HBT Financial, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report; the provided filing text does not give standalone fourth-quarter results. HBT is a community bank holding company operating through Heartland Bank across Illinois and, following an acquisition, Eastern Iowa.
Financial performance and condition
| Metric | 2021 | 2020 |
|---|---|---|
| Net income | $56.3 million | $36.8 million |
| Diluted earnings per share | $2.02 | $1.34 |
| Net interest income | $122.4 million | $117.6 million |
| Net interest margin | 3.18% | 3.54% |
| Noninterest income | $37.3 million | $34.5 million |
| Noninterest expense | $91.2 million | $92.0 million |
| Net cash from operating activities | $43.1 million | $31.3 million |
- At year-end, total assets were $4.31 billion, loans held for investment before allowance were $2.50 billion, and deposits were $3.74 billion. Year-over-year growth was 17.7%, 11.2%, and 19.4%, respectively.
- Cash and cash equivalents were $409.3 million, up $96.8 million. The bank also had $316.7 million of remaining FHLB borrowing capacity; management said liquidity was adequate for projected obligations.
- Total liabilities were $3.90 billion and stockholders’ equity was $411.9 million. Subordinated notes had a $39.3 million carrying value and junior subordinated debentures were $37.7 million. No FHLB borrowings were outstanding at year-end.
- Regulatory capital remained above requirements: the bank’s total capital ratio was 15.94%, common equity Tier 1 ratio 15.09%, and Tier 1 leverage ratio 10.13%. Tangible common equity to tangible assets was 8.89%, versus 9.27% a year earlier.
- Asset quality improved: nonperforming assets fell to $6.1 million, or 0.14% of assets, from $14.1 million, or 0.39%. The allowance for loan losses was $23.9 million, 0.96% of loans, compared with $31.8 million, or 1.42%, in 2020. Net recoveries were $0.2 million in 2021.
- Net cash from investing activities was negative $349.6 million, reflecting securities purchases and loan growth; financing activities provided $403.3 million, primarily from deposit growth. Cash increased by $96.8 million during the year.
Material changes versus 2020
- Net income rose 52.7%. The principal driver was an $18.6 million improvement in loan-loss provision, from a $10.5 million expense to an $8.1 million negative provision, reflecting improved economic conditions, lower specific reserves, and reduced qualitative reserves.
- Net interest income increased 4.1%, supported by $9.2 million of PPP loan fees recognized in 2021 versus $3.0 million in 2020, and higher earning-asset balances. However, margin narrowed 36 basis points as asset yields fell and more liquidity sat in cash and lower-yielding securities.
- Noninterest income increased 8.3%, helped by improved card income, wealth management fees, and mortgage servicing-rights valuation. Mortgage loan sale gains declined $3.0 million as refinancing activity eased.
- HBT acquired NXT Bancorporation on October 1, 2021, adding $234 million of assets, $195 million of loans, and $182 million of deposits and extending the footprint into Eastern Iowa. Consideration was $39.9 million, including approximately 1.8 million HBT shares; goodwill of $5.7 million was recorded. Acquisition-related expense was $1.4 million.
- Six branches were closed or consolidated during 2021. The company estimated approximately $1.1 million in annual pretax cost savings, net of related revenue impacts; reported closure costs were $748,000, including a $682,000 loss on other assets.
- Accumulated other comprehensive income fell to $1.5 million from $18.2 million, mainly reflecting unrealized losses on available-for-sale securities as market rates moved. Management characterized security declines as temporary.
Outlook, commentary, and risks
- The filing provides no numerical earnings or revenue guidance. Management expected rate increases to support net interest income and margin, while noting that the effect depends on the pace of rate changes, deposit pricing, and balance-sheet mix.
- Management anticipated lower mortgage refinancing activity and margin pressure in 2022, which were expected to reduce gains on mortgage loan sales relative to 2021. It also described continued investment in digital banking and an appropriately sized branch network.
- COVID-related loan modifications outstanding had fallen to $0.2 million from $28.0 million. PPP loans outstanding were $29.5 million at year-end; forgiveness accelerated fee recognition. Management cautioned that renewed pandemic disruption could still affect borrowers and credit quality.
- Key disclosed risks include interest-rate sensitivity, credit and commercial real estate concentrations, local economic exposure to Illinois and Iowa, deposit retention and liquidity, inflation and labor costs, cybersecurity and third-party technology providers, competition, LIBOR transition, and execution and integration risks from acquisitions.
- The investment portfolio includes $1.28 billion of debt securities at fair value; year-end gross unrealized losses were $11.9 million. The company transferred securities to held-to-maturity during 2021 partly to reflect its intent amid possible rate volatility.
- Commitments to extend credit were $609.9 million and standby letters of credit were $13.0 million. The company reported no reserve for unfunded commitments at year-end. Management did not expect routine legal matters to have a material adverse effect.
- HBT paid quarterly dividends of $0.15 per share in 2021; the board declared $0.16 per share in January 2022. Future dividends and repurchases remain subject to board discretion, capital, liquidity, and regulatory limits.
Most important facts for investors to verify
- Whether earnings growth is sustainable after the unusually favorable negative loan-loss provision and elevated PPP fee recognition.
- How margin, deposit costs, securities values, and net interest income respond to the rate environment and balance-sheet repricing.
- Whether the lower allowance and improved credit metrics remain adequate as economic conditions, CRE values, and borrower performance evolve.
- Whether NXT integration delivers expected funding-cost and customer-growth benefits, and whether projected branch savings are realized.
- The duration and severity of unrealized securities losses, uninsured deposits of $845.7 million, and the bank’s actual liquidity under stress.
- The company’s exposure to regulatory, technology, acquisition, dividend, and controlling-stockholder risks; the filing states that the Voting Trust held approximately 59.4% of shares at year-end.