HTLF - HBT Financial Inc. Announces Third Quarter 2023 Financial Results

Third Quarter Highlights

• Net income of $19.7 million , or $0.62 per diluted share; return on average assets (ROAA) of 1.58% ; return on average stockholders' equity (ROAE) of 17.02% ; and return on average tangible common equity (ROATCE) ⁽¹⁾ of 20.70%
• Adjusted net income ⁽¹⁾ of $20.3 million ; or $0.63 per diluted share; adjusted ROAA ⁽¹⁾ of 1.62% ; adjusted ROAE ⁽¹⁾ of 17.51% ; and adjusted ROATCE ⁽¹⁾ of 21.29%
• Asset quality remained strong with nonperforming assets to total assets of 0.16%
• Net interest margin of 4.07% and net interest margin (tax-equivalent basis) ⁽¹⁾ of 4.13%

BLOOMINGTON, Ill., Oct. 23, 2023 (GLOBE NEWSWIRE) -- HBT Financial, Inc. (NASDAQ: HBT) (the “Company” or “HBT Financial” or “HBT”), the holding company for Heartland Bank and Trust Company, today reported net income of $19.7 million, or $0.62 diluted earnings per share, for the third quarter of 2023. This compares to net income of $18.5 million, or $0.58 diluted earnings per share, for the second quarter of 2023, and net income of $15.6 million, or $0.54 diluted earnings per share, for the third quarter of 2022.

J. Lance Carter, President and Chief Executive Officer of HBT Financial, said, “This was another strong quarter of profitability with a ROAA of 1.58%, a ROATCE of 20.70%, and our highest quarterly diluted earnings per share since our IPO in October of 2019. Our balance sheet strength continues to show with our core deposit franchise allowing us to maintain a low cost of funds of 0.96% and credit quality remaining solid with nonperforming assets at only 0.16% of total assets. Our net interest margin remained very solid at 4.13% on a tax-equivalent basis ^{( 1 )} as loan growth and asset mix improvement continue to partially offset funding cost increases. We have continued to maintain our consistently conservative underwriting standards while also increasing loans by 3% during the quarter. In addition, our loan portfolio remains very well diversified with limited exposure to higher risk segments, such as office commercial real estate. Despite a decrease in accumulated other comprehensive income (loss) due to rising interest rates during the quarter, we were able to increase all capital measures and maintain a strong capital base providing us with flexibility for future capital deployment. We believe our consistent financial performance will enable us to continue enhancing the value of our franchise.”
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(1)    See "Reconciliation of Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measures to their most closely
comparable GAAP financial measures.

Adjusted Net Income

In addition to reporting GAAP results, the Company believes non-GAAP measures such as adjusted net income and adjusted earnings per share, which adjust for acquisition expenses, branch closure expenses, gains (losses) on sale of closed branch premises, net earnings (losses) from closed or sold operations, charges related to termination of certain employee benefit plans, realized gains (losses) on sales of securities, and mortgage servicing rights fair value adjustments, provide investors with additional insight into its operational performance. The Company reported adjusted net income of $20.3 million, or $0.63 adjusted diluted earnings per share, for the third quarter of 2023. This compares to adjusted net income of $18.8 million, or $0.58 adjusted diluted earnings per share, for the second quarter of 2023, and adjusted net income of $15.9 million, or $0.55 adjusted diluted earnings per share, for the third quarter of 2022 (see "Reconciliation of Non-GAAP Financial Measures" tables below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures).

Net Interest Income and Net Interest Margin

Net interest income for the third quarter of 2023 was $48.3 million, a slight decrease from $48.9 million for the second quarter of 2023. The decrease was primarily attributable to an increase in funding costs which were largely offset by higher yields on loans and a more favorable interest-earning asset mix.

Relative to the third quarter of 2022, net interest income increased 29.1% from $37.4 million. The increase was primarily attributable to the increase in average interest-earning assets following the Town and Country Financial Corporation (“Town and Country”) merger completed in the first quarter of 2023 and higher yields on interest-earning assets.

Net interest margin for the third quarter of 2023 was 4.07%, compared to 4.16% for the second quarter of 2023, and net interest margin (tax-equivalent basis) ⁽¹⁾ for the third quarter of 2023 was 4.13% compared to 4.22% for the second quarter of 2023. The decrease was primarily attributable to higher funding costs with the cost of funds increasing to 0.96% for the third quarter of 2023, compared to 0.71% for the second quarter of 2023, partially offset by higher yields on loans and a more favorable interest-earning asset mix.

Relative to the third quarter of 2022, net interest margin increased from 3.65%. This increase was primarily attributable to higher yields on interest-earning assets.
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(1)   See "Reconciliation of Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measures to their most closely
comparable GAAP financial measures.

Noninterest Income

Noninterest income for the third quarter of 2023 was $9.5 million, a decrease of 4.3% from $9.9 million for the second quarter of 2023. The decrease was primarily attributable to $0.8 million of losses realized on the sale of debt securities during the third quarter of 2023 which were not present in the second quarter of 2023 results. Partially offsetting these losses was a $0.6 million gain on sale of foreclosed assets compared to a $0.1 million loss included in the second quarter of 2023 results.

Relative to the third quarter of 2022, noninterest income increased 15.3% from $8.2 million. The increase was primarily attributable to the Town and Country merger completed in the first quarter of 2023 which contributed to a $0.5 million increase in mortgage servicing income, a $0.3 million increase in wealth management fees, and a $0.2 million increase in card income.

Noninterest Expense

Noninterest expense for the third quarter of 2023 was $30.7 million, a 9.7% decrease from $34.0 million for the second quarter of 2023. The decrease was primarily attributable to the realization of planned cost reductions following the Town and Country core system conversion completed in April 2023. Additionally, the absence of $0.8 million of legal fees and $0.8 million of accruals related to pending legal matters previously disclosed during the second quarter of 2023 further contributed to the decrease in noninterest expense during the third quarter of 2023.

Relative to the third quarter of 2022, noninterest expense increased 27.8% from $24.0 million, primarily attributable to the addition of Town and Country’s operations.

Acquisition-related expenses recognized are summarized below. No acquisition-related expenses were recognized subsequent to the second quarter of 2023, and we do not expect material acquisition-related expenses related to Town and Country in subsequent quarters.

Loan Portfolio

Total loans outstanding, before allowance for credit losses, were $3.34 billion at September 30, 2023, compared with $3.24 billion at June 30, 2023 and $2.58 billion at September 30, 2022. The $98.1 million increase from June 30, 2023 was primarily attributable to draws on existing construction projects and new fundings to primarily existing customers, in part driven by seasonally higher agricultural line of credit usage. Balance increases in the commercial real estate - non-owner occupied and multi-family categories were driven predominately by the completion of projects previously in the construction and land development category.

Deposits

Total deposits were $4.20 billion at September 30, 2023, compared with $4.16 billion at June 30, 2023 and $3.64 billion at September 30, 2022. The $33.5 million increase from June 30, 2023 was primarily attributable to a $64.0 million increase in brokered deposits, partially offset by decreases in balances held in mainly smaller balance accounts.

Asset Quality

Nonperforming loans totaled $6.7 million, or 0.20% of total loans, at September 30, 2023, compared with $7.5 million, or 0.23% of total loans, at June 30, 2023, and $3.2 million, or 0.12% of total loans, at September 30, 2022. Additionally, of the $6.7 million of nonperforming loans held as of September 30, 2023, $2.0 million is either wholly or partially guaranteed by the U.S. Government. The $0.9 million decrease in nonperforming loans from June 30, 2023 was primarily attributable to reductions as the result of foreclosures and charge-offs on several smaller credits.

The Company recorded a provision for credit losses of $0.5 million for the third quarter of 2023. The provision for credit losses primarily reflects a $0.9 million increase in required reserves driven by growth of the loan portfolio, a $0.8 million increase in required reserves resulting from changes in economic and qualitative factors, a $0.8 million decrease in reserves on debt securities available-for-sale, a $0.5 million decrease in specific reserve, and net recoveries of $0.1 million.

The Company had net recoveries of $0.1 million, or 0.01% of average loans on an annualized basis, for the third quarter of 2023, compared to net recoveries of $0.1 million, or 0.01% of average loans on an annualized basis, for the second quarter of 2023, and net charge-offs of $0.1 million, or 0.01% of average loans on an annualized basis, for the third quarter of 2022.

The Company’s allowance for credit losses was 1.16% of total loans and 582% of nonperforming loans at September 30, 2023, compared with 1.17% of total loans and 502% of nonperforming loans at June 30, 2023. In addition, the allowance for credit losses on unfunded lending-related commitments totaled $4.4 million as of September 30, 2023.

Stock Repurchase Program

During the third quarter of 2023, the Company repurchased 91,728 shares of its common stock at a weighted average price of $18.48 under its stock repurchase program. The Company’s Board of Directors have authorized the repurchase of up to $15 million of HBT Financial common stock under its stock repurchase program in effect until January 1, 2024. As of September 30, 2023, the Company had $7.6 million remaining under the current stock repurchase authorization.

About HBT Financial, Inc.

HBT Financial, Inc., headquartered in Bloomington, Illinois, is the holding company for Heartland Bank and Trust Company, and has banking roots that can be traced back to 1920. HBT provides a comprehensive suite of business, commercial, wealth management, and retail banking products and services to individuals, businesses and municipal entities throughout Illinois and Eastern Iowa through 67 full-service branches. As of September 30, 2023, HBT had total assets of $5.0 billion, total loans of $3.3 billion, and total deposits of $4.2 billion.

Non-GAAP Financial Measures

Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with GAAP. These non-GAAP financial measures include net interest income (tax-equivalent basis), net interest margin (tax-equivalent basis), efficiency ratio (tax-equivalent basis), tangible common equity to tangible assets, tangible book value per share, return on average tangible common equity, adjusted net income, adjusted earnings per share, adjusted return on average assets, adjusted return on average stockholders' equity, and adjusted return on average tangible common equity. Our management uses these non-GAAP financial measures, together with the related GAAP financial measures, in its analysis of our performance and in making business decisions. Management believes that it is a standard practice in the banking industry to present these non-GAAP financial measures, and accordingly believes that providing these measures may be useful for peer comparison purposes. These disclosures should not be viewed as substitutes for the results determined to be in accordance with GAAP; nor are they necessarily comparable to non-GAAP financial measures that may be presented by other companies. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures in the "Reconciliation of Non-GAAP Financial Measures" tables.

Forward-Looking Statements

Readers should note that in addition to the historical information contained herein, this press release contains, and future oral and written statements of the Company and its management may contain, "forward-looking statements" within the meanings of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe," "continue," or “should,” or similar terminology. Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to: (i) the strength of the local, state, national and international economies (including effects of inflationary pressures and supply chain constraints); (ii) the economic impact of any future terrorist threats and attacks, widespread disease or pandemics (including the COVID-19 pandemic in the United States), acts of war or other threats thereof (including the Israeli-Palestinian conflict and the Russian invasion of Ukraine), or other adverse external events that could cause economic deterioration or instability in credit markets, and the response of the local, state and national governments to any such adverse external events; (iii) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies, the FASB or the PCAOB (including the Company’s adoption of the current expected credit losses (“CECL”) methodology); (iv) changes in state and federal laws, regulations and governmental policies concerning the Company’s general business and any changes in response to the recent failures of other banks; (v) changes in interest rates and prepayment rates of the Company’s assets (including the impact of LIBOR phase-out and the recent and potential additional rate increases by the Federal Reserve); (vi) increased competition in the financial services sector, including from non-bank competitors such as credit unions and “fintech” companies, and the inability to attract new customers; (vii) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (viii) unexpected results of acquisitions, which may include failure to realize the anticipated benefits of acquisitions and the possibility that transaction costs may be greater than anticipated; (ix) the loss of key executives or employees; (x) changes in consumer spending; (xi) unexpected outcomes of existing or new litigation involving the Company; (xii) the economic impact of exceptional weather occurrences such as tornadoes, floods and blizzards; (xiii) fluctuations in the value of securities held in our securities portfolio; (xiv) concentrations within our loan portfolio, large loans to certain borrowers, and large deposits from certain clients; (xv) the concentration of large deposits from certain clients who have balances above current FDIC insurance limits and may withdraw deposits to diversify their exposure; (xvi) the level of non-performing assets on our balance sheets; (xvii) interruptions involving our information technology and communications systems or third-party servicers; (xviii) breaches or failures of our information security controls or cybersecurity-related incidents, and (xix) the ability of the Company to manage the risks associated with the foregoing as well as anticipated. Readers should note that the forward-looking statements included in this press release are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements. Additional information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in the Company’s filings with the Securities and Exchange Commission.

CONTACT:
Peter Chapman
HBTIR@hbtbank.com
(309) 664-4556