HBT Financial, Inc. Announces Third Quarter 2019 Financial Results

Third Quarter Highlights

• Net income of $17.4 million; Return on average assets (ROAA) of 2.18%; return on average stockholders' equity (ROAE) of 20.00%; and return on average tangible common equity (ROATCE)⁽¹⁾ of 21.76%
  
  
• C Corp equivalent net income of $13.1 million; C Corp equivalent ROAA of 1.64%; C Corp equivalent ROAE of 15.05%; and C Corp equivalent ROATCE⁽¹⁾ of 16.37%
  
  
• Adjusted C Corp equivalent net income⁽¹⁾ of $14.3 million; adjusted C Corp equivalent ROAA⁽¹⁾ of 1.79%; adjusted C Corp equivalent ROAE⁽¹⁾ of 16.45%; and adjusted C Corp equivalent ROATCE⁽¹⁾ of 17.90%
  
  
• Initial public offering priced on October 10, 2019
  

(1)   See "Non-GAAP Financial Measures" and "Reconciliation of Non-GAAP Financial Measures" below for a discussion of non-GAAP financial measures and reconciliations to GAAP financial measures.

BLOOMINGTON, Ill., Nov. 06, 2019 (GLOBE NEWSWIRE) -- HBT Financial, Inc. HBT (the "Company" or "HBT Financial"), the holding company for Heartland Bank and Trust Company and State Bank of Lincoln, today reported net income of $17.4 million, or $0.97 diluted earnings per share, for the third quarter of 2019.  This compares to net income of $14.6 million, or $0.81 diluted earnings per share, for the second quarter of 2019, and net income of $17.6 million, or $0.98 diluted earnings per share, for the third quarter of 2018.

Fred L. Drake, Chairman and Chief Executive Officer of HBT Financial, said, "Our third quarter results reflect continued execution on our strategy of prudent growth, disciplined expense management, and strong asset quality.  This formula continues to produce a superior level of profitability.  We are very pleased to have completed our initial public offering.  Becoming a public company is an important next chapter in our history, but our focus remains squarely on understanding our clients' needs and delivering the products and services that help them achieve their financial goals.  By remaining consistent with our core values, we believe that we will continue to enhance the value of our franchise over the long term."

C Corp Equivalent Net Income and Adjusted C Corp Equivalent Net Income

The Company has historically operated as an S Corporation for U.S. federal and state income tax purposes.  Following the completion of the initial public offering, the Company will be treated as a C Corporation ("C Corp") for federal and state income tax purposes.  For comparison, the Company reports its C Corp equivalent financial results, which does not reflect the additional shares issued in the initial public offering (the "IPO") for periods prior to the IPO.

For the third quarter of 2019, the Company reported C Corp equivalent net income of $13.1 million, or $0.73 diluted earnings per share.  This compares to C Corp equivalent net income of $11.1 million, or $0.62 diluted earnings per share, for the second quarter of 2019, and C Corp equivalent net income of $13.2 million, or $0.73 diluted earnings per share, for the third quarter of 2018.

In addition to reporting C Corp equivalent results, the Company believes adjusted C Corp equivalent results, which adjust for mortgage servicing right fair value adjustments, gains (losses) on sales of securities, and certain non-recurring items, provide investors with additional insight into its operational performance. The Company reported adjusted C Corp equivalent net income of $14.3 million, or $0.80 diluted earnings per share, for the third quarter of 2019.  This compares to adjusted C Corp equivalent net income of $14.3 million, or $0.79 diluted earnings per share, for the second quarter of 2019, and adjusted C Corp equivalent net income of $13.1 million, or $0.73 diluted earnings per share, for the third quarter of 2018 (see "Reconciliation of GAAP to Non-GAAP Financial Measures" tables).

Net Interest Income

Net interest income for the third quarter of 2019 was $33.1 million, a decrease of 2.3% from $33.9 million for the second quarter of 2019. The decrease was primarily attributable to a decline in net interest margin.

Relative to the third quarter of 2018, net interest income increased $0.5 million, or 1.7%.  The increase was primarily attributable to a higher net interest margin.

Net Interest Margin

Net interest margin for the third quarter of 2019 was 4.31%, compared to 4.36% for the second quarter of 2019.  The decrease was primarily attributable to a decline in average loan yields.

Relative to the third quarter of 2018, net interest margin increased from 4.22%. The increase was primarily attributable to higher loan and securities yields.

The Federal Open Market Committee lowered Federal Funds Target rates for the first time in 11 years on July 31, 2019 and then again in September 2019 and October 2019, for a combined decrease of 75 basis points which we expect to continue to put downward pressure on our net interest margin.

Noninterest Income

Noninterest income for the third quarter of 2019 was $7.6 million, an increase of 3.2% from $7.3 million for the second quarter of 2019.  The growth was primarily attributable to increases in service charges on deposit accounts, wealth management fees, and gain on sale of mortgage loans. Partially offsetting these increases were lower gains on foreclosed and other assets and modest securities losses.

In the third quarter of 2019, the Company recorded a fair value adjustment to mortgage servicing rights that negatively impacted noninterest income by $860,000, compared to a fair value adjustment that negatively impacted noninterest income by $1.1 million in the second quarter of 2019.

Relative to the third quarter of 2018, noninterest income decreased 9.8% from $8.4 million.  The decline was attributable to a larger negative fair value adjustment to mortgage servicing rights in the third quarter of 2019, the loss of revenue from title insurance activities, and unfavorable market value adjustments on equity securities between the two quarters.

Noninterest Expense

Noninterest expense for the third quarter of 2019 was $22.3 million, compared with $24.6 million for the second quarter of 2019.  The decrease was primarily attributable to lower employee benefits expense, as second quarter of 2019 results included a $3.3 million charge associated with the termination of the supplemental executive retirement plan (SERP) compared to the third quarter of 2019 which included a charge of $0.8 million associated with the termination of the SERP.

Relative to the third quarter of 2018, noninterest expense increased 1.7% from $21.9 million. The increase was primarily due to a $0.8 million charge during the third quarter of 2019 associated with the termination of the SERP which was not present during the third quarter of 2018.

Loan Portfolio

Total gross loans outstanding were $2.17 billion at September 30, 2019, compared with $2.20 billion at June 30, 2019 and $2.14 billion at September 30, 2018.  The $32.1 million decline in loans from June 30, 2019 was primarily due to the following items:

• A $26.0 million decrease in construction and land development balances resulting from the payoff of a number of large construction loans following the completion and sale of the projects by borrowers.  Total outstanding commitments for construction and land development loans were approximately the same at both period ends.
• A $11.7 million decrease in balances on lines of credit to grain elevator customers, which is a typical seasonal decline in the third quarter.
• $8.3 million in payoffs and paydowns of non-performing loans during the quarter.

Deposits

Total deposits were $2.70 billion at September 30, 2019, compared with $2.77 billion at June 30, 2019, and $2.74 billion at September 30, 2018.  The $69.7 million decrease in total deposits from June 30, 2019 was primarily due to the following items:

• A $30.3 million decrease in time deposits, as the Company continues to deemphasize higher cost deposit categories.
• A planned decrease of $22.6 million in one higher priced interest-bearing demand account.

Asset Quality

Nonperforming loans totaled $19.1 million, or 0.88% of total loans, at September 30, 2019, compared with $25.1 million, or 1.14% of total loans, at June 30, 2019, and $21.4 million, or 1.00% of total loans, at September 30, 2018.

Net charge-offs for the third quarter of 2019 were $0.5 million, or 0.08% of average loans on an annualized basis.

The Company recorded a provision for loan losses of $0.7 million for the third quarter of 2019, which was primarily driven by the level of net charge-offs in the quarter.  The Company's allowance for loan losses was 1.05% of total loans and 119.34% of nonperforming loans at September 30, 2019, compared with 1.02% of total loans and 89.98% of nonperforming loans at June 30, 2019.

Capital

At September 30, 2019, the Company exceeded all regulatory capital requirements under Basel III and was considered to be ‘‘well-capitalized'', as summarized in the following table:

                                               
(1) see "Reconciliation of Non-GAAP Financial Measures" tables

Completion of Initial Public Offering

On October 10, 2019, the Company priced its initial public offering (the "IPO"), and issued 8,300,000 shares of its common stock at a price to the public of $16.00 per share on October 16, 2019.  On October 29, 2019, the underwriters purchased an additional 1,129,794 shares pursuant to the exercise of their option to purchase additional shares from HBT Financial at the initial public offering price, less underwriting discounts and commissions. In total, HBT sold 9,429,794 shares of common stock in the initial public offering, raising total net proceeds, after deducting estimated underwriting discounts and commissions and offering expenses payable by the Company, of approximately $138 million.

On October 22, 2019, the Company paid a $170 million distribution to its pre-IPO stockholders, using the net proceeds of the initial public offering and the proceeds of dividends from Heartland Bank and Trust Company and State Bank of Lincoln.

About HBT Financial, Inc.

HBT Financial, Inc. is headquartered in Bloomington, Illinois and is the holding company for Heartland Bank and Trust Company and State Bank of Lincoln. The banks provide a comprehensive suite of business, commercial, wealth management and retail banking products and services to businesses, families and local governments throughout Central and Northeastern Illinois through 64 branches. As of September 30, 2019, HBT had total assets of $3.2 billion, total loans of $2.2 billion, and total deposits of $2.7 billion. HBT is a longstanding Central Illinois company, with banking roots that can be traced back nearly 100 years.

Non-GAAP Financial Measures

Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with GAAP.  These non-GAAP financial measures include net interest income (tax-equivalent basis), net interest margin (tax-equivalent basis), originated loans and acquired loans, efficiency ratio (tax-equivalent basis), tangible common equity to tangible assets, adjusted C Corp equivalent net income, adjusted C Corp equivalent return on average assets, adjusted C Corp equivalent return on average stockholders' equity, and adjusted C Corp equivalent return on average tangible common equity. Our management uses these non-GAAP financial measures, together with the related GAAP financial measures, in its analysis of our performance and in making business decisions. Management believes that it is a standard practice in the banking industry to present these non-GAAP financial measures, and accordingly believes that providing these measures may be useful for peer comparison purposes. These disclosures should not be viewed as substitutes for the results determined to be in accordance with GAAP; nor are they necessarily comparable to non-GAAP financial measures that may be presented by other companies. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures in the "Reconciliation of Non-GAAP Financial Measures" tables.

Forward-Looking Statements

Readers should note that in addition to the historical information contained herein, this press release includes "forward-looking statements" within the meanings of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited to statements about the Company's plans, objectives, future performance, goals and future earnings levels.  These statements are subject to many risks and uncertainties, including changes in interest rates and other general economic, business and political conditions, including changes in the financial markets; changes in business plans as circumstances warrant; risks relating to acquisitions; and other risks detailed from time to time in filings made by the Company with the Securities and Exchange Commission.  Readers should note that the forward-looking statements included in this press release are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements.  Forward-looking statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe" or "continue," or similar terminology.  Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

CONTACT:
Matthew Keating
HBTIR@hbtbank.com
(310) 622-8230

HBT Financial, Inc.
Consolidated Financial Summary
Consolidated Statements of Income

HBT Financial, Inc.
Consolidated Financial Summary
Consolidated Balance Sheets

HBT Financial, Inc.
Consolidated Financial Summary

HBT Financial, Inc.
Consolidated Financial Summary

                                            
(1) See "Reconciliation of Non-GAAP Financial Information" below for reconciliation of non-GAAP measure to their most comparable GAAP measures.
(2) Annualized measure.
(3) On a C Corp tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%.
(4) Net interest margin represents net interest income divided by average total interest-earning assets.
(5) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities
(6) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

HBT Financial, Inc.
Consolidated Financial Summary

                                                 
(1) See "Reconciliation of Non-GAAP Financial Information" below for reconciliation of non-GAAP measure to their most comparable GAAP measures.
(2) Annualized measure.
(3) On a C Corp tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%.
(4) Net interest margin represents net interest income divided by average total interest-earning assets.
(5) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities
(6) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

HBT Financial, Inc.
Consolidated Financial Summary

                                                 
(1) Excludes loans acquired with deteriorated credit quality that are past due 90 or more days totaling $0.7 million, $0.5 million, $2.5 million, $2.7 million, and $2.9 million as of September 30, 2019, June 30, 2019, March 30, 2019, December 31, 2018, September 30, 2018, respectively.
(2) Originated loans and acquired loans along with the related credit quality ratios such as net charge-offs to average loans (originated and acquired), nonperforming loans to total loans (originated and acquired), and nonperforming assets to total loans and other real estate owned (originated and acquired) are non-GAAP financial measures. Originated loans represent loans initially originated by the Company and acquired loans that were refinanced using the Company's underwriting criteria. Acquired loans represent loans originated under the underwriting criteria used by a bank that was acquired by Heartland Bank and Trust Company or State Bank of Lincoln. We believe these non-GAAP financial measures provide investors with information regarding the credit quality of loans underwritten using the Company's policies and procedures.

HBT Financial, Inc.
Consolidated Financial Summary

                                                 
(1) Originated loans and acquired loans along with the related credit quality ratios such as net charge-offs to average loans (originated and acquired), nonperforming loans to total loans (originated and acquired), and nonperforming assets to total loans and other real estate owned (originated and acquired) are non-GAAP financial measures. Originated loans represent loans initially originated by the Company and acquired loans that were refinanced using the Company's underwriting criteria. Acquired loans represent loans originated under the underwriting criteria used by a bank that was acquired by Heartland Bank and Trust Company or State Bank of Lincoln. We believe these non-GAAP financial measures provide investors with information regarding the credit quality of loans underwritten using the Company's policies and procedures.

HBT Financial, Inc.
Consolidated Financial Summary