8-K: HBT Financial Reports Strong Second Quarter 2024 Results, Driven by Solid Loan Growth and Asset Quality

HBT Financial announced a net income of $18.1 million for the second quarter of 2024, supported by solid loan growth and excellent asset quality.

Summary

• HBT Financial reported a net income of $18.1 million, or $0.57 per diluted share, for the second quarter of 2024.
• This compares to a net income of $15.3 million, or $0.48 per diluted share, for the first quarter of 2024, and $18.5 million, or $0.58 per diluted share, for the second quarter of 2023.
• The company's return on average assets (ROAA) was 1.45%, and return on average tangible common equity (ROATCE) was 17.21%.
• Adjusted net income was also $18.1 million, or $0.57 per diluted share.
• The net interest margin increased slightly to 3.95%, or 4.00% on a tax-equivalent basis.
• Total loans outstanding reached $3.39 billion, up from $3.35 billion in the previous quarter.
• Total deposits were $4.32 billion, slightly down from $4.36 billion in the previous quarter.
• Nonperforming assets remained low at 0.17% of total assets.
• The company repurchased 53,522 shares of its common stock at a weighted average price of $18.74 during the quarter.
• The company has $10.6 million remaining under its stock repurchase program.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, solid loan growth, and excellent asset quality. The company's performance metrics are above industry standards, and management expresses confidence in the company's future prospects. However, there are some minor negatives such as a decrease in deposits and a tax expense write-down.

Positives

• The company achieved strong profitability metrics with a ROAA of 1.45% and a ROATCE of 17.21%.
• The tangible book value per share has grown 17.8% over the past year.
• The loan portfolio saw solid growth of $39.5 million, or 4.7% on an annualized basis.
• The company maintained a stable core deposit base.
• The net interest margin expanded slightly to 4.00% on a tax-equivalent basis.
• Costs were well controlled during the quarter, as demonstrated by an efficiency ratio of 52.1%.
• The loan portfolio is performing well with no apparent signs of concentrated stress.
• Nonperforming assets represented only 0.17% of total assets.
• The company exceeded all regulatory capital requirements under Basel III.
• The company repurchased 53,522 shares of its common stock during the quarter.

Negatives

• Net interest income decreased 3.8% compared to the second quarter of 2023.
• Total deposits decreased by $41.9 million from the previous quarter.
• The decrease in deposits was primarily attributable to a $25.8 million decrease in brokered deposits and a $16.1 million decrease in higher cost reciprocal wealth management deposits.
• The company recognized an additional $0.5 million of tax expense for a deferred tax asset write-down.
• Net charge-offs were $0.7 million for the second quarter of 2024, compared to net recoveries of $0.2 million in the first quarter of 2024.

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 performance.
• The company is exposed to risks related to changes in technology and the ability to maintain secure electronic systems.
• Unexpected results of acquisitions could negatively impact the company.
• The company is subject to risks related to the loss of key executives or employees.
• Changes in consumer spending could affect the company's performance.
• The company is exposed to risks related to unexpected outcomes of litigation.
• The company is subject to risks related to the economic impact of exceptional weather occurrences.
• Fluctuations in the value of securities held in the company's portfolio could impact its financial results.
• Concentrations within the loan portfolio and large deposits from certain clients pose a risk.
• The level of non-performing assets on the balance sheet could impact the company's performance.
• Interruptions involving information technology and communications systems or third-party servicers could pose a risk.
• Breaches or failures of information security controls or cybersecurity-related incidents could negatively impact the company.

Future Outlook

The company expects loan balances to be flat to slightly down in 3Q24 due to elevated payoffs, deposit balances to remain stable, net interest margin to remain at or near current levels, noninterest income to grow in low single digits, noninterest expense to be between $30 million and $32 million per quarter, and asset quality to remain solid. The stock repurchase program will continue to be used opportunistically, and the company is open to M&A opportunities.

Management Comments

• J. Lance Carter, President and Chief Executive Officer of HBT Financial, expressed condolences to the George Drake family.
• J. Lance Carter stated that the company delivered another set of very strong performance metrics with net income of $18.1 million, a ROAA of 1.45% and ROATCE of 17.21%.
• J. Lance Carter noted that the tangible book value per share has grown 17.8% over the past year.
• J. Lance Carter mentioned solid loan growth of $39.5 million, or 4.7% on an annualized basis, and stability in the core deposit base.
• J. Lance Carter highlighted the continued repricing of the loan portfolio and tight management of deposit costs positively impacting the net interest margin.

Industry Context

The results reflect a stable performance in a challenging economic environment for banks, with a focus on maintaining asset quality and managing interest rate risks. The company's focus on community banking and relationship-based approach is a common strategy for regional banks.

Comparison to Industry Standards

• HBT Financial's ROAA of 1.45% is above the peer median of 1.11% for the first quarter of 2024, indicating strong profitability compared to its peers.
• The company's CET1 capital ratio of 12.66% is also above the peer median of 11.04% for the first quarter of 2024, demonstrating a robust capital position.
• HBT Financial's cost of funds at 1.39% is lower than the peer median of 2.31% for the first quarter of 2024, highlighting a funding advantage.
• The company's nonperforming assets to total assets ratio of 0.17% is lower than the peer median of 0.33% for the first quarter of 2024, indicating strong asset quality.
• HBT Financial has consistently outperformed its peers in terms of pre-tax return on average assets, as shown in the provided chart.
• 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.
• HBT Financial's deposit beta of 22.7% is lower than the peer median of 35.2%, indicating a more stable deposit base during interest rate tightening cycles.
• The company's cost of deposits remains consistently below its peers, contributing to its funding advantage.

Stakeholder Impact

• Shareholders will benefit from the strong financial performance and the stock repurchase program.
• Employees will benefit from the company's continued success and stability.
• Customers will benefit from the company's strong financial position and ability to provide financial services.
• Suppliers and creditors will benefit from the company's financial stability and ability to meet its obligations.

Next Steps

• The company will continue to use its stock repurchase program opportunistically.
• The company will continue to monitor its loan portfolio and asset quality.
• The company will continue to evaluate potential M&A opportunities.
• The company plans to reinvest approximately half of the $29 million of forecast principal cash flows from its investment portfolio.

Key Dates

Keywords

financial results, net income, loan growth, asset quality, net interest margin, deposits, ROAA, ROATCE, nonperforming assets, stock repurchase, banking, financial services