HBT Financial Inc
For the period ended Dec 31, 2024. Filed Mar 7, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 7, 2025
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-K
Period ended 2023-12-31; filed 2024-03-06.
0001628280-24-009388
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-07.
0001628280-25-011264
Item 7. 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 185 previous paragraphs and 169 current paragraphs.
84 unchanged; 48 reworded; 37 added; 51 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 34 previous and 37 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
•There were no Town and Country acquisition-related expenses during the year ended December 31, 2024, compared to $13.7 million of acquisition-related expenses incurred during the year ended December 31, 2023;
Current report
•A $0.2 million negative mortgage servicing rights fair value adjustment included in the 2024 results, compared to a $1.6 million negative mortgage servicing rights fair value adjustment included in the 2023 results; and
Current report
•A $2.9 million increase in income tax expense, primarily reflecting 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 26.3% during the year ended December 31, 2024, compared to 25.7% during the year ended December 31, 2023.
Current report
Net interest income for the year ended December 31, 2024 was $188.9 million, decreasing $2.2 million, or 1.2%, when compared to the year ended December 31, 2023. The decrease is primarily attributable to an increase in funding costs which were partially offset by higher yields on interest-earning assets and higher interest-earning asset balances following the Town and Country merger.
Current report
The FOMC began lowering interest rates in September 2024, with the target range for the federal funds rate decreasing by 100 basis points to a range of 4.25% to 4.50% by the end of 2024. This decrease, and potential future decreases, may put downward pressure on our net interest margin, as the negative impact on floating rate loans may not be fully offset by the positive impacts of maturing fixed rate loans and securities repricing at higher rates or potential decreases in deposit costs. Generally, we expect increases in market interest rates will increase our net interest income and net interest margin in future periods, while decreases in market interest rates may decrease our net interest income and net interest margin in future periods; however, this depends upon the timing and extent of interest rate fluctuations and may not always be the case.
Current report
•A $0.2 million negative mortgage servicing rights fair value adjustment included in the 2024 results, compared to a $1.6 million negative mortgage servicing rights fair value adjustment included in the 2023 results;
Current report
•A $1.1 million increase in wealth management fees, driven by higher values of assets under management, partially offset by lower farm management fees as a result of lower commodity prices;
Current report
•Impairment losses on bank premises of $0.6 million related to the closure of two branch premises were recognized during 2024, compared to a $0.1 million gain on sales of closed branch premises recognized during 2023; and
Current report
•A $0.3 million increase in income on bank owned life insurance, primarily attributable to a $0.2 million gain on life insurance proceeds.
Current report
•Excluding Town and Country acquisition-related expenses, the $1.3 million increase in salaries expense was primarily driven by annual merit increases;
Current report
•The $1.3 million increase in employee benefits expense was primarily attributable to higher medical benefits expenses; and
Current report
•Excluding Town and Country acquisition-related expenses, the $2.3 million decrease in other noninterest expense primarily reflects the absence of $0.8 million of legal fees and $1.0 million of accruals related to litigation matters disclosed in Note 23 to the Company's Consolidated Financial Statements in this Annual Report on Form 10-K.
Current report
•Debt securities decreased $83.0 million, largely due to the sale of $69.2 million of municipal securities with sales proceeds primarily used to reduce wholesale funding. Additionally, paydowns, maturities, and calls of debt securities generated another $126.3 million of cash proceeds with $105.1 million being reinvested into debt securities at higher yields;
Current report
•Loans increased by $61.7 million, primarily attributable to new originations to recurring customers; and
Current report
•Total deposits decreased by $83.2 million, primarily attributable to a $144.9 million decrease in brokered deposits. Deposit balances continued to shift towards higher cost deposit products, such as time deposits, which increased $158.2 million, including the addition of $65.0 million of time deposits from a State of Illinois loan matching program.
Current report
•A $10.7 million increase in construction loans primarily attributable to draws on existing construction projects and new construction loans to existing customers which were mostly offset by transfers of completed projects into other categories.
Current report
•An $18.9 million increase in commercial real estate – non-owner occupied loans and a $13.6 million increase in multi-family loans, primarily attributable to completed construction projects transferred from the construction and land development category, partially offset by early payoffs; and
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 December 31, 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 December 31, 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 $431.5 million as of December 31, 2024, and are primarily made based on projected cash flows from the rental or sale of the underlying collateral. As of December 31, 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 a vast majority of the commercial 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. Additionally, a robust internal review process reviews more than 45% of loan commitments on a rolling 24 month basis that is in addition to an annual third-party review of a sample of the portfolio.
Current report
Beginning in the fourth quarter of 2022 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. 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 $39.2 million, or 24.1%, from December 31, 2023 to December 31, 2024, primarily attributable to downgrades within the agricultural and farmland, commercial and industrial, and construction and land development segments.
Current report
Net Charge-offs (Recoveries)
Current report
Additionally, heightened net charge-offs within the commercial and industrial segment are primarily related to equipment finance loans which were purchased as part of a pool of loans during 2023.
Current report
The increase in average deposit balances in 2024 compared to 2023 was primarily attributable to increases in time deposits, including the addition of $65.0 million from a State of Illinois loan matching program, and money market accounts as balances continued to shift towards higher cost deposit products. Partially offsetting these increases was a decrease in brokered deposits due to planned repayment at scheduled maturity. As a result of these changes, deposit costs increased during 2024 compared to 2023.
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 December 31, 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 December 31, 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%.
Current report
Pre-Provision Net Revenue, Pre-Provision Net Revenue Less Charge-offs (Recoveries),
Current report
Adjusted Pre-Provision Net Revenue, and
Current report
Adjusted Pre-Provision Net Revenue Less Charge-offs (Recoveries)
Removed paragraphs (51)
Previous report
Acquisitions
Previous report
The Company incurred the following pre-tax acquisition expenses:
Previous report
NXT Bancorporation, Inc.
Previous report
On October 1, 2021, HBT Financial completed its acquisition of NXT Bancorporation, Inc. (“NXT”), the holding company for NXT Bank. The acquisition expanded our footprint into Eastern Iowa with four locations that began operating as branches of Heartland Bank following the merger and system conversion of NXT Bank into Heartland Bank in December 2021. After considering business combination accounting adjustments, NXT added total assets of $239.9 million, total loans of $194.6 million, and total deposits of $181.6 million.
Previous report
Branch Rationalization Plan
Previous report
In April 2021, the Company made plans to close or consolidate six branches. One branch was consolidated during the second quarter of 2021, and the remaining five branches were closed during the third quarter of 2021. The Company estimated annual pre-tax cost savings, net of associated revenue impacts, related to the branch rationalization plan to be approximately $1.1 million.
Previous report
The Company incurred the following pre-tax branch closure costs during the year ended December 31, 2021 (dollars in thousands):
Previous report
FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Previous report
Economic Conditions
Previous report
The Company's business and financial performance are affected by economic conditions generally in the U.S. and more directly in the Illinois and Iowa markets where we primarily operate. The significant economic factors that are most relevant to our business and our financial performance include the general economic conditions in the U.S. and in the Company's markets (including the effect of inflationary pressures and supply chain constraints), unemployment rates, real estate markets, and interest rates.
Previous report
Interest Rates
Previous report
Net interest income is our primary source of revenue. Net interest income is equal to the excess of interest income earned on interest earning assets (including discount accretion on purchased loans plus certain loan fees) over interest expense incurred on interest-bearing liabilities. The level of interest rates as well as the volume of interest-earning assets and interest-bearing liabilities both impact net interest income. Net interest income is also influenced by both the pricing and mix of interest-earning assets and interest-bearing liabilities which, in turn, are impacted by external factors such as local economic conditions, competition for loans and deposits, the monetary policy of the Federal Reserve Board (“FRB”) and market interest rates.
Previous report
The cost of our deposits and short-term wholesale borrowings is largely based on short-term interest rates, which are primarily driven by the FRB’s actions. The yields generated by our loans and securities are typically driven by short-term and long-term interest rates, which are set by the market and, to some degree, by the FRB’s actions. Our net interest income is therefore influenced by movements in such interest rates and the pace at which such movements occur. Generally, we expect increases in market interest rates will increase our net interest income and net interest margin in future periods, while decreases in market interest rates may decrease our net interest income and net interest margin in future periods.
Previous report
Credit Trends
Previous report
We focus on originating loans with appropriate risk/reward profiles. We have a detailed loan policy that guides our overall loan origination philosophy and a well-established loan approval process that requires experienced credit officers to approve larger loan relationships. Although we believe our loan approval and credit review processes are strengths that allow us to maintain a high-quality loan portfolio, we recognize that credit trends in the markets in which we operate and in our loan portfolio can materially impact our financial condition and performance and that these trends are primarily driven by the economic conditions in our markets.
Previous report
Competition
Previous report
Our profitability and growth are affected by the highly competitive nature of the financial services industry. We compete with community banks in all our markets and, to a lesser extent, with money center banks, primarily in the Chicago MSA. Additionally, we compete with non-bank financial services companies, FinTechs and other financial institutions operating within the areas we serve. We compete by emphasizing personalized service and efficient decision-making tailored to individual needs. We do not rely on any individual, group, or entity for a material portion of our loans or our deposits. We continue to see significant competitive pressure on loan rates and terms, as well as deposit pricing, which may affect our financial results in the future.
Previous report
Digital Banking
Previous report
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.
Previous report
Regulatory Environment and Trends
Previous report
We are subject to federal and state regulation and supervision, which continue to evolve as the legal and regulatory framework governing our operations continues to change. The current operating environment includes extensive regulation and supervision in areas such as consumer compliance, the Bank Secrecy Act and anti-money laundering compliance, risk management and internal audit. We anticipate that this environment of extensive regulation and supervision will continue for the industry. As a result, changes in the regulatory environment may result in additional costs for additional compliance, risk management and audit personnel or professional fees associated with advisors and consultants.
Previous report
FACTORS AFFECTING COMPARABILITY OF FINANCIAL RESULTS
Previous report
JOBS Act Accounting Election
Previous report
We qualify as an “emerging growth company” under the JOBS Act. The JOBS Act permits us an extended transition period for complying with new or revised accounting standards affecting public companies. The Company may remain an emerging growth company until the earliest to occur of: (1) the end of the fiscal year following the fifth anniversary of the completion of our initial public offering, which is December 31, 2024, (2) the last day of the fiscal year in which the Company has $1.235 billion or more in annual revenues, (3) the date on which the Company is deemed to be a “large accelerated filer” under the Exchange Act or (4) the date on which the Company has, during the previous three year period, issued, publicly or privately, more than $1.0 billion in non-convertible debt securities. We have elected to use the extended transition period until we are no longer an emerging growth company or until we choose to affirmatively and irrevocably opt out of the extended transition period. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies.
Previous report
The following table presents selected financial results and measures:
Previous report
•Excluding Town and Country acquisition-related expenses, noninterest expense increased by $19.2 million primarily due to the addition of Town and Country’s operations.
Previous report
Net interest income for the year ended December 31, 2023 was $191.1 million, increasing $45.2 million, or 31.0%, from the year ended December 31, 2022. The increase is primarily attributable to the increase in average interest-earning assets following the Town and Country merger and higher yields on interest-earning assets, partially offset by higher funding costs.
Previous report
In March 2020, the Federal Open Markets Committee (“FOMC”), in response to the economic downturn caused by the COVID-19 pandemic, lowered the target range for the federal funds rate to 0% to 0.25% and announced the Federal Reserve would substantially increase its Treasury and agency mortgage-backed securities holdings. This resulted in a historically low interest rate environment which lasted through the rest of 2020 and into 2021, putting downward pressure on our net interest margin over the same period.
Previous report
•A $3.8 million decrease in the mortgage servicing rights fair value adjustment, primarily due to changes in prepayment assumptions utilized in the valuations;
Previous report
•The addition of Town and Country's operations in the first quarter of 2023 contributed to a $2.1 million increase in mortgage servicing revenue, with the size of our existing mortgage servicing portfolio nearly doubling, a $0.8 million increase in service charges on deposit accounts, a $0.7 million increase in wealth management fees, and a $0.7 million increase in card income; and
Previous report
•A $0.5 million gain on foreclosed assets was recognized during 2023, primarily related to the sale of one property, compared to a $0.3 million loss on foreclosed assets during 2022.
Previous report
•Excluding Town and Country acquisition-related expenses, the $19.2 million increase in noninterest expense was mainly attributable to the addition of Town and Country’s operations, primarily related to personnel costs, occupancy of bank premises, and data processing;
Previous report
•Legal accruals totaled $1.0 million during the year ended December 31, 2023 and $8.2 million during the year ended December 31, 2022 relating to legal matters disclosed in Note 22 - Commitments and Contingencies - Legal Contingencies to the consolidated financial statements; and
Previous report
•A $1.8 million increase in amortization of intangible assets related to the addition of $22.3 million of intangible assets recognized through the Town and Country acquisition.
Previous report
•The Town and Country merger added $937.2 million in total assets, $635.4 million in loans held for investment, and $720.4 million in deposits;
Previous report
•Excluding the impact of the Town and Country merger, loan growth since December 31, 2022 was broad-based with total loans increasing $148.8 million;
Previous report
•Following the Town and Country merger, the vast majority of the securities acquired from Town and Country were sold and an additional $39.4 million of municipal securities sold during the third quarter of 2023. The proceeds were used to reduce FHLB borrowings and fund loan growth;
Previous report
•Additionally, paydowns, maturities and calls of debt securities generated another $102.6 million of proceeds which were also used to reduce FHLB borrowings and fund loan growth; and
Previous report
•Excluding the impact of the Town and Country merger, total deposits increased $94.0 million with the addition of $144.9 million of brokered deposits and $144.0 million of wealth management customer money market deposits brought on balance sheet in December 2023. These increases were partially offset by reduced balances held in existing customer deposit accounts.
Previous report
•The relative percent decrease in construction and land development loans was generally driven by the completion of a number of sizeable projects that are now amortizing and have been moved into other real estate loan categories, including the commercial real estate - non-owner occupied and multi-family categories;
Showing the first 40 of 51 passages. Open the source sections for the rest.
Reworded paragraphs (48)
Previous wording
Management’s discussion and analysis should be read in conjunction with the following parts of this Annual Report on Form 10-K: Part I, Item 1 “Business”, Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”, and Part II, Item 8 “Financial Statements and Supplementary Data”. Detailed discussion and analysis of the financial condition and results of operation for 2023 as compared to 2022 can be found below.
Current wording
Management’s discussion and analysis should be read in conjunction with the following parts of this Annual Report on Form 10-K: Part I, Item 1 “Business”, Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”, and Part II, Item 8 “Financial Statements and Supplementary Data”. Detailed discussion and analysis of the financial condition and results of operation for 2024 as compared to 2023 can be found below. Detailed discussion and analysis of the financial condition and results of operation for 2023 as compared to 2022 can be found in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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 businesses, families, and local governments throughout Illinois and Eastern Iowa. As of December 31, 2023, the Company had total assets of $5.1 billion, loans held for investment of $3.4 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 December 31, 2024, the Company had total assets of $5.0 billion, loans held for investment of $3.5 billion, and total deposits of $4.3 billion.
Previous wording
As of December 31, 2023, our branch network included 67 full-service branch locations throughout Illinois and Eastern Iowa. We hold a leading deposit share in many of our Central Illinois markets, which we define as a top three deposit share rank, providing the foundation for our strong deposit base. The stability provided by this low-cost funding is a key driver of our strong track record of financial performance. Below is a summary of our loan and deposit balances by geographic region:
Current wording
As of December 31, 2024, our branch network included 66 full-service branch locations throughout Illinois and eastern Iowa. We hold a leading deposit share in many of our central Illinois markets, which we define as a top three deposit share rank, providing the foundation for our strong deposit base. The stability provided by this low-cost funding is a key driver of our strong track record of financial performance. Below is a summary of our loan and deposit balances by geographic region:
Previous wording
Town and Country Financial Corporation
Current wording
Town and Country Financial Corporation Acquisition
Previous wording
On February 1, 2023, HBT Financial completed its acquisition of Town and Country, the holding company for Town and Country Bank. The acquisition of Town and Country further enhanced HBT Financial’s footprint in Central Illinois and expanded our footprint into metro-east St. Louis. At the time of acquisition, Town and Country Bank operated ten full-service branch locations which began operating as branches of Heartland Bank. The core system conversion was successfully completed in April 2023. After considering business combination accounting adjustments, Town and Country added total assets of $937.2 million, total loans held for investment of $635.4 million, and total deposits of $720.4 million.
Current wording
On February 1, 2023, HBT Financial completed its acquisition of Town and Country, the holding company for Town and Country Bank. The acquisition of Town and Country further enhanced HBT Financial’s footprint in central Illinois and expanded our footprint into metro-east St. Louis. At the time of acquisition, Town and Country Bank operated 10 full-service branch locations which began operating as branches of Heartland Bank. The core system conversion was successfully completed in April 2023. After considering business combination accounting adjustments, Town and Country added total assets of $937.2 million, total loans held for investment of $635.4 million, and total deposits of $720.4 million.
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.
Current 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. Total acquisition-related expenses were $13.7 million, including the recognition of an allowance for credit losses on non-purchased credit deteriorated loans (“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, during the year ended December 31, 2023 and were $1.1 million during the year ended December 31, 2022. There were no acquisition-related expenses during the year ended December 31, 2024.
Previous wording
For the year ended December 31, 2023, net income was $65.8 million, increasing by $9.4 million, or 16.6%, when compared to net income for the year ended December 31, 2022. Notable changes include the following:
Current wording
For the year ended December 31, 2024, net income was $71.8 million, increasing by $5.9 million, or 9.0%, when compared to net income for the year ended December 31, 2023. Notable changes include the following:
Previous wording
•Net losses of $1.8 million on the sale of $185.3 million of securities were realized during the year ended December 31, 2023 with the sales proceeds used to reduce FHLB borrowings and fund loan growth; and
Current wording
•Net losses of $3.7 million were realized on the sale of debt securities during the year ended December 31, 2024, compared to net losses of $1.8 million realized during the year ended December 31, 2023;
Previous wording
•A $45.2 million increase in net interest income, primarily attributable to the increase in average interest-earning assets following the Town and Country merger and higher yields on interest-earning assets, partially offset by higher funding costs;
Current wording
•A $2.2 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;
Previous wording
Net interest income equals the excess of interest income on interest earning assets (including discount accretion on acquired loans plus certain loan fees) over interest expense incurred on interest-bearing liabilities. Interest rate spread and net interest margin are utilized to measure and explain changes in net interest income. Interest rate spread is the difference between the yield on interest-earning assets and the rate paid for interest-bearing liabilities that fund those assets. The net interest margin is expressed as the percentage of net interest income to average interest-earning assets. The net interest margin exceeds the interest rate spread because noninterest-bearing sources of funds, principally noninterest-bearing demand deposits and stockholders’ equity, also support interest-earning assets.
Current wording
Net interest income equals the excess of interest income on interest earning assets (including discount accretion on acquired loans plus certain loan fees) over interest expense incurred on interest-bearing liabilities. Net interest margin, which is expressed as the percentage of net interest income to average interest-earning assets, is utilized to measure and explain changes in net interest income.
Previous wording
Net interest margin increased to 4.09% for the year ended December 31, 2023, compared to 3.54% for the year ended December 31, 2022. The increase was primarily attributable to higher yields on interest-earning assets which were partially offset by increased funding costs, driven by significant increases in market rates since early 2022. Additionally, the contribution of acquired loan discount accretion to net interest margin increased to 9 basis points during the year ended December 31, 2023, from 2 basis points during the year ended December 31, 2022.
Current wording
Net interest margin decreased to 3.96% for the year ended December 31, 2024, compared to 4.09% for the year ended December 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 was 9 basis points for each of the years ended December 31, 2024 and 2023.
Previous wording
The FOMC began raising interest rates in March 2022 and continued raising interest rates until setting the target range for the federal funds rate at 5.25% to 5.50% in its July 2023 meeting. As a result, market interest rates have also risen since March 2022 which led to improvements in our net interest margin through the first quarter of 2023. Our net interest margin decreased modestly beginning in the second quarter of 2023 as increased competition for deposits drove an increase in our funding costs. Competition for deposits continues to be elevated relative to 2022. As a result, deposit and funding costs have increased during 2023 compared to such costs in 2022 and could continue to increase. Additionally, core deposits balances may decrease and be replaced by higher cost funding sources, such as FHLB advances and brokered deposits.
Current wording
The FOMC began raising the target range for the federal funds rate in March 2022 and continued raising interest rates until its July 2023 meeting. As a result, market interest rates also rose during this time which led to improvements in our net interest margin through the first quarter of 2023. Our net interest margin decreased modestly beginning in the second quarter of 2023, as increased competition for deposits drove an increase in our funding costs. This continued during the remainder of 2023 with increases in funding costs outpacing increases in interest-earning asset yields. Our deposit balances and funding costs began to stabilize during the first quarter of 2024 while yields on loans continued to increase and debt securities continued to reprice at higher rates.
Previous wording
The following table sets forth the components of provision for credit losses for the periods indicated:
Current wording
The following table sets forth the components of provision for credit losses for the years indicated:
Previous wording
In connection with the Town and Country merger, we recognized 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. Excluding the impact of the Town and Country merger, the remaining provision for credit losses primarily reflects a $2.4 million increase in required reserves driven by growth of and changes in the loan portfolio and unfunded commitments, a $1.4 million increase in required reserves resulting from changes in economic and qualitative factors, and a $2.1 million decrease in specific reserves on individually evaluated loans.
Current wording
The Company recorded a provision for credit losses of $3.0 million for the year ended December 31, 2024. The 2024 provision for credit losses primarily reflects a $4.0 million increase in required reserves resulting from changes in qualitative factors; an $0.8 million increase in required reserves driven by changes within the loan portfolio; a $1.2 million decrease in specific reserves on individually evaluated loans; and a $0.6 million decrease in required reserves resulting from improvements in economic forecasts.
Previous wording
•Town and Country acquisition-related expenses totaled $13.7 million during the year ended December 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, compared to $1.1 million of acquisition-related expenses during the year ended December 31, 2022;
Current wording
Additionally, 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
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 wording
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 gross domestic product ("GDP") as macroeconomic variables, although other economic metrics are considered on a qualitative basis.
Previous wording
The following table sets forth the major categories of noninterest income for the periods indicated:
Current wording
The following table sets forth the major categories of noninterest income for the years indicated:
Previous wording
Total noninterest income for the year ended December 31, 2023, was $36.0 million, an increase of $1.3 million, or 3.8%, from the year ended December 31, 2022. Notable changes in noninterest income include the following:
Current wording
Total noninterest income for the year ended December 31, 2024, was $35.6 million, a decrease of $0.5 million, or 1.3%, from the year ended December 31, 2023. Notable changes in noninterest income include the following:
Previous wording
•Net losses of $1.8 million were realized on the sale of $185.3 million of debt securities during the year ended December 31, 2023. The vast majority of the securities portfolio acquired from Town and Country was sold during the first quarter of 2023 with an additional $39.4 million of municipal debt securities sold during the third quarter of 2023;
Current wording
•Net losses of $3.7 million were realized on the sale of debt securities during the year ended December 31, 2024, compared to net losses of $1.8 million realized during the year ended December 31, 2023;
Previous wording
The following table sets forth the major categories of noninterest expense for the periods indicated:
Current wording
The following table sets forth the major categories of noninterest expense for the years indicated:
Previous wording
Total noninterest expense for the year ended December 31, 2023, was $131.0 million, an increase of $25.9 million, or 24.6%, from the year ended December 31, 2022. Notable changes in noninterest expense include the following:
Current wording
Total noninterest expense for the year ended December 31, 2024, was $124.0 million, a decrease of $7.0 million, or 5.3%, from the year ended December 31, 2023. Notable changes in noninterest expense include the following:
Previous wording
•Town and Country acquisition-related noninterest expenses totaled $7.8 million and $1.1 million for the years ended December 31, 2023 and 2022, respectively;
Current wording
•There were no Town and Country acquisition-related noninterest expenses for the year ended December 31, 2024, but acquisition-related noninterest expenses totaled $7.8 million for the year ended December 31, 2023;
Previous wording
During the year ended December 31, 2023 and 2022, we recorded income tax expense of $22.7 million, or an effective tax rate of 25.7%, and $19.7 million, or an effective tax rate of 25.9%, respectively. The fluctuations in effective tax rate are primarily attributable to changes in state income taxes and changes in the proportion of federally tax-exempt interest income to pre-tax income.
Current wording
During the years ended December 31, 2024 and 2023, we recorded income tax expense of $25.6 million, or an effective tax rate of 26.3%, and $22.7 million, or an effective tax rate of 25.7%, respectively. The increase in effective tax rate during 2024 was primarily attributable to an additional $0.5 million of tax expense for a deferred tax asset write-down, as a result of an Illinois tax change, as well as changes in the proportion of federally tax-exempt interest income to pre-tax income.
Previous wording
Loans, before allowance for credit losses were $3.40 billion at December 31, 2023, an increase of $784.2 million, or 29.9%, from December 31, 2022. Excluding the impact of the Town and Country merger, total loans increased $148.8 million, or 5.7%, with the following notable changes:
Current wording
Loans, before allowance for credit losses were $3.47 billion at December 31, 2024, an increase of $61.7 million, or 1.8%, from December 31, 2023. Notable changes include the following:
Previous wording
•The increase in commercial and industrial loans was driven by new loan fundings and the purchase of four pools of loans totaling $61.0 million. Three pools include equipment finance loans purchased from a bank that originated the loans through its equipment finance division. These loans are to borrowers across multiple industries and geographic regions. The remaining pool is a 50% participation in a pool of loans originated by a financial services company with a long-standing history of originating loans to healthcare and professional service borrowers. These loans are to borrowers across multiple geographic regions.
Current wording
•During 2024, we purchased pools of commercial and industrial loans totaling $14.6 million. One pool included equipment finance loans purchased from a bank that originated the loans through its equipment finance division to borrowers across multiple industries and geographic regions. The remaining pool consisted of loans originated by a financial services company with a long-standing history of originating loans to healthcare and professional service borrowers across multiple geographic regions.
Previous wording
The following table sets forth information concerning nonperforming loans and nonperforming assets as of each of the dates indicated.
Current wording
Our nonperforming loans and nonperforming assets were as follows:
Previous wording
Total nonperforming assets were $8.7 million at December 31, 2023, increasing by $3.5 million since December 31, 2022. The increase was primarily attributable to the Town and Country merger, which added $3.8 million in nonaccrual loans and $0.3 million of foreclosed assets, and one commercial real estate - non-owner occupied retail credit moved to nonaccrual. These increases were partially offset by the sale of one larger foreclosed property. Additionally, of the $7.9 of nonperforming loans held as of December 31, 2023, $2.6 million are either wholly or partially guaranteed by the U.S. Government.
Current wording
Total nonperforming assets were $8.0 million at December 31, 2024, a slight decrease when compared to $8.7 million at December 31, 2023. The slight decrease was primarily attributable to sales of foreclosed assets and a decrease in nonaccrual one-to-four family residential loans. Additionally, of the $7.7 million of nonperforming loans held as of December 31, 2024, $1.6 million are either wholly or partially guaranteed by the U.S. Government.
Previous wording
The following table summarizes net charge-offs (recoveries) to average loans, before allowance for credit losses, by loan category.
Current wording
The following table summarizes net charge-offs (recoveries) to average loans by loan category.
Previous wording
The net charge-offs (recoveries) to average total loans ratio has remained low for several years. We believe our continuous credit monitoring and collection efforts have resulted in lower levels of loan losses, while also recognizing that favorable economic conditions prior to the COVID-19 pandemic and substantial federal economic stimulus during 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 during the COVID-19 pandemic and the relatively stable economic conditions after the pandemic have also contributed to reduced credit losses.
Previous wording
Management continues to focus on growing deposits through the Company’s relationship-driven banking philosophy and community-focused marketing programs. Additionally, the Bank continues to add and improve digital banking services to solidify deposit relationships.
Current wording
Management continues to focus on growing deposits through the Company’s relationship-driven banking philosophy and community-focused marketing programs. Additionally, we continue to add and improve digital banking services to solidify deposit relationships.
Previous wording
As of December 31, 2023 and December 31, 2022, the Bank’s uninsured deposits were estimated to be $867.7 million and $739.0 million, respectively.
Current wording
As of December 31, 2024 and 2023, the Bank’s uninsured deposits were estimated to be $949.4 million and $867.7 million, respectively.
Previous wording
Our use of FHLB advances and other borrowings was nominal during 2021, but increased during the second half of 2022 and throughout 2023 to fund increases in loan demand and to offset a decrease in deposits.
Current wording
Our use of FHLB advances and other borrowings was nominal during the first half of 2022, but increased during the second half of 2022 and throughout most of 2023 to fund increases in loan demand and to offset a decrease in deposits. Our use of FHLB advances and other borrowings returned to nominal levels during 2024, with loan demand funded primarily through cash flows from the debt securities portfolio.
Previous wording
The Holding Company, or HBT Financial on an unconsolidated basis, is a corporation separate and apart from the Bank and, therefore, it must provide for its own liquidity. As of December 31, 2023, the Holding Company had cash and cash equivalents of $17.2 million.
Current wording
The Holding Company, or HBT Financial on an unconsolidated basis, is a corporation separate and apart from the Bank and, therefore, it must provide for its own liquidity. As of December 31, 2024, the Holding Company had cash and cash equivalents of $16.2 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 years ended December 31, 2023, 2022, 2021, the Bank paid $64.0 million, $28.0 million, and $20.0 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. 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 years ended December 31, 2024, 2023, and 2022, the Bank paid $34.0 million, $64.0 million, and $28.0 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 years ended December 31, 2023, 2022, and 2021, holding company operating expenses consisted of interest expense of $5.4 million, $3.7 million, and $3.3 million, respectively, and other operating expenses of $5.5 million, $5.3 million, and $3.7 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 years ended December 31, 2024, 2023, and 2022, holding company operating expenses consisted of interest expense of $5.7 million, $5.4 million, and $3.7 million, respectively, and other operating expenses of $4.1 million, $5.5 million, and $5.3 million, respectively.
Previous wording
Additionally, the Holding Company paid $21.9 million, $18.6 million, and $16.8 million of dividends to stockholders during the years ended December 31, 2023, 2022, and 2021, 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 $24.2 million, $21.9 million, and $18.6 million of dividends to stockholders during the years ended December 31, 2024, 2023, and 2022, respectively. The Holding Company also paid $38.0 million in cash consideration in the acquisition of Town and Country during 2023.
Previous wording
In addition to meeting minimum capital requirements, the Company and the Bank must also maintain a “capital conservation buffer” to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. As of December 31, 2023 and December 31, 2022, the capital conservation buffer requirement was 2.5% of risk-weighted assets.
Current wording
In addition to meeting minimum capital requirements, the Company and the Bank must also maintain a “capital conservation buffer” to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. The capital conservation buffer requirement is 2.5% of risk-weighted assets.
Previous wording
The Company paid quarterly cash dividends of $0.17 per share during 2023, $0.16 per share during 2022, and $0.15 per share during 2021. On January 23, 2024, the Company’s Board of Directors increased the quarterly cash dividend by $0.02 per share to $0.19 per share.
Current wording
The Company paid quarterly cash dividends of $0.19 per share during 2024, $0.17 per share during 2023, and $0.16 per share during 2022. On January 21, 2025, the Company’s Board of Directors increased the quarterly cash dividend by $0.02 per share to $0.21 per share.
Previous wording
The Company repurchased 479,005 shares of its common stock at a weighted average price of $18.43 during 2023, 265,379 shares at a weighted average price of $18.02 during 2022, and 290,486 shares at a weighted average price of $16.89 during 2021. Repurchases were conducted in compliance with Rule 10b-18 and in compliance with Regulation M under the Exchange Act. On December 19, 2023, the Company’s Board of Directors approved a new stock repurchase program which authorizes the Company to repurchase up to $15.0 million of its common stock. The new stock repurchase program took effect upon the expiration of the prior stock repurchase program and expires on January 1, 2025.
Current wording
The Company repurchased 232,803 shares of its common stock at a weighted average price of $18.89 during 2024, 479,005 shares at a weighted average price of $18.43 during 2023, and 265,379 shares at a weighted average price of $18.02 during 2022. Repurchases were conducted in compliance with Rule 10b-18 and in compliance with Regulation M under the Exchange Act. On December 17, 2024, the Company’s Board of Directors approved a new stock repurchase program which authorizes the Company to repurchase up to $15.0 million of its common stock. The new stock repurchase program took effect upon the expiration of the prior stock repurchase program and expires on January 1, 2025.
Previous wording
Critical accounting estimates are those that are critical to the portrayal and understanding of the Company’s financial condition and results of operations and require management to make assumptions that are difficult, subjective or complex. These estimates involve judgments, assumptions and uncertainties that are susceptible to change. In the event that different assumptions or conditions were to prevail, and depending on the severity of such changes, the possibility of a materially different financial condition or materially different results of operations is a reasonable likelihood. Further, changes in accounting standards could impact the Company’s critical accounting estimates. The following accounting estimates could be deemed critical:
Current wording
Critical accounting estimates are those that are critical to the portrayal and understanding of the Company’s financial condition and results of operations and require management to make assumptions that are difficult, subjective, or complex. These estimates involve judgments, assumptions, and uncertainties that are susceptible to change. In the event that different assumptions or conditions were to prevail, and depending on the severity of such changes, the possibility of a materially different financial condition or materially different results of operations is a reasonable likelihood. Further, changes in accounting standards could impact the Company’s critical accounting estimates. The following accounting estimate could be deemed critical:
Showing the first 40 of 48 pairs. Open the source sections for the rest.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
(1)Includes recognition of an allowance for credit losses on non-purchase credit deteriorated ("non-PCD") loans of $5.2 million and an allowance for credit losses on unfunded commitments of $0.7 million in connection with the Town and Country merger during the first quarter of 2023 in accordance with ASC 326 which was adopted on January 1, 2023.
Previous report — wording carried elsewhere
Total consideration consisted of 1.8 million shares of HBT Financial’s common stock and $10.6 million in cash. Based upon the closing price of HBT Financial common stock of $16.27 on October 1, 2021, the aggregate consideration was approximately $39.9 million. Goodwill of $5.7 million was recorded in the acquisition.