HBT Financial(HBT) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents HBT Financial, Inc.'s unaudited consolidated financial statements, management's analysis, market risk disclosures, and internal controls Item 1. Consolidated Financial Statements This section presents HBT Financial, Inc.'s unaudited consolidated financial statements, including balance sheets, income, equity, cash flows, and notes on key accounting policies and acquisitions Consolidated Balance Sheets As of March 31, 2023, total assets increased to $5.01 billion from $4.29 billion at year-end 2022, primarily driven by the acquisition of Town and Country, with deposits also growing significantly Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :--- | :--- | :--- | | Total Assets | $5,013,821 | $4,286,734 | | Cash and cash equivalents | $177,112 | $114,159 | | Loans, net of allowance | $3,156,764 | $2,594,920 | | Goodwill | $59,876 | $29,322 | | Total Liabilities | $4,563,723 | $3,913,102 | | Total deposits | $4,310,521 | $3,587,024 | | Federal Home Loan Bank advances | $75,183 | $160,000 | | Total Stockholders' Equity | $450,098 | $373,632 | Consolidated Statements of Income For the three months ended March 31, 2023, net income decreased to $9.2 million from $13.6 million, primarily due to credit loss provisions and acquisition-related noninterest expenses, despite a 46.7% increase in net interest income Consolidated Income Statement Highlights (Unaudited) | Account | Three Months Ended Mar 31, 2023 ($ thousands) | Three Months Ended Mar 31, 2022 ($ thousands) | | :--- | :--- | :--- | | Net interest income | $46,837 | $31,928 | | Provision for credit losses | $6,210 | $(584) | | Total noninterest income | $7,437 | $10,043 | | Total noninterest expense | $35,933 | $24,157 | | Net Income | $9,208 | $13,604 | | Earnings Per Share - Diluted | $0.30 | $0.47 | Notes to Consolidated Financial Statements These notes detail significant accounting policies, including CECL adoption, the Town and Country acquisition, loan portfolio composition, credit quality, regulatory capital, and legal contingencies - On January 1, 2023, the Company adopted the CECL methodology (ASU 2016-13), which replaced the incurred loss model with an expected loss model, resulting in a net decrease to retained earnings of $6.9 million[32][33] - On February 1, 2023, HBT Financial acquired Town and Country Financial Corporation for approximately $109.4 million in cash and stock, adding $906 million in assets, $635 million in loans, $720 million in deposits, and $30.6 million of goodwill[39][40][41] - The company reached an agreement in principle to settle two lawsuits related to Today's Growth Consultant, Inc. for a total of $13.0 million, with an expected insurance recovery of $7.4 million, resulting in a net expense of $5.6 million recorded in Q4 2022[160][161][165] - As of March 31, 2023, the Company and its bank subsidiary met all capital adequacy requirements and were considered "well capitalized" under regulatory frameworks[122][124] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 financial performance, highlighting the Town and Country acquisition's impact, rising interest rates, and changes in financial condition, liquidity, and capital resources Overview of Recent Financial Results Q1 2023 net income was $9.2 million ($0.30 diluted EPS), down from $13.6 million, primarily due to acquisition expenses, though adjusted net income was $19.9 million and net interest margin expanded to 4.20% Key Financial Metrics | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Income | $9.2M | $13.6M | | Adjusted Net Income (Non-GAAP) | $19.9M | $12.2M | | Diluted EPS | $0.30 | $0.47 | | Adjusted Diluted EPS (Non-GAAP) | $0.64 | $0.42 | | Net Interest Margin | 4.20% | 3.08% | | Return on Average Assets | 0.78% | 1.27% | Results of Operations Analysis Net interest income grew by $14.9 million (46.7%) year-over-year, driven by higher asset yields and acquired earning assets, while noninterest income decreased and noninterest expense rose due to acquisition costs - Net interest income increased by $14.9 million, or 46.7%, from Q1 2022, primarily due to higher yields on interest-earning assets and growth in average earning assets following the Town and Country merger[202] - Acquisition-related expenses in Q1 2023 totaled $13.1 million, which included a $5.9 million provision for credit losses on acquired loans and unfunded commitments, and $7.1 million in noninterest expenses[176][190][212] - Noninterest income decreased by $2.6 million, primarily due to a $2.4 million negative swing in the mortgage servicing rights fair value adjustment and a $1.0 million realized loss on the sale of securities acquired from Town and Country[208][209] Financial Condition Analysis Total assets grew by $727.1 million (17.0%) to $5.01 billion, primarily from the Town and Country acquisition, with loans and deposits also increasing, while nonperforming assets remained low - The Town and Country merger was the primary driver of balance sheet growth, adding $905.6 million in assets, $635.4 million in loans, and $720.4 million in deposits[217] - Excluding the acquisition, total loans decreased by $60.1 million, partly due to lower seasonal usage on grain elevator lines of credit and payoffs of certain exited loans[216] - Total nonperforming assets increased to $9.9 million (0.20% of total assets) from $5.2 million at year-end, with the acquisition contributing $3.8 million in nonaccrual loans[222][223] Liquidity and Capital Resources The company maintains strong liquidity from its deposit base, with uninsured deposits at $936.1 million, and capital ratios remain well above regulatory minimums, alongside share repurchases and dividends - The bank's uninsured deposits were estimated to be $936.1 million as of March 31, 2023[235] Regulatory Capital Ratios (Consolidated) | Ratio | March 31, 2023 | Minimum for Capital Adequacy (with buffer) | | :--- | :--- | :--- | | Common Equity Tier 1 Capital | 11.79% | 7.00% | | Tier 1 Capital | 13.16% | 8.50% | | Total Capital | 15.11% | 10.50% | | Tier 1 Leverage Ratio | 10.29% | 4.00% | - The company repurchased 79,463 shares at an average price of $19.92 during Q1 2023, with $13.4 million remaining under the current stock repurchase authorization[253] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate risk, with an asset/liability simulation projecting a 1.1% increase in NII and a 5.0% increase in EVE in a +100 basis point rate shock Interest Rate Sensitivity Analysis (March 31, 2023) | Change in Interest Rates (bps) | % Change in EVE | % Change in NII (Year 1) | | :--- | :--- | :--- | | +300 | 9.6% | 2.8% | | +200 | 7.8% | 2.0% | | +100 | 5.0% | 1.1% | | -100 | (8.8)% | (3.1)% | | -200 | (20.9)% | (7.7)% | Item 4. Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective[285] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[286] PART II. OTHER INFORMATION This section provides information on legal proceedings, risk factors, equity security sales, and other required disclosures Item 1. Legal Proceedings The company is involved in routine legal actions incidental to its business, which management does not expect to have a material adverse effect on financial condition - The company is party to routine legal actions and does not expect them to have a material adverse effect on its financial condition[287] Item 1A. Risk Factors No material changes to the risk factors from the 2022 Form 10-K were reported - No material changes to risk factors from the 2022 Form 10-K were reported[288] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2023, the company repurchased 79,463 shares at an average price of $19.92, with $13.4 million remaining under the current authorization Issuer Purchases of Equity Securities (Q1 2023) | Period | Total Shares Purchased | Average Price Paid Per Share | Approx. Dollar Value Remaining Under Program | | :--- | :--- | :--- | :--- | | March 2023 | 79,463 | $19.92 | $13,417,000 | Other Information and Exhibits The company reported no defaults on senior securities, no mine safety disclosures, and no other material information, with Item 6 listing filed exhibits including CEO and CFO certifications - The company reported "None" for Defaults Upon Senior Securities (Item 3), Mine Safety Disclosures (Item 4), and Other Information (Item 5)[292][293][295]