HBT Financial, Inc. (HBT) - Q2 2024 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2024. HBT Financial, Inc. is the holding company for Heartland Bank and Trust Company, operating 66 full-service branches primarily in Illinois and eastern Iowa. The Company is classified as an emerging growth company and an accelerated filer. As of July 24, 2024, there were 31,559,366 shares of common stock outstanding.
Key Financial Metrics
| Metric | Q2 2024 (Three Months) | YTD 2024 (Six Months) | Balance Sheet (June 30, 2024) |
|---|---|---|---|
| Net Income | $18.1 million | $33.3 million | N/A |
| Earnings Per Share (Diluted) | $0.57 | $1.05 | N/A |
| Net Interest Income | $47.0 million | $93.7 million | N/A |
| Net Interest Margin | 3.95% | 3.95% | N/A |
| Provision for Credit Losses | $1.2 million | $1.7 million | N/A |
| Total Assets | N/A | N/A | $5.01 billion |
| Total Loans (Net) | N/A | N/A | $3.34 billion |
| Total Deposits | N/A | N/A | $4.32 billion |
| Cash and Cash Equivalents | N/A | N/A | $195.2 million |
| Stockholders' Equity | N/A | N/A | $509.5 million |
| Efficiency Ratio | 52.61% | 55.40% | N/A |
Material Changes vs. Prior Period
- Net Income: Q2 2024 net income decreased 2.2% ($0.4 million) compared to Q2 2023. However, YTD 2024 net income increased 20.4% ($5.6 million) compared to YTD 2023, primarily due to the absence of $13.7 million in acquisition-related expenses incurred in 2023.
- Net Interest Income: Decreased $1.8 million in Q2 and $2.0 million YTD compared to prior year periods. This was driven by higher funding costs (cost of funds rose to 1.42% from 0.71% in Q2) which outpaced increases in asset yields.
- Noninterest Expense: Decreased 10.2% in Q2 and 11.6% YTD. Reductions were attributed to the absence of acquisition-related costs and legal settlement accruals present in 2023, alongside planned cost reductions from the Town and Country core system conversion.
- Balance Sheet: Total assets decreased 1.3% to $5.01 billion. Loans decreased $18.9 million due to lower line utilization and early payoffs. Total deposits decreased $82.7 million, largely due to a $114.9 million reduction in brokered deposits, partially offset by $65.0 million in new time deposits from a state loan matching program.
- Securities: The Company realized net losses of $3.4 million on the sale of debt securities in the first six months of 2024, compared to $1.0 million in the prior year period.
Guidance, Outlook, Risks, and Unusual Items
- Outlook: Management anticipates continued pressure on net interest margin if funding costs rise further or if core deposits are replaced by higher-cost wholesale funding. The Company expects the $0.5 million deferred tax asset write-down (due to an Illinois tax change) to be earned back over several years.
- Capital Resources: The Company and the Bank remain "well capitalized." The Common Equity Tier 1 Capital ratio was 12.66% for the consolidated company and 14.61% for the Bank as of June 30, 2024.
- Stock Repurchases: The Company repurchased 53,522 shares in Q2 at an average price of $18.74. Approximately $10.6 million remains available under the current $15.0 million authorization expiring January 1, 2025.
- Dividends: The quarterly dividend was increased to $0.19 per share in 2024 (from $0.17 in 2023).
- Risks: Key risks include interest rate volatility, credit deterioration in commercial real estate (CRE) and multi-family portfolios, and the impact of the 2024 presidential election on regulatory policies. The Company has updated risk rating categories to include "Special Mention" to better monitor credit quality.
- Unusual Items: The Company recognized $0.6 million in impairment losses on bank premises related to branch closures. Legal settlements totaling $3.4 million were paid in late 2023, with an additional $0.3 million settlement reached in March 2024 regarding overdraft fee litigation.
Investor Verification Checklist
- Deposit Stability: Verify the trend in brokered deposits, which decreased significantly ($114.9 million) but remain a component of the funding mix.
- CRE Exposure: Review the concentration of Commercial Real Estate (non-owner occupied) and Multi-family loans, which represent significant portions of the portfolio and are subject to interest rate stress testing.
- Net Interest Margin Compression: Monitor the spread between asset yields and funding costs, as rising deposit rates continue to pressure margins.
- Legal Contingencies: Confirm the finalization and payment status of the $0.3 million overdraft fee settlement reached in March 2024.
- Securities Portfolio: Assess the impact of unrealized losses on the Available-for-Sale (AFS) debt securities portfolio, which totaled $69.7 million in gross unrealized losses as of June 30, 2024.