HBT Financial, Inc. Q3 2024 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2024. HBT Financial, Inc. is the holding company for Heartland Bank and Trust Company, operating primarily in Illinois and eastern Iowa. The Company is classified as an emerging growth company and an accelerated filer. As of the reporting date, the Company operated 66 full-service branch locations.
Key Financial Metrics
| Metric | Q3 2024 (Three Months) | Q3 2023 (Three Months) | YTD 2024 (Nine Months) | YTD 2023 (Nine Months) |
|---|---|---|---|---|
| Net Income | $18.2 million | $19.7 million | $51.5 million | $47.4 million |
| Diluted EPS | $0.57 | $0.62 | $1.62 | $1.49 |
| Net Interest Income | $47.7 million | $48.3 million | $141.4 million | $144.0 million |
| Net Interest Margin (TE) | 4.03% | 4.13% | 4.01% | 4.20% |
| Provision for Credit Losses | $0.6 million | $0.5 million | $2.3 million | $6.5 million |
| Total Assets | $4.99 billion | $5.07 billion (Dec 2023) | — | — |
| Total Deposits | $4.28 billion | $4.40 billion (Dec 2023) | — | — |
| Stockholders' Equity | $537.7 million | $489.5 million (Dec 2023) | — | — |
| Return on Average Assets | 1.44% | 1.58% | 1.37% | 1.29% |
| Efficiency Ratio | 54.24% | 51.85% | 55.00% | 57.73% |
Material Changes vs. Prior Period
- Net Income: Q3 2024 net income decreased 7.8% year-over-year, primarily due to a $1.5 million negative fair value adjustment on mortgage servicing rights (MSR) and higher funding costs. However, YTD 2024 net income increased 8.7% compared to YTD 2023, driven by the absence of $13.7 million in acquisition-related expenses incurred in 2023.
- Net Interest Margin: The margin compressed to 3.98% in Q3 2024 from 4.07% in Q3 2023. This was caused by rising deposit costs outpacing increases in asset yields. The Federal Reserve's 50 basis point rate cut in September 2024 may exert further downward pressure on margins.
- Balance Sheet: Total loans decreased $34.6 million from year-end 2023, driven by lower line of credit utilization and early payoffs. Total deposits declined $120.7 million, largely due to a $114.9 million reduction in brokered deposits, partially offset by an increase in time deposits.
- Asset Quality: Nonperforming assets remained stable at $8.6 million. The allowance for credit losses increased slightly to $41.0 million. Net charge-offs for the quarter were $0.6 million.
Guidance, Outlook, and Risks
- Interest Rate Environment: Management notes that the recent Federal Reserve rate cut may decrease net interest income and margin, as the negative impact on floating-rate loans may not be fully offset by deposit cost reductions or asset repricing.
- Capital Resources: The Company and the Bank remain "well capitalized" under regulatory standards. The Common Equity Tier 1 ratio was 13.15% for the consolidated entity as of September 30, 2024.
- Legal Contingencies: The Company settled two class-action lawsuits regarding overdraft fees in 2023 and 2024 for a total of $3.7 million. A separate lawsuit regarding a note with Meadows Mennonite Retirement Community Association is ongoing; an unfavorable outcome is deemed reasonably possible, though the potential cost is currently unpredictable.
- Stock Repurchases: The Company did not repurchase shares in Q3 2024. Approximately $10.6 million remains available under the current authorization expiring January 1, 2025.
Investor Verification Checklist
- Deposit Mix Stability: Verify the sustainability of the shift from brokered deposits to time deposits and the associated cost implications.
- Commercial Real Estate (CRE) Exposure: Review the $889 million non-owner occupied CRE portfolio, specifically the $37.9 million classified as substandard, and the impact of interest rate stress tests on cash flows.
- Mortgage Servicing Rights (MSR): Monitor the volatility of MSR fair value adjustments, which impacted Q3 earnings by $1.5 million, and the assumptions regarding prepayment speeds.
- Legal Exposure: Track the resolution of the Meadows Mennonite Retirement Community lawsuit and any potential damages or attorney fees.
- Emerging Growth Company Status: Note that the Company expects to exit its emerging growth company status on December 31, 2024, which may alter future reporting requirements.