
• The company's acquisition of Town and Country Financial Corporation on February 1, 2023, further enhanced its footprint in central Illinois and expanded into metro-east St.
• Louis, adding $937.2 million in assets, $635.4 million in loans, and $720.4 million in deposits.
• HBT Financial's business strategy focuses on preserving strong community ties, deploying excess deposit funding into loan growth opportunities, maintaining a prudent approach to credit underwriting, and pursuing strategic acquisitions.
• The company emphasizes its commitment to attracting, developing, and retaining a diverse group of highly qualified employees, with an average employee tenure of 7.2 years as of December 31, 2024.
• HBT Financial faces competition from community banks, money center banks, non-bank financial services companies, and fintech companies.
• The company is subject to extensive regulation under federal and state laws, including those from the IDFPR, the Federal Reserve, the FDIC, and the CFPB.
• HBT Financial's ability to pay dividends is subject to regulatory capital requirements and the policies of the Federal Reserve.
• The company's risk factors include credit risks, interest rate risks, liquidity risks, technology and cybersecurity risks, and legal and regulatory compliance risks.
• The filing includes a discussion of the company's risk management framework, which is designed to mitigate risks and losses.
• The company's principal stockholder, Heartland Bancorp, Inc.
• Voting Trust U/A/D 5/4/2016, has significant influence over the company.
• The company is classified as a 'controlled company' for purposes of the Nasdaq Listing Rules and, as a result, qualifies for certain exemptions from certain corporate governance requirements.

Sentiment

Score: 7

Explanation: The document presents a balanced view with positive growth in net income but also highlights challenges such as decreasing net interest margin and deposit levels. The strategic focus and community ties are positive indicators.

Positives

• HBT Financial reported a strong net income of $71.8 million for 2024, reflecting solid financial performance.
• The successful acquisition of Town and Country Financial Corporation has expanded HBT Financial's market presence and increased its asset base.
• The company maintains a strong capital position, exceeding regulatory requirements and providing a buffer for potential losses.
• HBT Financial's strategic focus on community banking and relationship-based service contributes to its growth and success.
• The company's commitment to attracting and retaining qualified employees supports its long-term growth and stability.
• The company's board of directors approved a new stock repurchase program authorizing the repurchase of up to $15.0 million of its common stock.
• The company's board of directors increased the quarterly cash dividend by $0.02 per share to $0.21 per share on January 21, 2025.

Negatives

• The company's net interest margin decreased to 3.96% for 2024, primarily due to increases in funding costs outpacing increases in interest-earning asset yields.
• The company realized net losses of $3.7 million on the sale of debt securities during 2024.
• The company's total deposits decreased by $83.2 million in 2024, primarily due to a decrease in brokered deposits.
• The company's nonperforming loans increased slightly to $7.7 million as of December 31, 2024.
• The company's loans rated pass-watch or worse increased $39.2 million, or 24.1%, from December 31, 2023 to December 31, 2024, primarily attributable to downgrades within the agricultural and farmland, commercial and industrial, and construction and land development segments.

Risks

• Credit risks associated with borrowers' ability to repay loans, particularly in the small to mid-sized business sector.
• Interest rate risks that could reduce net interest income and negatively impact financial condition.
• Liquidity risks that could affect operations and jeopardize the business.
• Technology and cybersecurity risks that could lead to fraudulent activity, breaches, or failures of information security controls.
• Legal and regulatory compliance risks due to the highly regulated nature of the banking industry.
• Risks associated with pursuing growth via acquisitions, including financial, execution, and operational risks.
• The significant influence of the principal stockholder, Heartland Bancorp, Inc.
• Voting Trust U/A/D 5/4/2016, over the company.
• Adverse changes in local economic conditions and adverse conditions in an industry on which a local market in which we do business depends could hurt our business in a material way.
• Climate change could have a material negative impact on the Company and our customers.

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.

Industry Context

The financial services industry is highly competitive, with increasing competition from community banks, money center banks, non-bank financial services companies, and fintech companies. The company seeks to meet this competition by emphasizing relationship-based service, efficient decision-making tailored to individual needs, and offering robust digital functionality.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• However, the document does mention that the company competes with community banks, money center banks, non-bank financial services companies, and fintech companies.
• A more detailed analysis would require comparing HBT Financial's financial metrics, such as net interest margin, efficiency ratio, and return on equity, to those of its peers.

Legal Proceedings

• The Bank was a defendant in the purported Class Action lawsuit that was filed on February 12, 2020, in the U.S. District Court for the Northern District of Illinois.
• The plaintiff in the DeBaere, et al case, a customer of the Bank, alleges that the Bank breached its contract with the plaintiff by (1) charging multiple insufficient funds fees or overdraft fees on a single customer-initiated transaction, and (2) charging overdraft fees for transactions that were authorized on a positive account balance, but when settled, settled into a negative balance.
• The plaintiff in the Miller, et al case, a customer of State Bank of Lincoln, which previously merged with the Bank, alleges that the Bank breached its contract with the plaintiff by charging multiple insufficient funds fees or overdraft fees on a single customer-initiated transaction.
• The Bank is a defendant in a purported class action lawsuit filed in October 2023, in the Circuit Court of Sangamon County, Illinois.
• This lawsuit arises out of a suit filed in the Circuit Court of Woodford County, Illinois, (the 'Trial Court') by the Bank for breach of a note and commercial security agreement.

Related Party Transactions

• As of December 31, 2024 and 2023, loans to directors, executive officers, principal shareholders and their affiliated entities (related parties) totaled $0.5 million and $1.1 million, respectively.
• As of December 31, 2024 and 2023, deposits of related parties totaled $4.8 million and $4.0 million, respectively.

Stakeholder Impact

• Shareholders: The company's financial performance and dividend policy directly impact shareholder returns.
• Employees: The company's commitment to attracting and retaining qualified employees affects their career opportunities and compensation.
• Customers: The company's focus on community banking and relationship-based service impacts customer satisfaction and access to financial products and services.
• Communities: The company's community reinvestment act requirements and lending practices affect the economic development of the communities it serves.

Next Steps

• The company intends to prudently deploy excess funding and liquidity into assets that optimize risk-adjusted returns with minimal losses.
• The company continues 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.

Key Dates