8-K: HBT Financial Reports Solid First Quarter 2024 Results, Driven by Strong Profitability and Asset Quality

HBT Financial announced a net income of $15.3 million for the first quarter of 2024, demonstrating continued strength in its financial performance.

Summary

• HBT Financial reported a net income of $15.3 million, or $0.48 per diluted share, for the first quarter of 2024.
• This compares to a net income of $18.4 million, or $0.58 per diluted share, for the fourth quarter of 2023, and $9.2 million, or $0.30 per diluted share, for the first quarter of 2023.
• Adjusted net income for the quarter was $18.1 million, or $0.57 per diluted share.
• The company's return on average assets (ROAA) was 1.23%, and return on average tangible common equity (ROATCE) was 14.83%.
• Adjusted ROAA was 1.45%, and adjusted ROATCE was 17.57%.
• Net interest margin remained stable at 3.94%, or 3.99% on a tax-equivalent basis.
• Total loans decreased slightly to $3.35 billion, while total deposits were $4.36 billion.
• Nonperforming assets to total assets remained low at 0.20%.
• The company repurchased 179,281 shares of its common stock at a weighted average price of $18.93 during the quarter.

Sentiment

Score: 6

Explanation: The document presents a mixed picture. While the company highlights strong profitability metrics and asset quality, there are also concerning trends such as decreased net income and increased expenses. The overall sentiment is cautiously optimistic, but with some underlying concerns.

Positives

• The company's profitability remained strong with an adjusted ROAA of 1.45% and an adjusted ROATCE of 17.57%.
• Net interest margin was stable at 3.99% on a tax-equivalent basis, indicating effective management of interest rate changes.
• Asset quality remained strong, with nonperforming assets to total assets at 0.20%, close to a historic low.
• Tangible book value per share increased by $0.29, demonstrating growth in shareholder value.
• The company's capital ratios increased during the quarter.
• The company has a strong, granular, and low-cost deposit franchise with a 1.26% cost of deposits and 94.8% core deposits.

Negatives

• Net income decreased compared to both the previous quarter and the same quarter last year.
• Noninterest income decreased by 38.9% compared to the previous quarter, primarily due to realized losses on the sale of securities.
• Noninterest expense increased by 2.9% compared to the previous quarter, driven by higher salaries and employee benefit costs.
• Total loans decreased by $58.5 million from the previous quarter.
• Total deposits decreased by $40.9 million from the previous quarter, primarily due to a decrease in brokered deposits.

Risks

• The company faces risks related to changes in interest rates and prepayment rates of its assets.
• Increased competition in the financial services sector could impact the company's ability to attract new customers.
• The company is exposed to risks related to technology changes and the ability to maintain secure electronic systems.
• Unexpected results of acquisitions could negatively impact the company's performance.
• The company is subject to risks related to economic conditions, including inflation and supply chain constraints.
• The company is exposed to risks related to cybersecurity incidents and breaches of information security controls.
• The company has concentrations within its loan portfolio, large loans to certain borrowers, and large deposits from certain clients.

Future Outlook

The company expects total loans to increase in the second quarter of 2024, with low single-digit growth for the full year. Deposit balances are expected to remain stable, and the company intends to pay down $25.8 million of maturing brokered deposits. The net interest margin is expected to remain at current levels or decline modestly. Noninterest income is expected to grow in low single digits, and noninterest expense should remain between $31 million and $32 million per quarter. 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, 'This has been an excellent start to 2024 as we continue to show the strength of our franchise.'
• He also noted, 'Our profitability remained very strong with an adjusted ROAA of 1.45% and an adjusted ROATCE of 17.57%.'
• Carter stated, 'Our net interest margin (tax-equivalent basis) was stable at 3.99%, as the increase in funding costs has slowed.'

Industry Context

HBT Financial's results reflect a challenging environment for banks, with rising funding costs impacting net interest income. The company's focus on maintaining strong asset quality and a stable net interest margin is consistent with industry trends. The company's comments on potential M&A activity also reflect the ongoing consolidation in the banking sector.

Comparison to Industry Standards

• HBT Financial's adjusted ROAA of 1.45% is above the peer median of 1.31% in 2022 and 1.59% in 2023, indicating strong profitability compared to its peers.
• The company's net interest margin (FTE) of 3.99% is slightly below the peer median of 4.15% in 2023, suggesting room for improvement in managing interest rate spreads.
• HBT Financial's cost of deposits at 1.26% is significantly lower than the peer median of 1.79% in 2023, highlighting a strong funding advantage.
• The company's nonperforming assets to total assets ratio of 0.20% is lower than the peer median of 0.30% in 2023, indicating better asset quality.
• HBT Financial's CET1 capital ratio of 12.44% is above the peer median of 11.94% in 2023, demonstrating a strong capital position.
• The company's cumulative total return since its IPO has significantly outperformed both its peer median and the S&P 600 Small Cap Bank Index, indicating strong shareholder value creation.
• HBT Financial has been recognized by Forbes, S&P Global Market Intelligence, and Bank Director for its strong performance, further validating its position as a high-performing bank.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net income but encouraged by the increase in tangible book value per share and the stock repurchase program.
• Employees may be impacted by the increase in salaries and benefits expenses.
• Customers may benefit from the company's strong financial position and continued investment in its products and services.
• Creditors may view the company's strong capital ratios and asset quality favorably.

Next Steps

• The company expects total loans to increase in 2Q24 back to near December 31, 2023 levels.
• The company intends to pay down $25.8 million of maturing brokered deposits in 2Q24.
• The company will continue to use its stock repurchase program opportunistically.
• The company will continue to evaluate M&A opportunities.

Key Dates

Keywords

financial results, net income, earnings per share, return on assets, return on equity, net interest margin, asset quality, loan portfolio, deposit base, capital ratios, stock repurchase, banking, community bank