HBT Financial Inc
For the period ended Jun 30, 2024. Filed Aug 1, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 1, 2024
HBT$37.00-0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-01.
0001628280-24-019634
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-01.
0001628280-24-034168
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 167 previous paragraphs and 195 current paragraphs.
115 unchanged; 36 reworded; 37 added; 16 removed; 0 previous and 7 current paragraphs rearranged.
Tables are not compared: 30 previous and 35 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (37)
Current report
•Noninterest expense decreased by $3.5 million, primarily reflecting the absence of $0.8 million of legal fees and $0.8 million of accruals related to legal matters previously disclosed, the absence of $0.6 million of Town and Country acquisition-related expenses, and the realization of planned cost reductions following the Town and Country core system conversion completed in April 2023;
Current report
•Net interest income decreased $1.8 million, primarily attributable to higher funding costs which were partially offset by higher asset yields and an increase in interest-earning assets;
Current report
•A provision for credit losses of $1.2 million was recognized during the three months ended June 30, 2024, compared to a negative provision for credit losses of $0.2 million during the three months ended June 30, 2023; and
Current report
•An additional $0.5 million of tax expense was recognized during the second quarter of 2024 for a deferred tax expense write-down, primarily as a result of an Illinois tax change. This increased our effective tax rate to 27.6% during the second quarter of 2024 compared to 26.2% during the second quarter of 2023. We expect this write-down to be earned back over several years through reduced tax expense.
Current report
For the six months ended June 30, 2024, net income was $33.3 million, increasing by $5.6 million, or 20.4%, when compared to net income for the six months ended June 30, 2023. Notable changes include the following:
Current report
•A $2.0 million decrease in net interest income, primarily attributable to higher funding costs which were partially offset by higher asset yields and an increase in interest-earning assets;
Current report
•A $2.7 million increase in tax expense primarily reflects higher pre-tax income resulting from the above items as well as an additional $0.5 million for a deferred tax expense write-down, primarily as a result of an Illinois tax change. This increased our effective tax rate to 26.7% during the six months ended June 30, 2024, compared to 25.5% during the six months ended June 30, 2023. We expect this write-down to be earned back over several years through reduced tax expense.
Current report
Net interest income for the three months ended June 30, 2024 was $47.0 million, decreasing $1.8 million, or 3.8%, when compared to the three months ended June 30, 2023. The decrease is primarily attributable to an increase in funding costs which were mostly offset by higher yields on interest-earning assets and an increase in interest-earning assets.
Current report
The Company recorded a provision for credit losses of $1.2 million for the second quarter of 2024, compared to a $0.2 million negative provision during the second quarter of 2023. The second quarter of 2024 provision for credit losses primarily reflects a $0.9 million increase in required reserves resulting from changes in economic forecasts and a $0.9 million increase in required reserves driven by increased loan balances and changes within the loan portfolio which were mostly offset by a $0.7 million decrease in specific reserves.
Current report
Additionally, the 2023 results included the establishment of an allowance for credit losses of $0.8 million on debt securities available-for-sale, related to one bank subordinated debt security, which was later reversed during the third quarter of 2023 after a merger announcement by the issuer of the bank subordinated debt security.
Current report
Credit losses are highly dependent on current and forecast economic conditions. Potential deterioration of economic conditions may lead to higher credit losses and adversely impact our financial condition and results of operations. The economic forecasts utilized in estimating the allowance for credit losses on loans and lending-related unfunded commitments include the unemployment rate and changes in GDP as macroeconomic variables, although other economic metrics are considered on a qualitative basis.
Current report
•A $0.3 million increase in wealth management fees, driven by higher values of assets under management; and
Current report
Total noninterest income for the six months ended June 30, 2024, was $15.2 million, a decrease of $2.1 million, or 12.2%, from the six months ended June 30, 2023. Notable changes in noninterest income include the following:
Current report
•A $0.6 million increase in wealth management fees, driven by higher values of assets under management; and
Current report
•Excluding Town and Country acquisition-related expenses, the $1.6 million decrease in other noninterest expense primarily reflects the absence of $0.8 million of legal fees and $0.8 million of accruals related to legal matters previously disclosed; and
Current report
•Additionally, the second quarter of 2024 results reflect the realization of planned cost reductions following the Town and Country core system conversion completed in April 2023.
Current report
Total noninterest expense for the six months ended June 30, 2024, was $61.8 million, a decrease of $8.1 million, or 11.6%, from the six months ended June 30, 2023. Notable changes in noninterest expense include the following:
Current report
•Excluding Town and Country acquisition-related expenses, the $0.5 million increase in salaries expense was primarily driven by annual merit increases;
Current report
•Excluding Town and Country acquisition-related expenses, the $0.6 million increase in benefits expense was primarily attributable to higher medical benefits expenses;
Current report
•Excluding Town and Country acquisition-related expenses, the $1.8 million decrease in other noninterest expense primarily reflects the absence of $0.8 million of legal fees and $0.8 million of accruals related to legal matters previously disclosed; and
Current report
•Additionally, the 2024 results reflect the realization of planned cost reductions following the Town and Country core system conversion completed in April 2023.
Current report
During the three and six months ended June 30, 2024, we recognized an additional $0.5 million of tax expense for a deferred tax asset write-down, primarily as a result of an Illinois tax change. This was the primary driver of the increase in our effective tax rate to 27.6% during the three months ended June 30, 2024 from 26.2% during the three months ended June 30, 2023, and to 26.7% during the six months ended June 30, 2024 from 25.5% during the six months ended June 30, 2023.
Current report
•A $12.0 million increase in multi-family loans and a $8.5 million increase in commercial real estate – non-owner occupied loans primarily attributable to completed construction projects transferred from the construction and land development category, partially offset by early payoffs; and
Current report
•A $1.4 million increase in construction loans primarily attributable to draws on existing construction projects and new construction loans to existing customers, mostly offset by transfers of completed projects into other categories.
Current report
Commercial Real Estate Portfolios
Current report
Commercial real estate – owner occupied loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The commercial real estate – owner occupied portfolio composition, segmented by the owner’s business classification, as of June 30, 2024 was as follows:
Current report
Commercial real estate – non-owner occupied loans are primarily made based on projected cash flows from the rental or sale of the underlying collateral. The commercial real estate – non-owner occupied portfolio composition, segmented by the property type, as of June 30, 2024 was as follows:
Current report
(1) Weighted average LTV is based on the most recent appraisals available, which are generally obtained at the time of origination.
Current report
Multi-family loans totaled $430.0 million as of June 30, 2024 and are primarily made based on projected cash flows from the rental or sale of the underlying collateral. As of June 30, 2024, multi-family loans had a weighted average LTV of 57%, based on the most recent appraisals available, which are generally obtained at the time of origination.
Current report
Management’s disciplined approach to credit risk management is exercised through portfolio diversification, robust underwriting policies, and routine loan monitoring practices in order to identify and mitigate any credit weakness as early as possible. Management continually monitors and evaluates commercial real estate concentrations by property class, industry, and relative to the Bank’s regulatory capital to remain in line with board established limits and adapt to changing industry conditions. A centralized credit underwriting group, independent of the originating lender, evaluates all exposures over $750 thousand annually, if not more frequently, through a standardized credit review process to ensure uniform application of policies and procedures as well as analyze credit performance. All loans require appropriate internal approval, with a centralized credit approval group reviewing all exposures over $500 thousand. A sampling of the loan portfolio is also reviewed by the Bank’s internal loan review function annually, in addition to an annual third-party review of the portfolio.
Current report
In response to the rapid increase in interest rates, we have prepared quarterly cash flow stress tests for our commercial real estate – non-owner occupied and multi-family loans since the fourth quarter of 2022. For commercial real estate – non-owner occupied and multi-family loans over $1 million, we evaluate the impact of current interest rates on the underlying cash flows of the properties securing these loans, based on the most recent cash flow data available. This testing is completed in addition to the various sensitivity testing completed at the initial extension of credit. Individual credits with a maturity scheduled within the next five quarters that are presenting stress under current renewal terms are identified, so that ample time is available to develop solutions to manage credit risk.
Current report
(1) In June 2024, the Company updated its risk rating categories to add the special mention category to provide another level of granularity in distinguishing risk levels of loans. As of June 30, 2024, $19.5 million of the special mention loans would have been considered pass-watch and $10.6 million would have been considered substandard under the previous risk rating categories.
Current report
Loans rated pass-watch or worse increased $25.1 million, or 15.4%, from December 31, 2023 to June 30, 2024, primarily attributable to the downgrade of one construction and land development credit and two farmland-secured credits to the pass-watch risk classification.
Current report
Our on-balance sheet sources of liquidity included cash and cash equivalents as well as unpledged securities which may be sold or pledged as collateral to meet liquidity needs. As of June 30, 2024 and December 31, 2023, our on-balance sheet sources of liquidity included the following:
Current report
Additional sources of liquidity include borrowings from the FHLB, the Federal Reserve discount window, and federal fund lines of credit. Interest is charged on outstanding borrowings at the prevailing market rate. As of June 30, 2024, our current borrowings and additional available borrowing capacity were as follows:
Current report
Further, the Bank could utilize brokered deposits as an additional source of liquidity, as needed.
Current report
(2)Assumes a federal income tax rate of 21% and a state tax rate of 9.5%.
Removed paragraphs (16)
Previous report
(2)On a tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%.
Previous report
•Excluding Town and Country acquisition-related expenses, noninterest expense increased by $2.5 million, primarily reflecting one additional month of Town and Country's operations during the first quarter of 2024, compared to the first quarter of 2023, and an increase in salaries and benefits expenses driven by annual merit increases and higher medical benefit costs;
Previous report
•Net interest income remained relatively stable overall with an increase in funding costs being mostly offset by higher interest-earning asset balances, following the Town and Country merger, and higher yields on interest-earning assets;
Previous report
*Annualized measure.
Previous report
(2)On a tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%.
Previous report
•A $0.2 million increase in wealth management fees was primarily attributable to higher asset management and trust service fees being partially offset by lower farm management and farmland real estate brokerage fees.
Previous report
•Excluding Town and Country acquisition-related expenses, the $2.5 million increase in noninterest expense primarily reflects one additional month of Town and Country's operations during the first quarter of 2024 compared to 2023, as well as an increase in salaries and benefits expenses driven by annual merit increases and higher medical benefit costs.
Previous report
During the three months ended March 31, 2024 and 2023, we recorded income tax expense of $5.3 million, or an effective tax rate of 25.6%, and $2.9 million, or an effective tax rate of 24.1%, respectively. The fluctuations in effective tax rate are primarily attributable to changes in the proportion of federally tax-exempt interest income to pre-tax income.
Previous report
•The $119.0 million increase in cash and cash equivalents was primarily the result of the items noted above.
Previous report
•Across the portfolio, early payoffs of loans maturing or repricing beyond 2024 and with fixed rates of 4.00% or less totaled $14.4 million;
Previous report
•Construction and land development loans decreased by $18.0 million with several completed projects shifting to other loan categories; and
Previous report
•Although grain elevator lines of credit increased $5.7 million during the first quarter of 2024, seasonal line utilization was significantly lower relative to historical levels.
Previous report
As of March 31, 2024, office commercial real estate loans totaled $167.3 million, with 3.5% rated pass-watch, less than 0.1% rated substandard, and 1.6% was past due 30 days or more. Management regularly monitors office and other industry concentrations within the loan portfolio.
Previous report
Pass-watch loans increased $11.1 million, or 11.3%, and substandard loans increased $4.1 million, or 6.4%, from December 31, 2023 to March 31, 2024. The increase in pass-watch loans was primarily attributable to the downgrade of two commercial real estate - non-owner occupied credits, and the increase in substandard loans was primarily attributable to the downgrade of one commercial and industrial credit.
Previous report
*Annualized measure.
Previous report
Additional sources of liquidity include unpledged securities, federal funds purchased, borrowings from the FHLB and Federal Reserve, and brokered deposits. Unpledged securities may be sold or pledged as collateral for borrowings to meet liquidity needs. Interest is charged at the prevailing market rate.
Reworded paragraphs (36)
Previous wording
The following is management’s discussion and analysis of the financial condition as of March 31, 2024 (unaudited), as compared with December 31, 2023, and the results of operations for the three months ended March 31, 2024 and 2023 (unaudited). Management’s discussion and analysis should be read in conjunction with the Company’s unaudited consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q, as well as the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 6, 2024. Results of operations for the three months ended March 31, 2024 and 2023 are not necessarily indicative of results to be attained for the year ended December 31,2024, or for any other period.
Current wording
The following is management’s discussion and analysis of the financial condition as of June 30, 2024 (unaudited), as compared with December 31, 2023, and the results of operations for the three and six months ended June 30, 2024 and 2023 (unaudited). Management’s discussion and analysis should be read in conjunction with the Company’s unaudited consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q, as well as the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 6, 2024. Results of operations for the three and six months ended June 30, 2024 and 2023 are not necessarily indicative of results to be attained for the year ended December 31, 2024, or for any other period.
Previous wording
HBT Financial, Inc., headquartered in Bloomington, Illinois, is the holding company for Heartland Bank and Trust Company, and has banking roots that can be traced back to 1920. We provide a comprehensive suite of financial products and services to consumers, businesses, and municipal entities throughout Illinois and eastern Iowa. As of March 31, 2024, the Company had total assets of $5.0 billion, loans held for investment of $3.3 billion, and total deposits of $4.4 billion.
Current wording
HBT Financial, Inc., headquartered in Bloomington, Illinois, is the holding company for Heartland Bank and Trust Company, and has banking roots that can be traced back to 1920. We provide a comprehensive suite of financial products and services to consumers, businesses, and municipal entities throughout Illinois and eastern Iowa. As of June 30, 2024, the Company had total assets of $5.0 billion, loans held for investment of $3.4 billion, and total deposits of $4.3 billion.
Previous wording
Total consideration consisted of 3.4 million shares of HBT Financial’s common stock and $38.0 million in cash. Based upon the closing price of HBT Financial common stock of $21.12 on February 1, 2023, the aggregate consideration was approximately $109.4 million. Goodwill of $30.5 million was recorded in the acquisition. There were no acquisition-related expenses during the three months ended March 31, 2024. Acquisition-related expenses totaled $13.1 million for the three months ended March 31, 2023, including the recognition of an allowance for credit losses on non-PCD loans of $5.2 million and an allowance for credit losses on unfunded commitments of $0.7 million through provision for credit losses.
Current wording
There were no acquisition-related expenses during the three and six months ended June 30, 2024. Acquisition-related expenses totaled $0.6 million during the three months ended June 30, 2023 and $13.7 million during the six months ended June 30, 2023, including the recognition of an allowance for credit losses on non-PCD loans of $5.2 million and an allowance for credit losses on unfunded commitments of $0.7 million through provision for credit losses.
Previous wording
Throughout the banking industry, in-person branch traffic is expected to continue to decline as more customers turn to digital banking for routine banking transactions. The COVID-19 pandemic accelerated this transition, and in-person branch traffic is not expected to return to pre-pandemic levels. Additionally, widespread adoption of faster payment and instant payment technologies could require us to substantially increase our expenditures on technology infrastructure, increase our regulatory compliance costs, and adversely impact the stability of our deposit base. We plan to continue investing in our digital banking platforms, while maintaining an appropriately sized branch network. An inability to meet evolving customer expectations, with the appropriate level of security, for both digital and in-person banking may adversely affect our financial results in the future.
Current wording
Throughout the banking industry, in-person branch traffic is expected to continue to decline as more customers turn to digital banking for routine banking transactions. Additionally, widespread adoption of faster payment and instant payment technologies could require us to substantially increase our expenditures on technology and cybersecurity infrastructure, increase our regulatory compliance costs, and adversely impact the stability of our deposit base. We plan to continue investing in our digital banking platforms while maintaining an appropriately sized branch network. An inability to meet evolving customer expectations for both digital and in-person banking may adversely affect our financial results in the future.
Previous wording
For the three months ended March 31, 2024, net income was $15.3 million, increasing by $6.1 million, or 65.7%, when compared to net income for the three months ended March 31, 2023. Notable changes include the following:
Current wording
For the three months ended June 30, 2024, net income was $18.1 million, decreasing by $0.4 million, or 2.2%, when compared to net income for the three months ended June 30, 2023. Notable changes include the following:
Previous wording
•There were no Town and Country acquisition-related expenses during the first quarter of 2024, compared to $13.1 million of acquisition-related expenses incurred during the first quarter of 2023;
Current wording
•There were no Town and Country acquisition-related expenses during the six months ended June 30, 2024, compared to $13.7 million of acquisition-related expenses incurred during the six months ended June 30, 2023;
Previous wording
•Net losses of $3.4 million were realized on the sale of debt securities during the first quarter of 2024, compared to net losses of $1.0 million realized during the first quarter of 2023;
Current wording
•Net losses of $3.4 million were realized on the sale of debt securities during the six months ended June 30, 2024, compared to net losses of $1.0 million realized during the six months ended June 30, 2023;
Previous wording
•Impairment losses on bank premises of $0.6 million related to the closure of two branch premises now held for sale were recognized during the first quarter of 2024 which were not present in the first quarter of 2023 results; and
Current wording
•Impairment losses on bank premises of $0.6 million related to the closure of two branch premises, now held for sale, were recognized during 2024 which were not present in the 2023 results; and
Previous wording
The following table sets forth average balances, average yields and costs, and certain other information. Average balances are daily average balances. Nonaccrual loans are included in the computation of average balances but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees and costs, discounts and premiums, as well as purchase accounting adjustments that are accreted or amortized to interest income or expense.
Current wording
The following tables set forth average balances, average yields and costs, and certain other information. Average balances are daily average balances. Nonaccrual loans are included in the computation of average balances but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees and costs, discounts and premiums, as well as purchase accounting adjustments that are accreted or amortized to interest income or expense.
Previous wording
Net interest margin decreased to 3.94% for the three months ended March 31, 2024, compared to 4.20% for the three months ended March 31, 2023. The decrease was primarily attributable to increases in funding costs outpacing increases in interest-earning asset yields. Additionally, the contribution of acquired loan discount accretion to net interest margin increased to 10 basis points during the three months ended March 31, 2024, compared to 7 basis points during the three months ended March 31, 2023.
Current wording
Net interest margin decreased to 3.95% for the three months ended June 30, 2024, compared to 4.16% for the three months ended June 30, 2023. The decrease was primarily attributable to increases in funding costs outpacing increases in interest-earning asset yields. Additionally, the contribution of acquired loan discount accretion to net interest margin decreased to 8 basis points during the three months ended June 30, 2024, from 9 basis points during the three months ended June 30, 2023.
Previous wording
Net interest income for the three months ended March 31, 2024 was $46.7 million, decreasing $0.1 million, or 0.3%, from the three months ended March 31, 2023. The slight decrease is primarily attributable to an increase in funding costs which were mostly offset by higher interest-earning asset balances, following the Town and Country merger, and higher yields on interest-earning assets.
Current wording
Net interest income for the six months ended June 30, 2024 was $93.7 million, decreasing $2.0 million, or 2.1%, when compared to the six months ended June 30, 2023. The decrease is primarily attributable to an increase in funding costs which were mostly offset by higher yields on interest-earning assets and higher interest-earning asset balances following the Town and Country merger.
Previous wording
The Company recorded a provision for credit losses of $0.5 million for the first quarter of 2024. The provision for credit losses primarily reflects a $3.7 million increase in required reserves resulting from changes in qualitative factors; a $2.1 million decrease in required reserves resulting from changes in economic forecasts; a $1.0 million decrease in required reserves driven by a reduction in loan portfolio balances; and a $0.1 million decrease in specific reserves on individually evaluated loans.
Current wording
The Company recorded a provision for credit losses of $1.7 million for the six months ended June 30, 2024. The 2024 provision for credit losses primarily reflects a $3.7 million increase in required reserves resulting from changes in qualitative factors; a $1.2 million decrease in required reserves resulting from changes in economic forecasts; a $0.8 million decrease in specific reserves on individually evaluated loans; and a $0.1 million decrease in required reserves driven by changes within the loan portfolio.
Previous wording
Additionally, the first quarter of 2023 results included the recognition of an allowance for credit losses on non-PCD loans of $5.2 million and an allowance for credit losses on unfunded commitments of $0.7 million through provision for credit losses which were related to the Town and Country acquisition and not present in the first quarter of 2024 results.
Current wording
The 2023 results included the recognition of an allowance for credit losses on non-PCD loans of $5.2 million and an allowance for credit losses on unfunded commitments of $0.7 million through provision for credit losses which were related to the Town and Country acquisition.
Previous wording
Total noninterest income for the three months ended March 31, 2024, was $5.6 million, a decrease of $1.8 million, or 24.4%, from the three months ended March 31, 2023. Notable changes in noninterest income include the following:
Current wording
Total noninterest income for the three months ended June 30, 2024, was $9.6 million, a decrease of $0.3 million, or 3.1%, from the three months ended June 30, 2023. Notable changes in noninterest income include the following:
Previous wording
•A $0.7 million increase in the mortgage servicing rights fair value adjustment, primarily due to changes in prepayment assumptions utilized in the valuations; and
Current wording
•A $0.2 million decrease in the mortgage servicing rights fair value adjustment, primarily due to changes in prepayment assumptions utilized in the valuations.
Previous wording
•Net losses of $3.4 million were realized on the sale of debt securities during the first quarter of 2024, compared to net losses of $1.0 million realized during the first quarter of 2023;
Current wording
•Net losses of $3.4 million were realized on the sale of debt securities during the six months ended June 30, 2024, compared to net losses of $1.0 million realized during the six months ended June 30, 2023;
Previous wording
•Impairment losses on bank premises of $0.6 million related to the closure of two branch premises now held for sale were recognized during the first quarter of 2024 which were not present in the first quarter of 2023 results.
Current wording
•Impairment losses on bank premises of $0.6 million related to the closure of two branch premises, now held for sale, were recognized during 2024 which were not present in the 2023 results;
Previous wording
•A $0.7 million increase in the mortgage servicing rights fair value adjustment, primarily due to changes in prepayment assumptions utilized in the valuations;
Current wording
•A $0.5 million increase in the mortgage servicing rights fair value adjustment, primarily due to changes in prepayment assumptions utilized in the valuations.
Previous wording
Total noninterest expense for the three months ended March 31, 2024, was $31.3 million, a decrease of $4.7 million, or 13.0%, from the three months ended March 31, 2023. Notable changes in noninterest expense include the following:
Current wording
Total noninterest expense for the three months ended June 30, 2024, was $30.5 million, a decrease of $3.5 million, or 10.2%, from the three months ended June 30, 2023. Notable changes in noninterest expense include the following:
Previous wording
•There were no Town and Country acquisition-related noninterest expenses for the three months ended March 31, 2024, but acquisition-related noninterest expenses totaled $7.1 million during the three months ended March 31, 2023; and
Current wording
•There were no Town and Country acquisition-related noninterest expenses for the three months ended June 30, 2024, but acquisition-related noninterest expenses totaled $0.6 million for the three months ended June 30, 2023;
Previous wording
•Debt securities decreased $94.4 million, largely due to the sale of $66.8 million of municipal securities with sales proceeds used to reduce wholesale funding. Additionally, paydowns, maturities, and calls of debt securities generated another $29.6 million of cash proceeds;
Current wording
•Debt securities decreased $99.3 million, largely due to the sale of $66.8 million of municipal securities with sales proceeds used to reduce wholesale funding. Additionally, paydowns, maturities, and calls of debt securities generated another $58.5 million of cash proceeds with a portion reinvested into securities at currently higher yields;
Previous wording
•Loans decreased by $58.5 million with lower line of credit utilization as well as early payoffs of loans;
Current wording
•Loans decreased by $18.9 million, driven by lower line of credit utilization and early payoffs of loans; and
Previous wording
•The $40.9 million decrease in total deposits was primarily attributable to an $89.1 million decrease in brokered deposits, partially offset by the addition of $33.9 million of time deposits from a State of Illinois loan matching program which are a lower cost source of funding; and
Current wording
•The $82.7 million decrease in total deposits was primarily attributable to a $114.9 million decrease in brokered deposits and a $18.8 million decrease in higher cost reciprocal wealth management customer deposits included with money market deposits, partially offset by the addition of $65.0 million of time deposits from a State of Illinois loan matching program which are a lower cost source of funding.
Previous wording
Loans, before allowance for credit losses were $3.35 billion at March 31, 2024, a decrease of $58.5 million, or 1.7%, from December 31, 2023. Notable changes included with the following:
Current wording
Loans, before allowance for credit losses were $3.39 billion at June 30, 2024, a decrease of $18.9 million, or 0.6%, from December 31, 2023. Notable changes include the following:
Previous wording
•A $28.3 million decrease in line utilization on existing lines of credit, including $13.2 million drawn on two customers' lines of credit in late December 2023 that paid off in early January 2024;
Current wording
•A $16.3 million decrease in line utilization on existing lines of credit, including $13.2 million drawn on two customers' lines of credit in late December 2023 that paid off in early January 2024;
Previous wording
Total nonperforming assets were $9.9 million at March 31, 2024, increasing by $1.2 million since December 31, 2023. The increase was primarily attributable to the movement of a few commercial and industrial and commercial real estate - owner occupied credits to nonaccrual status which was partially offset by the sale of several foreclosed properties. Additionally, of the $9.7 million of nonperforming loans held as of March 31, 2024, $2.7 million are either wholly or partially guaranteed by the U.S. Government.
Current wording
Total nonperforming assets were $8.8 million at June 30, 2024, remaining relatively stable from December 31, 2023. Additionally, of the $8.4 million of nonperforming loans held as of June 30, 2024, $2.1 million are either wholly or partially guaranteed by the U.S. Government.
Previous wording
The net charge-offs (recoveries) to average total loans ratio has remained low for several years. While we believe our continuous credit monitoring and collection efforts have resulted in lower levels of loan losses, we also recognize that substantial federal economic stimulus following the COVID-19 pandemic and the relatively stable economic conditions after the pandemic have also contributed to reduced loan losses.
Current wording
The net charge-offs (recoveries) to average total loans ratio has remained low for several years. While we believe our continuous credit monitoring and collection efforts have resulted in lower levels of credit losses, we also recognize that substantial federal economic stimulus following the COVID-19 pandemic and the relatively stable economic conditions after the pandemic have also contributed to reduced credit losses.
Previous wording
The increase in average deposits balances in 2024 compared to 2023 is primarily attributable to the Town and Country merger which added $720.4 million of deposits on February 1, 2023. Increased market interest rates and competition for deposits drove an increase in deposit costs throughout 2023 as well as a shift from lower to higher cost deposit products. Additionally, we brought the majority of our wealth management customer reciprocal deposits on balance sheet in December 2023, which increased average money market deposits by $142.4 million during the three months ended March 31, 2024.
Current wording
The increase in average deposits balances in 2024 compared to 2023 is primarily attributable to wealth management customer reciprocal deposits brought on balance sheet in December 2023, which increased average money market deposits by $132.7 million during the three months ended June 30, 2024 and by $137.5 million during the six months ended June 30, 2024. Additionally, the Town and Country merger added $720.4 million of deposits on February 1, 2023.
Previous wording
As of March 31, 2024, the Company had $55.8 million of wholesale brokered deposits outstanding. Brokered deposits are generally considered to be deposits that have been received from a third party who is engaged in the business of placing deposits on behalf of others. A traditional deposit broker will direct deposits to the banking institution offering the highest interest rate available. Federal banking laws and regulations place restrictions on depository institutions regarding brokered deposits because of the general concern that these deposits are not relationship based and are at a greater risk of being withdrawn and placed on deposit at another institution offering a higher interest rate, thus posing liquidity risk for institutions that gather brokered deposits in significant amounts.
Current wording
As of June 30, 2024, the Company had $30.0 million of wholesale brokered deposits outstanding. Brokered deposits are generally considered to be deposits that have been received from a third party who is engaged in the business of placing deposits on behalf of others. A traditional deposit broker will direct deposits to the banking institution offering the highest interest rate available. Federal banking laws and regulations place restrictions on depository institutions regarding brokered deposits because of the general concern that these deposits are not relationship based and are at a greater risk of being withdrawn and placed on deposit at another institution offering a higher interest rate, thus posing liquidity risk for institutions that gather brokered deposits in significant amounts.
Previous wording
As of March 31, 2024 and December 31, 2023, the Bank’s uninsured deposits were estimated to be $867.9 million and $867.7 million, respectively.
Current wording
As of June 30, 2024 and December 31, 2023, the Bank’s uninsured deposits were estimated to be $917.8 million and $867.7 million, respectively.
Previous wording
The Holding Company, or HBT Financial, Inc. on an unconsolidated basis, is a corporation separate and apart from the Bank and, therefore, it must provide for its own liquidity. As of March 31, 2024, the Holding Company had cash and cash equivalents of $12.8 million.
Current wording
The Holding Company, or HBT Financial, Inc. on an unconsolidated basis, is a corporation separate and apart from the Bank and, therefore, it must provide for its own liquidity. As of June 30, 2024, the Holding Company had cash and cash equivalents of $16.4 million.
Previous wording
The Holding Company’s main source of funding is dividends declared and paid to it by the Bank. Due to state banking laws, the Bank may not declare dividends in any calendar year in an amount that would exceed accumulated retained earnings, after giving effect to any unrecognized losses and bad debts, without the prior approval of the Illinois Department of Financial and Professional Regulation. In addition, dividends paid by the Bank to the Holding Company would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements. Management believes that these limitations will not impact the Holding Company’s ability to meet its ongoing short-term cash obligations. During the three months ended March 31, 2024 and 2023, the Bank paid $8.0 million and $25.0 million in dividends to the Holding Company, respectively.
Current wording
The Holding Company’s main source of funding is dividends declared and paid to it by the Bank. Dividends paid by the Bank to the Holding Company would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements. Management believes that such limitations will not impact the Holding Company’s ability to meet its ongoing short-term or intermediate-term cash obligations. During the three months ended June 30, 2024 and 2023, the Bank paid $10.0 million and $15.0 million in dividends to the Holding Company, respectively. During the six months ended June 30, 2024 and 2023, the Bank paid $18.0 million and $40.0 million in dividends to the Holding Company, respectively.
Previous wording
The liquidity needs of the Holding Company on an unconsolidated basis consist primarily of operating expenses, interest payments on the subordinated notes and junior subordinated debentures, and shareholder distributions in the form of dividends and stock repurchases. During the three months ended March 31, 2024 and 2023, holding company operating expenses consisted of interest expense of $1.4 million and $1.2 million, respectively, and other operating expenses of $1.1 million and $2.2 million, respectively.
Current wording
The liquidity needs of the Holding Company on an unconsolidated basis consist primarily of operating expenses, interest payments on the subordinated notes and junior subordinated debentures, and shareholder distributions in the form of dividends and stock repurchases. During the three months ended June 30, 2024 and 2023, holding company operating expenses consisted of interest expense of $1.4 million and $1.4 million, respectively, and other operating expenses of $1.0 million and $1.2 million, respectively. During the six months ended June 30, 2024 and 2023, holding company operating expenses consisted of interest expense of $2.8 million and $2.6 million, respectively, and other operating expenses of $2.1 million and $3.4 million, respectively.
Previous wording
Additionally, the Holding Company paid $6.1 million and $5.5 million of dividends to stockholders during the three months ended March 31, 2024 and 2023, respectively. The Holding Company also paid $38.0 million in cash consideration in the acquisition of Town and Country during the first quarter of 2023.
Current wording
Additionally, the Holding Company paid $6.0 million and $5.5 million of dividends to stockholders during the three months ended June 30, 2024 and 2023, respectively, and paid $12.1 million and $11.0 million of dividends to stockholders during the six months ended June 30, 2024 and 2023, respectively. The Holding Company also paid $38.0 million in cash consideration in the acquisition of Town and Country during the first quarter of 2023.
Previous wording
During 2023, the Company paid quarterly cash dividends of $0.17 per share. On January 23, 2024, the Company announced an increase of $0.02 and paid a $0.19 per share dividend during the first quarter of 2024.
Current wording
During 2023, the Company paid quarterly cash dividends of $0.17 per share. On January 23, 2024, the Company announced an increase of $0.02 and paid a $0.19 per share dividend during the first and second quarters of 2024.
Previous wording
Under the Company’s stock repurchase program, the Company repurchased 179,281 shares of its common stock at a weighted average price of $18.93 during the three months ended March 31, 2024. The Company’s Board of Directors authorized the repurchase of up to $15.0 million of its common stock under its stock repurchase program in effect until January 1, 2025. As of March 31, 2024, the Company had $11.6 million remaining under the current stock repurchase authorization.
Current wording
Under the Company’s stock repurchase program, the Company repurchased 53,522 shares of its common stock at a weighted average price of $18.74 during the three months ended June 30, 2024. The Company’s Board of Directors authorized the repurchase of up to $15.0 million of its common stock under its stock repurchase program in effect until January 1, 2025. As of June 30, 2024, the Company had $10.6 million remaining under the current stock repurchase authorization.
Rearranged current paragraphs (7)
Current report — wording carried from elsewhere
Total consideration consisted of 3.4 million shares of HBT Financial’s common stock and $38.0 million in cash. Based upon the closing price of HBT Financial common stock of $21.12 on February 1, 2023, the aggregate consideration was approximately $109.4 million. Goodwill of $30.5 million was recorded in the acquisition.
Current report — wording carried from elsewhere
(1)Net interest margin represents net interest income divided by average total interest-earning assets.
Current report — wording carried from elsewhere
(3)See "Non-GAAP Financial Information" for reconciliation of non-GAAP measure to their most closely comparable GAAP measures.
Current report — wording carried from elsewhere
(4)Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
Current report — wording carried from elsewhere
(5)Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.
Current report — wording carried from elsewhere
Net interest margin decreased to 3.95% for the six months ended June 30, 2024, compared to 4.18% for the six months ended June 30, 2023. The decrease was primarily attributable to increases in funding costs outpacing increases in interest-earning asset yields. Additionally, the contribution of acquired loan discount accretion to net interest margin increased to 9 basis points during the six months ended June 30, 2024, compared to 8 basis points during the six months ended June 30, 2023.
Current report — wording carried from elsewhere
•There were no Town and Country acquisition-related noninterest expenses for the six months ended June 30, 2024, but acquisition-related noninterest expenses totaled $7.8 million for the six months ended June 30, 2023;