HBT Financial, Inc. — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. HBT is a bank holding company serving Illinois and eastern Iowa through Heartland Bank and Trust Company. The 10-K was filed March 6, 2024; the financial statements received an unqualified audit opinion.
Business context and financial performance
- Scale: Year-end assets were $5.07 billion, loans held for investment were $3.40 billion, and deposits were $4.40 billion. The February 2023 Town and Country acquisition expanded the company’s Central Illinois and metro-east St. Louis presence and added approximately $937 million of assets, $635 million of loans, and $720 million of deposits at acquisition.
- Earnings: 2023 net income was $65.8 million, up 16.6% from $56.5 million in 2022. Diluted EPS was $2.07, compared with $1.95. Management’s non-GAAP adjusted net income was $78.2 million versus $55.8 million; adjusted diluted EPS was $2.46 versus $1.93.
- Revenue and margins: Net interest income increased 31.0% to $191.1 million; net interest margin rose to 4.09% from 3.54%. Total noninterest income increased 3.8% to $36.0 million. The efficiency ratio improved to 56.49% from 57.72%.
- Expenses and credit costs: Noninterest expense rose 24.6% to $131.0 million, reflecting acquired operations and higher operating costs. Provision for credit losses was $7.6 million, versus a $0.7 million provision benefit in 2022. The reported 2023 provision included $5.9 million of acquisition-related day-two credit allowances.
- Cash flow: Net cash from operating activities was $65.8 million, down from $72.6 million. Cash and cash equivalents ended the year at $141.3 million, up from $114.2 million. Investing activities provided $132.7 million, while financing activities used $171.4 million.
- Asset quality: Nonperforming assets were $8.7 million, or 0.17% of assets, versus $5.2 million, or 0.12%, a year earlier. Nonperforming loans were 0.23% of loans; net charge-offs were low at $0.2 million. The allowance for credit losses was $40.0 million, or 1.18% of loans.
- Liquidity and funding: The year-end loan-to-deposit ratio was 77.35%. Core deposits were $4.13 billion, or 93.75% of deposits, down from 99.24% a year earlier. Estimated uninsured deposits were $867.7 million. Management said available liquidity was adequate for foreseeable needs.
- Debt and capital: Year-end FHLB advances were $12.6 million, down from $160.0 million; subordinated notes were $39.5 million and junior subordinated debentures were $52.8 million. The Bank’s total capital ratio was 14.92% and common equity Tier 1 ratio was 14.01%; it was categorized as well-capitalized. Tangible book value per share was $12.90.
Material changes versus 2022
- Town and Country’s acquisition materially increased assets, loans, deposits, goodwill, and intangible assets; reported loan growth was 29.9%, while loans increased 5.7% excluding the acquisition.
- Interest income grew substantially as asset yields increased, but deposit and other funding costs also rose. Average cost of total deposits increased to 0.60% from 0.07%; quarterly net interest margin declined from 4.20% in Q1 to 3.93% in Q4 2023.
- HBT sold $185.3 million of securities, recording a $1.8 million realized loss; proceeds helped reduce FHLB funding and support loan growth. Available-for-sale securities had $72.3 million of gross unrealized losses at year-end, and held-to-maturity securities’ fair value was $466.5 million versus $521.4 million carrying value.
- HBT adopted CECL on January 1, 2023, recording a $6.9 million reduction to opening retained earnings. Prior-period credit-loss figures are not presented under the new methodology.
Outlook, risks, and unusual items
- The filing provides no quantified earnings, loan-growth, margin, or other formal financial guidance. Management described continued investment in digital banking, disciplined loan growth, prudent underwriting, and opportunistic acquisitions as strategic priorities.
- Management’s year-end allowance forecast assumed a mild 2024 recession, modestly rising unemployment, and slowing then contracting GDP over the forecast period. Results remain sensitive to economic conditions, interest rates, deposit competition, loan demand, and credit quality.
- Key disclosed risks include deposit outflows and higher funding costs, interest-rate and securities valuation exposure, commercial real estate and other credit concentrations, local economic weakness, cyber and third-party service disruptions, regulatory changes, and acquisition integration risks. Office CRE loans were $169.2 million; management reported 2.0% pass-watch and less than 0.1% substandard or 30-plus-days past due.
- Legal settlements included $13.0 million paid in 2023 on two cases, with $7.4 million reimbursed by insurance; the net $5.6 million expense was accrued in 2022. HBT also paid $3.4 million to settle two overdraft-fee cases and recorded a $0.2 million accrual for a separate pending class action. Management did not expect pending matters to materially affect the consolidated financial statements.
- Quarterly dividends were $0.17 per share during 2023; the board raised the quarterly dividend to $0.19 in January 2024. A new $15 million repurchase authorization took effect January 1, 2024.
Important facts for investors to verify
- Track deposit balances, uninsured-deposit levels, brokered funding, and deposit costs; confirm whether core-deposit trends and liquidity remain consistent with management’s assessment.
- Review subsequent credit performance, especially criticized/nonaccrual loans, office CRE exposure, acquired loans, and the adequacy of the CECL allowance.
- Assess the impact of security sales and remaining unrealized losses on tangible book value, liquidity, and future interest income.
- Separate ongoing earnings from acquisition expenses and other adjustments; compare GAAP results with management’s non-GAAP adjusted measures.
- Monitor integration benefits and costs from Town and Country, the new dividend level, and repurchases against capital and funding needs. The filing’s forward-looking statements are subject to significant uncertainties.