HBT Financial (HBT) 8-KHBT Financial, Inc. Announces Second Quarter 2024 Financial Results

In addition to reporting GAAP results, the Company believes non-GAAP measures such as adjusted net income and adjusted earnings per share, which adjust for acquisition expenses, branch closure expenses, gains (losses) on closed branch premises, net earnings (losses) from closed or sold operations, charges related to termination of certain employee benefit plans, realized gains (losses) on sales of securities, and mortgage servicing rights fair value adjustments, provide investors with additional insight into its operational performance. The Company reported adjusted net income of $18.1 million, or $0.57 adjusted diluted earnings per share, for the second quarter of 2024. This compares to adjusted net income of $18.1 million, or $0.57 adjusted diluted earnings per share, for the first quarter of 2024, and adjusted net income of $18.8 million, or $0.58 adjusted diluted earnings per share, for the second quarter of 2023 (see “Reconciliation of Non-GAAP Financial Measures” tables below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures).

Net interest income for the second quarter of 2024 was $47.0 million, a slight increase of 0.7% from $46.7 million for the first quarter of 2024. The slight increase was primarily attributable to improved asset yields and growth in interest-earning assets which were mostly offset by an increase in funding costs.

Relative to the second quarter of 2023, net interest income decreased 3.8% from $48.9 million. The decrease was primarily attributable to higher funding costs which were partially offset by higher asset yields and an increase in interest-earning assets.

Noninterest income for the second quarter of 2024 was $9.6 million, an increase from $5.6 million for the first quarter of 2024. The increase was primarily attributable to the absence of $3.4 million of losses on sales of securities and $0.6 million of impairment losses related to the closure of two branches recognized during the first quarter of 2024. Additionally, seasonal changes in card income, which increased by $0.3 million, were mostly offset by a $0.2 million decrease in other noninterest income.

Noninterest expense for the second quarter of 2024 was $30.5 million, a 2.4% decrease from $31.3 million for the first quarter of 2024. The decrease was primarily attributable to a $0.3 million decrease in salaries expense, which included higher vacation accruals and payroll taxes in the first quarter of 2024, a $0.3 million decrease in occupancy expense, and a $0.3 million decrease in data processing expense.

Relative to the second quarter of 2023, noninterest expense decreased 10.2% from $34.0 million. The decrease was primarily attributable to the absence of $0.8 million of legal fees and $0.8 million of accruals related to legal matters previously disclosed as well as the absence of $0.6 million of Town and Country Financial Corporation (“Town and Country”) acquisition-related expenses incurred during the second quarter of 2023. Additionally, the realization of planned cost reductions following the Town and Country core system conversion completed in April 2023 further contributed to the decrease in noninterest expense.

Acquisition-related expenses recognized during the three and six months ended June 30, 2023 are summarized below. No Town and Country acquisition-related expenses were recognized subsequent to the second quarter of 2023.

During the second quarter of 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 increased our effective tax rate to 27.6% during the second quarter of 2024 from 25.6% during the first quarter of 2024. We expect this write-down to be earned back over several years through reduced state tax expense.

Total loans outstanding, before allowance for credit losses, were $3.39 billion at June 30, 2024, compared with $3.35 billion at March 31, 2024, and $3.24 billion at June 30, 2023. The $39.5 million increase from March 31, 2024 was primarily attributable to draws on existing construction projects and new construction loans to existing customers. In addition, growth in our municipal, consumer and other portfolio was primarily due to draws on an existing loan to a recurring borrower. The $8.4 million increase in multi-family loans was driven predominately by the completion of projects previously in the construction and land development category.

Total deposits were $4.32 billion at June 30, 2024, compared with $4.36 billion at March 31, 2024, and $4.16 billion at June 30, 2023. The $41.9 million decrease from March 31, 2024 was primarily attributable to a $25.8 million decrease in brokered deposits and a $16.1 million decrease in higher cost reciprocal wealth management customer deposits included with money market deposits. Partially offsetting these decreases was a $31.1 million increase in time deposits from a State of Illinois loan matching program, a lower cost source of funding, which totaled $65.0 million as of June 30, 2024.

Nonperforming loans totaled $8.4 million, or 0.25% of total loans, at June 30, 2024, compared with $9.7 million, or 0.29% of total loans, at March 31, 2024, and $7.5 million, or 0.23% of total loans, at June 30, 2023. Additionally, of the $8.4 million of nonperforming loans held as of June 30, 2024, $2.1 million is either wholly or partially guaranteed by the U.S. government. The $1.2 million decrease in nonperforming loans from March 31, 2024 was primarily attributable to a $0.4 million reduction in nonaccrual one-to-four family residential loans as well as charge-offs.

The Company recorded a provision for credit losses of $1.2 million for the second quarter of 2024. The 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.

The Company had net charge-offs of $0.7 million, or 0.08% of average loans on an annualized basis, for the second quarter of 2024, compared to net recoveries of $0.2 million, or 0.02% of average loans on an annualized basis, for the first quarter of 2024, and net recoveries of $0.1 million, or 0.01% of average loans on an annualized basis, for the second quarter of 2023. During the second quarter of 2024, net charge-offs were primarily recognized in the commercial and industrial category, which had $0.5 million of net charge-offs, and the multi-family category, which had $0.2 million of net charge-offs.

The Company’s allowance for credit losses was 1.21% of total loans and 484% of nonperforming loans at June 30, 2024, compared with 1.22% of total loans and 423% of nonperforming loans at March 31, 2024. In addition, the allowance for credit losses on unfunded lending-related commitments totaled $4.3 million as of June 30, 2024, compared with $3.8 million as of March 31, 2024.

As of June 30, 2024, the Company exceeded all regulatory capital requirements under Basel III as summarized in the following table:

During the second quarter of 2024, the Company repurchased 53,522 shares of its common stock at a weighted average price of $18.74 under its stock repurchase program. The Company’s Board of Directors has authorized the repurchase of up to $15 million of HBT Financial common stock under its stock repurchase program, which is in effect until January 1, 2025. As of June 30, 2024, the Company had $10.6 million remaining under the stock repurchase program.

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. HBT Financial provides a comprehensive suite of financial products and services to consumers, businesses, and municipal entities throughout Illinois and eastern Iowa through 66 full-service branches. As of June 30, 2024, HBT Financial had total assets of $5.0 billion, total loans of $3.4 billion, and total deposits of $4.3 billion.

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), efficiency ratio (tax-equivalent basis), ratio of tangible common equity to tangible assets, tangible book value per share, ROATCE, adjusted net income, adjusted earnings per share, adjusted ROAA, adjusted ROAE, and adjusted ROATCE. 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.

Readers should note that in addition to the historical information contained herein, this press release contains, and future oral and written statements of the Company and its management may contain, “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. 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,” “continue,” or “should,” 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.

Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to: (i) the strength of the local, state, national and international economies (including effects of inflationary pressures and supply chain constraints); (ii) the economic impact of any future terrorist threats and attacks, widespread disease or pandemics, acts of war or other threats thereof (including the Israeli-Palestinian conflict and the Russian invasion of Ukraine), or other adverse external events that could cause economic deterioration or instability in credit markets, and the response of the local, state and national governments to any such adverse external events; (iii) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies, the Financial Accounting Standards Board or the Public Company Accounting Oversight Board; (iv) changes in state and federal laws, regulations and governmental policies concerning the Company’s general business and any changes in response to the recent failures of other banks or as a result of the upcoming 2024 presidential election; (v) changes in interest rates and prepayment rates of the Company’s assets (including the effects of sustained, elevated interest rates); (vi) increased competition in the financial services sector, including from non-bank competitors such as credit unions and “fintech” companies, and the inability to attract new customers; (vii) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (viii) unexpected results of acquisitions, which may include failure to realize the anticipated benefits of acquisitions and the possibility that transaction costs may be greater than anticipated; (ix) the loss of key executives or employees; (x) changes in consumer spending; (xi) unexpected outcomes of existing or new litigation involving the Company; (xii) the economic impact of exceptional weather occurrences such as tornadoes, floods and blizzards; (xiii) fluctuations in the value of securities held in our securities portfolio; (xiv) concentrations within our loan portfolio (including commercial real estate loans), large loans to certain borrowers, and large deposits from certain clients; (xv) the concentration of large deposits from certain clients who have balances above current FDIC insurance limits and may withdraw

deposits to diversify their exposure; (xvi) the level of non-performing assets on our balance sheets; (xvii) interruptions involving our information technology and communications systems or third-party servicers; (xviii) breaches or failures of our information security controls or cybersecurity-related incidents, and (xix) the ability of the Company to manage the risks associated with the foregoing as well as anticipated. 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. Additional information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in the Company’s filings with the Securities and Exchange Commission.