UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20192022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-39085
HBT Financial, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 37-1117216 |
|
|
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| |
401 North Hershey Rd Bloomington, Illinois61704 |
|
(Address of principal executive offices, | (Registrant’s telephone number, |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.01 per share | HBT | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐☒ No ☒☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer |
|
| | | |
Non-accelerated filer |
| Smaller reporting company |
|
| | | |
Emerging growth company | ☒ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 20, 2019,2, 2022, there were 27,457,30628,752,626 shares outstanding of the registrant’s common stock, $0.01 par value.
TABLE OF CONTENTS
HBT Financial, Inc.
| Page | ||
| | | |
| 3 | ||
| 3 | ||
| Consolidated Balance Sheets | | 3 |
| Consolidated Statements of Income | | 4 |
| | 5 | |
| | 6 | |
| Consolidated Statements of Cash Flows | | 8 |
| | 10 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 52 | |
| 86 | ||
| 87 | ||
| 88 | ||
| 88 | ||
| 88 | ||
| 88 | ||
| 88 | ||
| 89 | ||
| 89 | ||
| 89 | ||
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this quarterly report are forward-looking statements. Forward-looking statements may include statements relating to our plans, strategies and expectations, the economic impact of the COVID-19 pandemic and our future financial results, near-term loan growth, net interest margin, mortgage banking profits, wealth management fees, expenses, asset quality, capital levels, continued earnings, and liquidity. Forward-looking statements are generally identifiable by use of the words "believe," "may," "will," "should," "could," "expect," "estimate," "intend," "anticipate," "project," "plan" or similar expressions. Forward-looking statements are frequently based on assumptions that may or may not materialize and are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that could cause actual results to differ materially from the results anticipated or projected and which could materially and adversely affect our operating results, financial condition or prospects include, but are not limited to:
| ● | the strength of the local, state, national and international economies (including effects of inflationary pressures and supply chain constraints); |
| ● | the economic impact of any future terrorist threats and attacks, widespread disease or pandemics (including the COVID-19 pandemic in the United States), acts of war or other threats thereof, 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; |
| ● | our asset quality and any loan charge-offs; |
| ● | the composition of our loan portfolio; |
| ● | environmental liability associated with our lending activities; |
| ● | the effects of changes in interest rates on our net interest income, net interest margin, our investments, our loan originations, and our modeling estimates relating to interest rate changes; |
| ● | changes in and uncertainty related to benchmark interest rates used to price our loans, including the elimination of the London Interbank Offered Rate (“LIBOR”); |
| ● | our access to sources of liquidity and capital to address our liquidity needs; |
| ● | our inability to receive dividends from the Bank, pay dividends to our common stockholders or satisfy obligations as they become due; |
| ● | the effects of problems encountered by other financial institutions; |
| ● | our ability to achieve organic loan and deposit growth and the composition of such growth; |
| ● | our ability to attract and retain skilled employees or changes in our management personnel; |
| ● | any failure or interruption of our information and communications systems; |
| ● | our ability to identify and address cybersecurity risks; |
| ● | the effects of the failure of any component of our business infrastructure provided by a third party; |
| ● | our ability to keep pace with technological changes; |
| ● | our ability to successfully develop and commercialize new or enhanced products and services; |
| ● | current and future business, economic and market conditions in the United States (“U.S.”) generally or in the States of Illinois and Iowa in particular; |
| ● | the geographic concentration of our operations in the States of Illinois and Iowa; |
| ● | our ability to effectively compete with other financial services companies and the effects of competition in the financial services industry on our business; |
| ● | our ability to attract and retain customer deposits; |
| ● | our ability to maintain the Bank’s reputation; |
| ● | possible impairment of our goodwill and other intangible assets; |
| ● | the impact of, and changes in applicable laws, regulations and accounting standards and policies; |
| ● | our prior status as an S corporation; |
| ● | possible changes in trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar organizations; |
| ● | the effectiveness of our risk management and internal disclosure controls and procedures; |
| ● | market perceptions associated with certain aspects of our business; |
| ● | our ability to meet our obligations as a public company, including our obligations under Section 404 of the Sarbanes-Oxley Act of 2002; |
1
| ● | damage to our reputation from any of the factors described above; |
| ● | our success at managing the risks involved in the foregoing items; and |
| ● | the factors discussed in “Risk Factors”, "Management's Discussion and Analysis of Financial Condition and Results of Operations" or elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange (“SEC”) Commission on March 11, 2022. |
These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Forward-looking statements speak only as of the date they are made. We do not undertake any obligation to update any forward-looking statement in the future, or to reflect circumstances and events that occur after the date on which the forward-looking statement was made.
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
HBT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
|
|
|
|
|
|
|
|
| (Unaudited) September 30, 2019 |
| December 31, 2018 | ||
|
| (dollars in thousands) | ||||
ASSETS |
|
|
| |||
Cash and due from banks |
| $ | 19,969 |
| $ | 21,343 |
Interest-bearing deposits with banks |
|
| 134,972 |
|
| 165,536 |
Cash and cash equivalents |
|
| 154,941 |
|
| 186,879 |
|
|
|
|
|
|
|
Interest-bearing time deposits with banks |
|
| 248 |
|
| 248 |
Securities available-for-sale, at fair value |
|
| 618,120 |
|
| 679,526 |
Securities held-to-maturity (fair value of $102,378 in 2019 and $121,506 in 2018) |
|
| 99,861 |
|
| 121,715 |
Equity securities |
|
| 4,436 |
|
| 3,261 |
Restricted stock, at cost |
|
| 2,425 |
|
| 2,719 |
Loans held for sale |
|
| 7,608 |
|
| 2,800 |
Loans, net of allowance for loan losses of $22,761 in 2019 and $20,509 in 2018 |
|
| 2,148,253 |
|
| 2,123,748 |
Bank premises and equipment, net |
|
| 54,105 |
|
| 54,736 |
Bank premises held for sale |
|
| 121 |
|
| 749 |
Foreclosed assets |
|
| 6,574 |
|
| 9,559 |
Goodwill |
|
| 23,620 |
|
| 23,620 |
Core deposit intangible assets, net |
|
| 4,366 |
|
| 5,453 |
Mortgage servicing rights, at fair value |
|
| 7,936 |
|
| 10,918 |
Investments in unconsolidated subsidiaries |
|
| 1,165 |
|
| 1,165 |
Accrued interest receivable |
|
| 14,816 |
|
| 15,300 |
Other assets |
|
| 18,018 |
|
| 7,173 |
Total assets |
| $ | 3,166,613 |
| $ | 3,249,569 |
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
Noninterest-bearing |
| $ | 649,316 |
| $ | 664,876 |
Interest-bearing |
|
| 2,054,742 |
|
| 2,131,094 |
Total deposits |
|
| 2,704,058 |
|
| 2,795,970 |
|
|
|
|
|
|
|
Securities sold under agreements to repurchase |
|
| 32,267 |
|
| 46,195 |
Subordinated debentures |
|
| 37,566 |
|
| 37,517 |
Other liabilities |
|
| 43,786 |
|
| 29,491 |
Total liabilities |
|
| 2,817,677 |
|
| 2,909,173 |
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Notes 8 and 16) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity |
|
|
|
|
|
|
Common stock: |
|
|
|
|
|
|
Voting - $0.01 par value, 5,000,000 shares authorized, 315,780 shares issued, 268,312 shares outstanding |
|
| 3 |
|
| 3 |
Series A nonvoting - $0.01 par value, 120,000,000 shares authorized, 17,835,960 shares issued, 17,759,200 shares outstanding |
|
| 178 |
|
| 178 |
Surplus |
|
| 32,288 |
|
| 32,288 |
Retained earnings |
|
| 311,055 |
|
| 315,234 |
Accumulated other comprehensive income (loss) |
|
| 8,431 |
|
| (4,288) |
Less cost of treasury stock held: |
|
|
|
|
|
|
Voting - 47,468 shares |
|
| (1,667) |
|
| (1,667) |
Series A nonvoting - 76,760 shares |
|
| (1,352) |
|
| (1,352) |
Total stockholders’ equity |
|
| 348,936 |
|
| 340,396 |
Total liabilities and stockholders’ equity |
| $ | 3,166,613 |
| $ | 3,249,569 |
| | | | | | |
|
| (Unaudited) |
| | ||
| | September 30, | | December 31, | ||
| | 2022 | | 2021 | ||
ASSETS | | | | | | |
Cash and due from banks | | $ | 22,169 | | $ | 23,387 |
Interest-bearing deposits with banks | | | 56,046 | | | 385,881 |
Cash and cash equivalents | | | 78,215 | | | 409,268 |
| | | | | | |
Interest-bearing time deposits with banks | | | — | | | 490 |
Debt securities available-for-sale, at fair value | | | 853,740 | | | 942,168 |
Debt securities held-to-maturity (fair value of $481,692 in 2022 and $336,027 in 2021) | | | 546,694 | | | 336,185 |
Equity securities with readily determinable fair value | | | 2,996 | | | 3,443 |
Equity securities with no readily determinable fair value | | | 1,977 | | | 1,927 |
Restricted stock, at cost | | | 4,050 | | | 2,739 |
Loans held for sale | | | 2,297 | | | 4,942 |
| | | | | | |
Loans, before allowance for loan losses | | | 2,579,928 | | | 2,499,689 |
Allowance for loan losses | | | (25,060) | | | (23,936) |
Loans, net of allowance for loan losses | | | 2,554,868 | | | 2,475,753 |
| | | | | | |
Bank owned life insurance | | | 7,515 | | | 7,393 |
Bank premises and equipment, net | | | 50,854 | | | 52,483 |
Bank premises held for sale | | | 281 | | | 1,452 |
Foreclosed assets | | | 2,637 | | | 3,278 |
Goodwill | | | 29,322 | | | 29,322 |
Core deposit intangible assets, net | | | 1,210 | | | 1,943 |
Mortgage servicing rights, at fair value | | | 10,440 | | | 7,994 |
Investments in unconsolidated subsidiaries | | | 1,165 | | | 1,165 |
Accrued interest receivable | | | 16,881 | | | 14,901 |
Other assets | | | 48,182 | | | 17,408 |
Total assets | | $ | 4,213,324 | | $ | 4,314,254 |
| | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | |
Liabilities | | | | | | |
Deposits: | | | | | | |
Noninterest-bearing | | $ | 1,017,710 | | $ | 1,087,659 |
Interest-bearing | | | 2,625,733 | | | 2,650,526 |
Total deposits | | | 3,643,443 | | | 3,738,185 |
| | | | | | |
Securities sold under agreements to repurchase | | | 48,130 | | | 61,256 |
Federal Home Loan Bank advances | | | 60,000 | | | — |
Subordinated notes | | | 39,376 | | | 39,316 |
Junior subordinated debentures issued to capital trusts | | | 37,763 | | | 37,714 |
Other liabilities | | | 25,539 | | | 25,902 |
Total liabilities | | | 3,854,251 | | | 3,902,373 |
| | | | | | |
COMMITMENTS AND CONTINGENCIES (Note 14) | | | | | | |
| | | | | | |
Stockholders' Equity | | | | | | |
Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued or outstanding | | | — | | | — |
Common stock, $0.01 par value; 125,000,000 shares authorized; shares issued of 29,308,491 at 2022 and 29,276,547 at 2021; shares outstanding of 28,752,626 at 2022 and 28,986,061 at 2021 | | | 293 | | | 293 |
Surplus | | | 222,436 | | | 220,891 |
Retained earnings | | | 223,495 | | | 194,132 |
Accumulated other comprehensive income (loss) | | | (77,462) | | | 1,471 |
Treasury stock at cost, 555,865 shares at 2022 and 290,486 at 2021 | | | (9,689) | | | (4,906) |
Total stockholders’ equity | | | 359,073 | | | 411,881 |
Total liabilities and stockholders’ equity | | $ | 4,213,324 | | $ | 4,314,254 |
See accompanying Notes to Consolidated Financial Statements (Unaudited)
13
HBT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | ||||||||
| | 2022 |
| 2021 |
| 2022 |
| 2021 | | ||||
INTEREST AND DIVIDEND INCOME | | (dollars in thousands, except per share data) | | ||||||||||
Loans, including fees: | | | | | | | | | | | | | |
Taxable | | $ | 29,855 | | $ | 25,604 | | $ | 84,504 | | $ | 76,016 | |
Federally tax exempt | | | 842 | | | 572 | | | 2,183 | | | 1,722 | |
Securities: | | | | | | | | | | | | | |
Taxable | | | 6,635 | | | 4,632 | | | 16,947 | | | 12,323 | |
Federally tax exempt | | | 1,207 | | | 1,103 | | | 3,385 | | | 3,383 | |
Interest-bearing deposits in bank | | | 458 | | | 190 | | | 1,037 | | | 385 | |
Other interest and dividend income | | | 17 | | | 14 | | | 50 | | | 39 | |
Total interest and dividend income | | | 39,014 | | | 32,115 | | | 108,106 | | | 93,868 | |
| | | | | | | | | | | | | |
INTEREST EXPENSE | | | | | | | | | | | | | |
Deposits | | | 587 | | | 564 | | | 1,662 | | | 1,821 | |
Securities sold under agreements to repurchase | | | 9 | | | 8 | | | 26 | | | 23 | |
Borrowings | | | 85 | | | 1 | | | 87 | | | 2 | |
Subordinated notes | | | 470 | | | 470 | | | 1,409 | | | 1,409 | |
Junior subordinated debentures issued to capital trusts | | | 473 | | | 357 | | | 1,231 | | | 1,069 | |
Total interest expense | | | 1,624 | | | 1,400 | | | 4,415 | | | 4,324 | |
Net interest income | | | 37,390 | | | 30,715 | | | 103,691 | | | 89,544 | |
PROVISION FOR LOAN LOSSES | | | 386 | | | (1,667) | | | (53) | | | (7,234) | |
Net interest income after provision for loan losses | | | 37,004 | | | 32,382 | | | 103,744 | | | 96,778 | |
| | | | | | | | | | | | | |
NONINTEREST INCOME | | | | | | | | | | | | | |
Card income | | | 2,569 | | | 2,509 | | | 7,687 | | | 7,216 | |
Wealth management fees | | | 2,059 | | | 2,036 | | | 6,670 | | | 6,013 | |
Service charges on deposit accounts | | | 1,927 | | | 1,677 | | | 5,371 | | | 4,364 | |
Mortgage servicing | | | 697 | | | 699 | | | 2,016 | | | 2,095 | |
Mortgage servicing rights fair value adjustment | | | 351 | | | 40 | | | 2,446 | | | 1,425 | |
Gains on sale of mortgage loans | | | 354 | | | 1,257 | | | 1,267 | | | 4,919 | |
Unrealized gains (losses) on equity securities | | | (107) | | | 28 | | | (447) | | | 74 | |
Gains (losses) on foreclosed assets | | | (225) | | | (14) | | | (192) | | | 126 | |
Gains (losses) on other assets | | | (31) | | | (672) | | | 119 | | | (719) | |
Income on bank owned life insurance | | | 41 | | | — | | | 122 | | | — | |
Other noninterest income | | | 599 | | | 832 | | | 1,769 | | | 2,461 | |
Total noninterest income | | | 8,234 | | | 8,392 | | | 26,828 | | | 27,974 | |
| | | | | | | | | | | | | |
NONINTEREST EXPENSE | | | | | | | | | | | | | |
Salaries | | | 12,752 | | | 11,835 | | | 38,489 | | | 36,486 | |
Employee benefits | | | 1,771 | | | 1,455 | | | 6,199 | | | 4,549 | |
Occupancy of bank premises | | | 1,979 | | | 1,610 | | | 5,780 | | | 5,011 | |
Furniture and equipment | | | 668 | | | 657 | | | 1,843 | | | 1,883 | |
Data processing | | | 1,631 | | | 1,767 | | | 5,274 | | | 5,176 | |
Marketing and customer relations | | | 880 | | | 883 | | | 2,936 | | | 2,291 | |
Amortization of intangible assets | | | 243 | | | 252 | | | 733 | | | 799 | |
FDIC insurance | | | 302 | | | 279 | | | 888 | | | 763 | |
Loan collection and servicing | | | 336 | | | 400 | | | 771 | | | 1,098 | |
Foreclosed assets | | | 97 | | | 242 | | | 260 | | | 704 | |
Other noninterest expense | | | 3,339 | | | 2,787 | | | 8,824 | | | 8,105 | |
Total noninterest expense | | | 23,998 | | | 22,167 | | | 71,997 | | | 66,865 | |
INCOME BEFORE INCOME TAX EXPENSE | | | 21,240 | | | 18,607 | | | 58,575 | | | 57,887 | |
INCOME TAX EXPENSE | | | 5,613 | | | 4,892 | | | 15,259 | | | 15,210 | |
NET INCOME | | $ | 15,627 | | $ | 13,715 | | $ | 43,316 | | $ | 42,677 | |
| | | | | | | | | | | | | |
EARNINGS PER SHARE - BASIC | | $ | 0.54 | | $ | 0.50 | | $ | 1.50 | | $ | 1.56 | |
EARNINGS PER SHARE - DILUTED | | $ | 0.54 | | $ | 0.50 | | $ | 1.49 | | $ | 1.56 | |
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING | | | 28,787,662 | | | 27,340,926 | | | 28,887,757 | | | 27,377,809 | |
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
INTEREST AND DIVIDEND INCOME |
| (dollars in thousands, except per share amounts) | ||||||||||
Loans, including fees: |
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
| $ | 29,308 |
| $ | 28,226 |
| $ | 89,257 |
| $ | 82,724 |
Federally tax exempt |
|
| 684 |
|
| 749 |
|
| 2,130 |
|
| 1,981 |
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
| 3,572 |
|
| 3,619 |
|
| 11,295 |
|
| 10,804 |
Federally tax exempt |
|
| 1,395 |
|
| 1,758 |
|
| 4,459 |
|
| 5,484 |
Interest-bearing deposits in bank |
|
| 662 |
|
| 362 |
|
| 1,948 |
|
| 1,137 |
Other interest and dividend income |
|
| 15 |
|
| 18 |
|
| 46 |
|
| 54 |
Total interest and dividend income |
|
| 35,636 |
|
| 34,732 |
|
| 109,135 |
|
| 102,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
| 2,000 |
|
| 1,619 |
|
| 6,094 |
|
| 4,215 |
Securities sold under agreements to repurchase |
|
| 17 |
|
| 13 |
|
| 48 |
|
| 32 |
Borrowings |
|
| — |
|
| 29 |
|
| 7 |
|
| 252 |
Subordinated debentures |
|
| 478 |
|
| 470 |
|
| 1,462 |
|
| 1,319 |
Total interest expense |
|
| 2,495 |
|
| 2,131 |
|
| 7,611 |
|
| 5,818 |
Net interest income |
|
| 33,141 |
|
| 32,601 |
|
| 101,524 |
|
| 96,366 |
PROVISION FOR LOAN LOSSES |
|
| 684 |
|
| 1,238 |
|
| 3,266 |
|
| 1,791 |
Net interest income after provision for loan losses |
|
| 32,457 |
|
| 31,363 |
|
| 98,258 |
|
| 94,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
Card income |
|
| 1,985 |
|
| 1,848 |
|
| 5,813 |
|
| 5,427 |
Service charges on deposit accounts |
|
| 2,111 |
|
| 2,157 |
|
| 5,805 |
|
| 6,063 |
Wealth management fees |
|
| 1,676 |
|
| 1,695 |
|
| 5,216 |
|
| 5,315 |
Mortgage servicing |
|
| 795 |
|
| 755 |
|
| 2,342 |
|
| 2,400 |
Mortgage servicing rights fair value adjustment |
|
| (860) |
|
| (93) |
|
| (2,982) |
|
| 274 |
Gains on sale of mortgage loans |
|
| 992 |
|
| 855 |
|
| 2,177 |
|
| 2,206 |
Gains (losses) on securities |
|
| (73) |
|
| 180 |
|
| 42 |
|
| 150 |
Gains (losses) on foreclosed assets |
|
| (20) |
|
| (251) |
|
| 132 |
|
| (858) |
Gains (losses) on sales of other assets |
|
| (29) |
|
| (13) |
|
| 944 |
|
| 207 |
Title insurance activity |
|
| — |
|
| 335 |
|
| 167 |
|
| 931 |
Other noninterest income |
|
| 1,005 |
|
| 939 |
|
| 2,759 |
|
| 2,696 |
Total noninterest income |
|
| 7,582 |
|
| 8,407 |
|
| 22,415 |
|
| 24,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
|
Salaries |
|
| 12,335 |
|
| 12,264 |
|
| 36,339 |
|
| 36,572 |
Employee benefits |
|
| 2,224 |
|
| 1,492 |
|
| 8,314 |
|
| 4,722 |
Occupancy of bank premises |
|
| 1,785 |
|
| 1,822 |
|
| 5,260 |
|
| 5,576 |
Furniture and equipment |
|
| 545 |
|
| 695 |
|
| 2,050 |
|
| 2,307 |
Data processing |
|
| 1,471 |
|
| 1,265 |
|
| 4,023 |
|
| 3,935 |
Marketing and customer relations |
|
| 801 |
|
| 974 |
|
| 2,837 |
|
| 3,086 |
Amortization of intangible assets |
|
| 335 |
|
| 389 |
|
| 1,087 |
|
| 1,169 |
FDIC insurance |
|
| 8 |
|
| 241 |
|
| 435 |
|
| 728 |
Loan collection and servicing |
|
| 547 |
|
| 625 |
|
| 1,901 |
|
| 1,990 |
Foreclosed assets |
|
| 196 |
|
| 247 |
|
| 525 |
|
| 672 |
Other noninterest expense |
|
| 2,056 |
|
| 1,923 |
|
| 6,305 |
|
| 6,120 |
Total noninterest expense |
|
| 22,303 |
|
| 21,937 |
|
| 69,076 |
|
| 66,877 |
INCOME BEFORE INCOME TAX EXPENSE |
|
| 17,736 |
|
| 17,833 |
|
| 51,597 |
|
| 52,509 |
INCOME TAX EXPENSE |
|
| 299 |
|
| 241 |
|
| 819 |
|
| 630 |
NET INCOME |
| $ | 17,437 |
| $ | 17,592 |
| $ | 50,778 |
| $ | 51,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER SHARE - BASIC |
| $ | 0.97 |
| $ | 0.98 |
| $ | 2.82 |
| $ | 2.87 |
EARNINGS PER SHARE - DILUTED |
| $ | 0.97 |
| $ | 0.98 |
| $ | 2.82 |
| $ | 2.87 |
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING |
|
| 18,027,512 |
|
| 18,027,512 |
|
| 18,027,512 |
|
| 18,054,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
PRO FORMA C CORP EQUIVALENT INFORMATION (Note 1) |
|
|
|
|
|
|
|
|
|
|
|
|
Historical income before income tax expense |
| $ | 17,736 |
| $ | 17,833 |
| $ | 51,597 |
| $ | 52,509 |
Pro forma C Corp equivalent income tax expense |
|
| 4,614 |
|
| 4,605 |
|
| 13,313 |
|
| 13,406 |
Pro forma C Corp equivalent net income |
| $ | 13,122 |
| $ | 13,228 |
| $ | 38,284 |
| $ | 39,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRO FORMA C CORP EQUIVALENT EARNINGS PER SHARE - BASIC |
| $ | 0.73 |
| $ | 0.73 |
| $ | 2.12 |
| $ | 2.17 |
PRO FORMA C CORP EQUIVALENT EARNINGS PER SHARE - DILUTED |
| $ | 0.73 |
| $ | 0.73 |
| $ | 2.12 |
| $ | 2.17 |
See accompanying Notes to Consolidated Financial Statements (Unaudited)
24
HBT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
|
| (dollars in thousands) | ||||||||||
NET INCOME |
| $ | 17,437 |
| $ | 17,592 |
| $ | 50,778 |
| $ | 51,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS) |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on securities available-for-sale |
|
| 1,289 |
|
| (3,196) |
|
| 13,913 |
|
| (12,458) |
Reclassification adjustment for (gains) losses on securities available-for-sale realized in income |
|
| — |
|
| (262) |
|
| — |
|
| (262) |
Reclassification adjustment for accretion of net unrealized gain on securities transferred to held-to-maturity |
|
| (62) |
|
| (99) |
|
| (221) |
|
| (287) |
Unrealized losses on derivative instruments |
|
| (208) |
|
| (13) |
|
| (897) |
|
| (118) |
Reclassification adjustment for net settlements on derivative instruments |
|
| (24) |
|
| (39) |
|
| (76) |
|
| (137) |
Total other comprehensive income (loss) |
|
| 995 |
|
| (3,609) |
|
| 12,719 |
|
| (13,262) |
TOTAL COMPREHENSIVE INCOME |
| $ | 18,432 |
| $ | 13,983 |
| $ | 63,497 |
| $ | 38,617 |
| | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | ||||||||
| | 2022 |
| 2021 |
| 2022 |
| 2021 | | ||||
| | (dollars in thousands) | | ||||||||||
NET INCOME | | $ | 15,627 | | $ | 13,715 | | $ | 43,316 | | $ | 42,677 | |
| | | | | | | | | | | | | |
OTHER COMPREHENSIVE LOSS | | | | | | | | | | | | | |
Unrealized losses on debt securities available-for-sale | | | (35,358) | | | (5,676) | | | (112,931) | | | (19,950) | |
Reclassification adjustment for amortization of net unrealized losses on debt securities transferred to held-to-maturity | | | 504 | | | 195 | | | 1,234 | | | 426 | |
Unrealized gains (losses) on derivative instruments | | | 374 | | | (8) | | | 1,117 | | | 173 | |
Reclassification adjustment for net settlements on derivative instruments | | | 14 | | | 105 | | | 177 | | | 306 | |
Total other comprehensive loss, before tax | | | (34,466) | | | (5,384) | | | (110,403) | | | (19,045) | |
Income tax benefit | | | (9,824) | | | (1,535) | | | (31,470) | | | (5,429) | |
Total other comprehensive loss | | | (24,642) | | | (3,849) | | | (78,933) | | | (13,616) | |
TOTAL COMPREHENSIVE (LOSS) INCOME | | $ | (9,015) | | $ | 9,866 | | $ | (35,617) | | $ | 29,061 | |
See accompanying Notes to Consolidated Financial Statements (Unaudited)
35
HBT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
| Total | |||||
|
| Common Stock |
|
|
|
| Retained |
| Comprehensive |
| Treasury |
| Stockholders’ | ||||||||
|
| Voting |
| Series A |
| Surplus |
| Earnings |
| Income (Loss) |
| Stock |
| Equity | |||||||
|
| (dollars in thousands, except per share data) | |||||||||||||||||||
Balance, June 30, 2019 |
| $ | 3 |
| $ | 178 |
| $ | 32,288 |
| $ | 302,984 |
| $ | 7,436 |
| $ | (3,019) |
| $ | 339,870 |
Net income |
|
| — |
|
| — |
|
| — |
|
| 17,437 |
|
| — |
|
| — |
|
| 17,437 |
Other comprehensive income |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 995 |
|
| — |
|
| 995 |
Cash dividends ($0.52 per share) |
|
| — |
|
| — |
|
| — |
|
| (9,366) |
|
| — |
|
| — |
|
| (9,366) |
Balance, September 30, 2019 |
| $ | 3 |
| $ | 178 |
| $ | 32,288 |
| $ | 311,055 |
| $ | 8,431 |
| $ | (3,019) |
| $ | 348,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2018 |
| $ | 3 |
| $ | 178 |
| $ | 32,288 |
| $ | 305,730 |
| $ | (10,150) |
| $ | (3,019) |
| $ | 325,030 |
Net income |
|
| — |
|
| — |
|
| — |
|
| 17,592 |
|
| — |
|
| — |
|
| 17,592 |
Other comprehensive loss |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (3,609) |
|
| — |
|
| (3,609) |
Cash dividends ($0.51 per share) |
|
| — |
|
| — |
|
| — |
|
| (9,156) |
|
| — |
|
| — |
|
| (9,156) |
Balance, September 30, 2018 |
| $ | 3 |
| $ | 178 |
| $ | 32,288 |
| $ | 314,166 |
| $ | (13,759) |
| $ | (3,019) |
| $ | 329,857 |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Accumulated | | | | | | | |
| | Common Stock | | | | | | | | Other | | | | | Total | |||||
| | Shares | | | | | | | Retained | | Comprehensive | | Treasury | | Stockholders’ | |||||
|
| Outstanding |
| Amount |
| Surplus |
| Earnings |
| Income (Loss) |
| Stock |
| Equity | ||||||
| | (dollars in thousands, except per share data) | ||||||||||||||||||
Balance, June 30, 2022 | | 28,831,197 | | $ | 293 | | $ | 222,087 | | $ | 212,506 | | $ | (52,820) | | $ | (8,257) | | $ | 373,809 |
Net income | | — | | | — | | | — | | | 15,627 | | | — | | | — | | | 15,627 |
Other comprehensive loss | | — | | | — | | | — | | | — | | | (24,642) | | | — | | | (24,642) |
Stock-based compensation | | — | | | — | | | 349 | | | — | | | — | | | — | | | 349 |
Repurchase of common stock | | (78,571) | | | — | | | — | | | — | | | — | | | (1,432) | | | (1,432) |
Cash dividends and dividend equivalents ($0.16 per share) | | — | | | — | | | — | | | (4,638) | | | — | | | — | | | (4,638) |
Balance, September 30, 2022 | | 28,752,626 | | $ | 293 | | $ | 222,436 | | $ | 223,495 | | $ | (77,462) | | $ | (9,689) | | $ | 359,073 |
| | | | | | | | | | | | | | | | | | | | |
Balance, June 30, 2021 | | 27,355,053 | | $ | 275 | | $ | 191,185 | | $ | 175,328 | | $ | 8,386 | | $ | (1,980) | | $ | 373,194 |
Net income | | — | | | — | | | — | | | 13,715 | | | — | | | — | | | 13,715 |
Other comprehensive loss | | — | | | — | | | — | | | — | | | (3,849) | | | — | | | (3,849) |
Stock-based compensation | | — | | | — | | | 228 | | | — | | | — | | | — | | | 228 |
Repurchase of common stock | | (20,625) | | | | | | | | | | | | | | | (343) | | | (343) |
Cash dividends and dividend equivalents ($0.15 per share) | | — | | | — | | | — | | | (4,124) | | | — | | | — | | | (4,124) |
Balance, September 30, 2021 | | 27,334,428 | | $ | 275 | | $ | 191,413 | | $ | 184,919 | | $ | 4,537 | | $ | (2,323) | | $ | 378,821 |
See accompanying Notes to Consolidated Financial Statements (Unaudited)
46
HBT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
| Total | |||||
|
| Common Stock |
|
|
|
| Retained |
| Comprehensive |
| Treasury |
| Stockholders’ | ||||||||
|
| Voting |
| Series A |
| Surplus |
| Earnings |
| Income (Loss) |
| Stock |
| Equity | |||||||
|
| (dollars in thousands, except per share data) | |||||||||||||||||||
Balance, December 31, 2018 |
| $ | 3 |
| $ | 178 |
| $ | 32,288 |
| $ | 315,234 |
| $ | (4,288) |
| $ | (3,019) |
| $ | 340,396 |
Net income |
|
| — |
|
| — |
|
| — |
|
| 50,778 |
|
| — |
|
| — |
|
| 50,778 |
Other comprehensive income |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 12,719 |
|
| — |
|
| 12,719 |
Cash dividends ($3.05 per share) |
|
| — |
|
| — |
|
| — |
|
| (54,957) |
|
| — |
|
| — |
|
| (54,957) |
Balance, September 30, 2019 |
| $ | 3 |
| $ | 178 |
| $ | 32,288 |
| $ | 311,055 |
| $ | 8,431 |
| $ | (3,019) |
| $ | 348,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017 |
| $ | 3 |
| $ | 178 |
| $ | 32,288 |
| $ | 293,934 |
| $ | (375) |
| $ | (2,112) |
| $ | 323,916 |
Adoption of ASU 2016-01 |
|
| — |
|
| — |
|
| — |
|
| 122 |
|
| (122) |
|
| — |
|
| — |
Net income |
|
| — |
|
| — |
|
| — |
|
| 51,879 |
|
| — |
|
| — |
|
| 51,879 |
Other comprehensive loss |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (13,262) |
|
| — |
|
| (13,262) |
Repurchase of common stock -Series A (43,180 shares) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (907) |
|
| (907) |
Cash dividends ($1.76 per share) |
|
| — |
|
| — |
|
| — |
|
| (31,769) |
|
| — |
|
| — |
|
| (31,769) |
Balance, September 30, 2018 |
| $ | 3 |
| $ | 178 |
| $ | 32,288 |
| $ | 314,166 |
| $ | (13,759) |
| $ | (3,019) |
| $ | 329,857 |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Accumulated | | | | | | | |
| | Common Stock | | | | | | | | Other | | | | | Total | |||||
| | Shares | | | | | | | Retained | | Comprehensive | | Treasury | | Stockholders’ | |||||
|
| Outstanding |
| Amount |
| Surplus | �� | Earnings |
| Income (Loss) |
| Stock |
| Equity | ||||||
| | (dollars in thousands, except per share data) | ||||||||||||||||||
Balance, December 31, 2021 | | 28,986,061 | | $ | 293 | | $ | 220,891 | | $ | 194,132 | | $ | 1,471 | | $ | (4,906) | | $ | 411,881 |
Net income | | — | | | — | | | — | | | 43,316 | | | — | | | — | | | 43,316 |
Other comprehensive loss | | — | | | — | | | — | | | — | | | (78,933) | | | — | | | (78,933) |
Stock-based compensation | | — | | | — | | | 1,602 | | | — | | | — | | | — | | | 1,602 |
Issuance of common stock upon vesting of restricted stock units, net of tax withholdings | | 31,944 | | | — | | | (57) | | | — | | | — | | | — | | | (57) |
Repurchase of common stock | | (265,379) | | | — | | | — | | | — | | | — | | | (4,783) | | | (4,783) |
Cash dividends and dividend equivalents ($0.48 per share) | | — | | | — | | | — | | | (13,953) | | | — | | | — | | | (13,953) |
Balance, September 30, 2022 | | 28,752,626 | | $ | 293 | | $ | 222,436 | | $ | 223,495 | | $ | (77,462) | | $ | (9,689) | | $ | 359,073 |
| | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2020 | | 27,457,306 | | $ | 275 | | $ | 190,875 | | $ | 154,614 | | $ | 18,153 | | $ | — | | $ | 363,917 |
Net income | | — | | | — | | | — | | | 42,677 | | | — | | | — | | | 42,677 |
Other comprehensive loss | | — | | | — | | | — | | | — | | | (13,616) | | | — | | | (13,616) |
Stock-based compensation | | — | | | — | | | 538 | | | — | | | — | | | — | | | 538 |
Issuance of common stock upon vesting of restricted stock units | | 20,225 | | | — | | | — | | | — | | | — | | | — | | | — |
Repurchase of common stock | | (143,103) | | | — | | | — | | | — | | | — | | | (2,323) | | | (2,323) |
Cash dividends and dividend equivalents ($0.45 per share) | | — | | | — | | | — | | | (12,372) | | | — | | | — | | | (12,372) |
Balance, September 30, 2021 | | 27,334,428 | | $ | 275 | | $ | 191,413 | | $ | 184,919 | | $ | 4,537 | | $ | (2,323) | | $ | 378,821 |
See accompanying Notes to Consolidated Financial Statements (Unaudited)
57
HBT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, | ||||
|
| 2019 |
| 2018 | ||
|
| (dollars in thousands) | ||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
Net income |
| $ | 50,778 |
| $ | 51,879 |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
Depreciation expense |
|
| 2,042 |
|
| 2,494 |
Provision for loan losses |
|
| 3,266 |
|
| 1,791 |
Net amortization of securities |
|
| 2,759 |
|
| 3,942 |
Net accretion of discount and deferred loan fees on loans |
|
| (3,150) |
|
| (4,107) |
Net realized gain on sales of securities |
|
| — |
|
| (262) |
Net unrealized (gain) loss on equity securities |
|
| (42) |
|
| 112 |
Net gain on sales of bank premises and equipment |
|
| (29) |
|
| (13) |
Net gain on sales of bank premises held for sale |
|
| (448) |
|
| (136) |
Impairment losses on bank premises held for sale |
|
| 37 |
|
| 52 |
Net (gain) loss on sales of foreclosed assets |
|
| (240) |
|
| 281 |
Gain on loan foreclosures |
|
| — |
|
| (96) |
Write-down of foreclosed assets |
|
| 552 |
|
| 711 |
Amortization of intangibles |
|
| 1,087 |
|
| 1,169 |
Decrease (increase) in mortgage servicing rights |
|
| 2,982 |
|
| (274) |
Amortization of subordinated debt purchase accounting adjustment |
|
| 49 |
|
| 50 |
Mortgage loans originated for sale |
|
| (106,885) |
|
| (103,983) |
Proceeds from sale of mortgage loans |
|
| 104,254 |
|
| 106,544 |
Net gain on sale of mortgage loans |
|
| (2,177) |
|
| (2,206) |
Gain on sale of First Community Title Services, Inc. |
|
| (498) |
|
| — |
Decrease (increase) in accrued interest receivable |
|
| 484 |
|
| (1,429) |
(Increase) decrease in other assets |
|
| (2,228) |
|
| 1,329 |
Increase (decrease) in other liabilities |
|
| 4,705 |
|
| (1,475) |
Net cash provided by operating activities |
|
| 57,298 |
|
| 56,373 |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
Net change in interest-bearing time deposits with banks |
|
| — |
|
| 496 |
Proceeds from sales of securities available-for-sale |
|
| — |
|
| 15,665 |
Proceeds from paydowns, maturities, and calls of securities |
|
| 134,347 |
|
| 118,821 |
Purchase of securities |
|
| (40,903) |
|
| (81,592) |
Net increase in loans |
|
| (26,049) |
|
| (20,090) |
Purchase of restricted stock |
|
| — |
|
| (2,374) |
Proceeds from redemption of restricted stock |
|
| 294 |
|
| 2,531 |
Purchases of bank premises and equipment |
|
| (1,558) |
|
| (480) |
Proceeds from sales of bank premises and equipment |
|
| 176 |
|
| 31 |
Proceeds from sales of bank premises held for sale |
|
| 1,039 |
|
| 1,599 |
Proceeds from sales of foreclosed assets |
|
| 4,142 |
|
| 6,092 |
Capital improvements to foreclosed assets |
|
| (41) |
|
| — |
Cash received from sale of First Community Title Services, Inc. |
|
| 114 |
|
| — |
Net cash provided by investing activities |
|
| 71,561 |
|
| 40,699 |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
Net decrease in deposits |
|
| (91,912) |
|
| (116,031) |
Net (decrease) increase in repurchase agreements |
|
| (13,928) |
|
| 8,062 |
Repayment of Federal Home Loan Bank borrowings |
|
| — |
|
| (29,000) |
Repurchase of common stock |
|
| — |
|
| (907) |
Cash dividends paid |
|
| (54,957) |
|
| (31,769) |
Net cash used in financing activities |
|
| (160,797) |
|
| (169,645) |
|
|
|
|
|
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS |
|
| (31,938) |
|
| (72,573) |
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR |
|
| 186,879 |
|
| 165,683 |
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF YEAR |
| $ | 154,941 |
| $ | 93,110 |
| | | | | | |
| | Nine Months Ended September 30, | ||||
|
| 2022 |
| 2021 | ||
| | (dollars in thousands) | ||||
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
Net income | | $ | 43,316 | | $ | 42,677 |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
Depreciation expense | | | 2,296 | | | 2,297 |
Provision for loan losses | | | (53) | | | (7,234) |
Net amortization of debt securities | | | 5,337 | | | 5,205 |
Deferred income tax (benefit) expense | | | (245) | | | 2,409 |
Stock-based compensation | | | 1,602 | | | 538 |
Net accretion of discount and deferred loan fees on loans | | | (4,320) | | | (9,529) |
Net unrealized loss (gain) on equity securities | | | 447 | | | (74) |
Net loss on disposals of bank premises and equipment | | | 8 | | | 33 |
Net gain on sales of bank premises held for sale | | | (187) | | | — |
Impairment losses on bank premises held for sale | | | 61 | | | 652 |
Net gain on sales of foreclosed assets | | | (118) | | | (321) |
Write-down of foreclosed assets | | | 310 | | | 195 |
Amortization of intangibles | | | 733 | | | 799 |
Increase in mortgage servicing rights | | | (2,446) | | | (1,425) |
Amortization of discount and issuance costs on subordinated notes and debentures | | | 109 | | | 109 |
Amortization of premium on interest-bearing time deposits with banks | | | 5 | | | — |
Amortization of premium on time deposits | | | (164) | | | — |
Mortgage loans originated for sale | | | (50,467) | | | (152,036) |
Proceeds from sale of mortgage loans | | | 54,379 | | | 163,086 |
Net gain on sale of mortgage loans | | | (1,267) | | | (4,919) |
Increase in cash surrender value of bank owned life insurance | | | (122) | | | — |
(Increase) decrease in accrued interest receivable | | | (1,980) | | | 879 |
Decrease in other assets | | | 289 | | | 1,639 |
Increase (decrease) in other liabilities | | | 1,583 | | | (18,284) |
Net cash provided by operating activities | | | 49,106 | | | 26,696 |
| | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
Proceeds from maturities of interest-bearing time deposits with banks | | | 485 | | | — |
Proceeds from paydowns, maturities, and calls of debt securities | | | 129,629 | | | 149,659 |
Purchase of securities | | | (368,794) | | | (398,387) |
Net (increase) decrease in loans | | | (74,769) | | | 104,376 |
Purchase of restricted stock | | | (1,311) | | | (241) |
Purchases of bank premises and equipment | | | (683) | | | (773) |
Proceeds from sales of bank premises and equipment | | | 8 | | | 17 |
Proceeds from sales of bank premises held for sale | | | 1,297 | | | — |
Proceeds from sales of foreclosed assets | | | 476 | | | 1,583 |
Net cash used in investing activities | | | (313,662) | | | (143,766) |
| | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
Net (decrease) increase in deposits | | | (94,578) | | | 289,022 |
Net (decrease) increase in repurchase agreements | | | (13,126) | | | 2,221 |
Net increase in Federal Home Loan Bank advances | | | 60,000 | | | — |
Taxes paid related to the vesting of restricted stock units | | | (57) | | | — |
Repurchase of common stock | | | (4,783) | | | (2,323) |
Cash dividends and dividend equivalents paid | | | (13,953) | | | (12,372) |
Net cash (used in) provided by financing activities | | | (66,497) | | | 276,548 |
| | | | | | |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | | | (331,053) | | | 159,478 |
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | | | 409,268 | | | 312,451 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | | $ | 78,215 | | $ | 471,929 |
See accompanying Notes to Consolidated Financial Statements (Unaudited)
68
HBT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, | ||||
|
| 2019 |
| 2018 | ||
|
| (dollars in thousands) | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
|
|
|
|
|
|
Cash paid for interest |
| $ | 7,646 |
| $ | 5,674 |
Cash paid for income taxes |
| $ | 880 |
| $ | 851 |
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING ACTIVITIES |
|
|
|
|
|
|
Transfers of loans to foreclosed assets |
| $ | 1,788 |
| $ | 1,889 |
Sales of foreclosed assets through loan origination |
| $ | 360 |
| $ | 1,174 |
| | | | | | |
| | Nine Months Ended September 30, | ||||
|
| 2022 |
| 2021 | ||
| | (dollars in thousands) | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | | | | | | |
Cash paid for interest | | $ | 4,851 | | $ | 4,992 |
Cash paid for income taxes | | $ | 13,805 | | $ | 17,295 |
| | | | | | |
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING ACTIVITIES | | | | | | |
Transfers of loans to foreclosed assets | | $ | 27 | | $ | 4,856 |
Sales of foreclosed assets through loan origination | | $ | — | | $ | 252 |
Transfers of bank premises and equipment to bank premises held for sale | | $ | — | | $ | 1,345 |
See accompanying Notes to Consolidated Financial Statements (Unaudited)
79
Basis of Presentation
HBT Financial, Inc. (“HBT Financial” or the “Company”) is headquartered in Bloomington, Illinois and is the holding company for Heartland Bank and Trust Company (“Heartland Bank” or the “Bank”). The Bank provides a comprehensive suite of business, commercial, wealth management and retail banking products and services to individuals, businesses, and municipal entities throughout Central and Northeastern Illinois and Eastern Iowa. Additionally, the Company is subject to the regulations of certain federal and state agencies and undergoes periodic examinations by those regulatory agencies.
The unaudited consolidated financial statements, including the notes thereto, of HBT Financial, Inc. (the Company), formerly known as Heartland Bancorp, Inc. until the Company name was changed on September 13, 2019, have been prepared in accordance with accounting principles generally accepted accounting principles (GAAP)in the United States (“GAAP”) interim reporting requirements. Certain information in footnote disclosuredisclosures normally included in financial statements prepared in accordance with GAAP has been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission.SEC. These interim unaudited consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Company’s prospectusAnnual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (SEC)SEC on OctoberMarch 11, 2019.
The Company’s principal business activity is banking, conducted through its wholly owned subsidiaries, Heartland Bank and Trust Company (Heartland Bank) and State Bank of Lincoln (Lincoln Bank). Heartland Bank and Lincoln Bank are collectively referred to as “the Banks”.
On September 13, 2019, the Company effected a twenty-for-one stock split of its issued and outstanding shares of common stock and its issued and outstanding shares of Series A nonvoting common stock. Accordingly, all share and per share amounts for all periods presented in these financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the stock split.2022.
The unaudited consolidated financial statements include all adjustments, consisting of normal, recurring adjustments necessary for a fair presentation of the results for the interim periods. The results for interim periods are not necessarily indicative of results for a full year.
Initial Public Offering
On September 13, 2019, the Company filed a Registration Statement on Form S-1 with the SEC. The Registration Statement was declared effective by the SEC on October 10, 2019. The Company issued and sold 9,429,794 shares of common stock at a price of $16 per share pursuant to that Registration Statement. Total proceeds received by the Company, net of offering costs, were approximately $138 million. The proceeds were used to fund a $170 million special dividend, or $9.43 per share, to shareholders of record prior to the initial public offering.
The Company qualifies as an "emerging growth company" as defined by the Jumpstart Our Business Startups Act (JOBS Act)(“JOBS Act”). The JOBS Act permits emerging growth companies 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 $1.07 billion or more in annual revenues, (3) the date on which the Company is deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, (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. The Company has elected to use the extended transition period until the Company is no longer an emerging growth company or until the Company chooses to affirmatively and irrevocably opt out of the extended transition period. As a result, the Company’s financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies.
Use of Estimates
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America.GAAP. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and the reported results of operations for the periods then ended.
Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant changes in the near term relate to the determination of the allowance for loan losses.
losses and fair value of assets acquired and liabilities assumed in business combinations.
810
Income Taxes
Through October 10, 2019, the Company, with the consent of its stockholders, elected to be taxed under sections of federal and state income tax law as an "S Corporation" which provides that, in lieu of Company income taxes, except for state replacement and franchise taxes, the stockholders separately account for their pro rata shares of the Company’s items of income, deductions, losses and credits. As a result of this election, no income taxes, other than state replacement and franchise taxes, have been recognized in the accompanying consolidated financial statements. No provision has been made for any amounts which may be advanced or paid as dividends to the stockholders to assist them in paying their personal taxes on the income from the Company.
Effective October 11, 2019, in connection with the initial public offering, the Company revoked its S Corporation status and became a taxable entity (C Corporation). As such, any periods prior to October 11, 2019 will only reflect an effective state income tax rate. In connection with the conversion of tax status, the Company recognized a deferred tax asset of approximately $0.5 million, income tax benefit of approximately $3.3 million, and a reduction in accumulated other comprehensive income of approximately $2.7 million.
The Company files consolidated federal and state income tax returns. The Company is no longer subject to federal or state income tax examinations for years prior to 2016.
Pro Forma Income Statement Information
The pro forma C Corp equivalent income tax expense information gives effect to the income tax expense had the Company been a C Corporation during the three and nine months ended September 30, 2019 and 2018. The pro forma C Corp equivalent net income information, therefore, includes an adjustment for income tax expense as if the Company had been a C Corporation during the three and nine months ended September 30, 2019 and 2018.
The pro forma basic and diluted earnings per share information is computed using the pro forma C Corp equivalent net income and weighted average shares of common stock outstanding. There were no dilutive instruments outstanding during 2019, therefore, the pro forma C Corp equivalent basic and diluted earnings per share amounts are the same.
Segment Reporting
The Company’s operations consist of one reportable segment called community banking.segment. The operations of the non-bank subsidiaries of the Company primarily supportCompany’s chief operating decision maker evaluates the operations of the Banks. While the Company’s management monitors both bank subsidiaries’ operationsCompany using consolidated information for purposes of allocating resources and profitability separately, these subsidiaries have been aggregated into one reportable segment due to the similarities in products and services, customer base, operations, profitability measures, and economic characteristics.assessing performance.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation without any impact on the reported amounts of net income or stockholders’ equity.
Subsequent Events
In preparing these consolidated financial statements, the Company has evaluated events and transactions for potential of recognition or disclosure through the date the financial statements were issued.
9
On October 10, 2019, each share of Series A nonvoting common stock was reclassified and converted into one share of common stock. Additionally, the Company increased the authorized shares to 150,000,000, of which 125,000,000 shares, par value of $0.01 per share, are designated as common stock and 25,000,000 shares, par value of $0.01 per share, are designated as preferred stock.
Sale of First Community Title Services, Inc.
On February 15, 2019, the Company consummated an agreement to sell substantially all assets and liabilities of First Community Title Services, Inc. to Illinois Real Estate Title Center, LLC, an Illinois limited liability company, for a combination of cash and an equity interest in Illinois Real Estate Title Center, LLC representing total consideration of approximately $498,000.
Recent Accounting Pronouncements
On January 1, 2019, the Company adopted Accounting Standards Update (ASU) 2016‑02, Leases (Topic 842). Under the new guidance in this ASU, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee`s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The new lease guidance also simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. On January 1, 2019, the Company adopted this standard without a material impact on the Company’s results of operations or financial condition.
In June 2016, the Financial Accounting Standards Board (FASB)(“FASB”) issued ASU 2016‑13, 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016‑132016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, ASU 2016‑132016-13 amends the accounting for credit losses on available-for-sale debt securities available-for-sale and purchased financial assets with credit deterioration. ASU 2016‑132016-13 is effective for years beginning after December 15, 2021,2022, including interim periods within those fiscal years. Early adoption is permitted for years beginning after December 31, 2018, including interim periods within those years.
The Company is currently evaluatinghas formed an implementation team to assess the effectimpact that this standardASU 2016-13 will have on the Company’s consolidated financial statements. For the majority of loans evaluated on a pooled basis, the Company anticipates using a discounted cash flow method which considers instrument level cash flows adjusted for, among other factors, prepayment speeds, probability of default, and loss given default. The Company also anticipates using regression analysis of historical internal and peer data to determine which variables are best suited to be economic variables utilized when modeling lifetime probability of default and loss given default.
The ultimate impact to the Company’s financial condition and results of operations of ASU 2016-13, at both adoption and financial position.each subsequent reporting period, is highly dependent on credit quality, macroeconomic forecasts and conditions, the composition of our loan and securities portfolios, along with other management judgments.
11
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In January 2017, the FASB issued ASU 2017‑04, 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU 2017-04 simplifies measurement of goodwill and eliminates Step 2 from the goodwill impairment test. Under the ASU 2017-04, a company should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The impairment charge is limited to the amount of goodwill allocated to that reporting unit. The amendments in this update are effective for annual or any interim goodwill impairment tests in years beginning after December 15, 2021,2022, including interim periods within those years. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. This standard is not expected to have a material impact on the Company’s consolidated results of operations or financial position.
10
In March 2017,2020, the FASB issued ASU 2017‑08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310‑20), Premium Amortization2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Purchased Callable Debt SecuritiesFinancial Reporting. ASU 2017‑08 shortens2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform, if certain criteria are met. In January 2021, the amortization periodFASB also issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which refined the scope for certain callable debt securities held at a premium, requiringoptional expedients and exceptions for contract modifications and hedge accounting to apply to derivative contracts and certain hedging relationships affected by the premium to be amortized todiscounting transition. Entities may apply the earliest call date. ASU 2017‑08 does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. This guidance is effective for years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early application is permitted. The adoption of this ASU requires use of a modified retrospective basis through a cumulative-effect adjustment directly to retained earningsprovisions as of the beginning of the reporting period of adoption.when the election is made and are available until December 31, 2022. The Company adoptedis currently evaluating the effect that this standard on January 1, 2019 without a material impactwill have on the Company’s consolidated results of operations orand financial condition.
In August 2017, the FASB issued ASU 2017‑12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2017‑12 improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and make certain targeted improvements to simplify the application of the hedge accounting guidance in current generally accepted accounting principles. The Company adopted this standard on January 1, 2018 without a material impact on the Company’s consolidated results of operations or financial condition.
In August 2018, the FASB issued ASU 2018‑13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018‑13 removes, modifies, and adds certain disclosure requirements on fair value measurements. This guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. This standard is not expected to have a material impact on the Company’s consolidated results of operations or financial position.
In October 2018, the FASB issued ASU 2018‑16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. ASU 2018‑16 permits the use of the SOFR Overnight Index Swap Rate as a U.S. benchmark interest rate for hedge accounting purposes under ASC 815. The Company adopted this standard on January 1, 2019 without a material impact on the Company’s consolidated results of operations or financial condition.
NOTE 2 – TRANSACTIONS BETWEEN ENTITIES UNDER COMMON CONTROLACQUISITIONS
Town and Country Financial Corporation
On October 29, 2018, the Company entered into an agreement to exchange 100% of the outstanding stock of Lincoln S.B. Corp., an Illinois Corporation headquartered in Lincoln, Illinois, for shares ofAugust 23, 2022, HBT Financial Inc. Series A common stock.and Town and Country Financial Corporation (“Town and Country”), the holding company for Town and Country Bank, jointly announced the signing of a merger agreement pursuant to which HBT Financial will acquire Town and Country and Town and Country Bank. The transaction was completed on December 31, 2018 (the effective date). Lincoln Bank, which was Lincoln S.B. Corp.’s wholly-owned subsidiary prior to the agreement, offers a full line of quality retailacquisition will further enhance HBT Financial’s footprint in Central Illinois and commercial banking products through six branches in central Illinois. The Company has operated Lincoln Bank as a separate subsidiary since the transaction was completed.expand HBT Financial’s footprint into metro-east St. Louis.
Under the terms of the definitivemerger agreement, total consideration consists of approximately 3.4 million shares of HBT Financial’s common stock and $38.0 million in cash. Town and Country shareholders may elect to receive either (i) 1.9010 shares of HBT Financial’s common stock for each share of Town and Country, or (ii) $35.66 per share in cash, or (iii) a combination of cash and stock consideration, subject to adjustment and to the 14,548election and proration provisions in the merger agreement. Based upon the closing price of HBT Financial common stock of $18.76 on August 22, 2022, the implied per share purchase price is $35.66 with an aggregate transaction value of approximately $101.4 million. Upon closing of the transaction, shareholders of Town and Country are expected to hold approximately 10.5% of HBT Financial’s outstanding common stock.
The transaction is expected to close in the first quarter of 2023, subject to customary closing conditions, approval of Town and Country’s shareholders, and regulatory approvals.
During the three months ended September 30, 2022, HBT Financial incurred $0.5 million in pre-tax acquisition expenses related to the planned acquisition of Town and Country, comprised of legal and professional fees included in other noninterest expense in the consolidated statements of income.
12
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NXT Bancorporation, Inc.
On October 1, 2021, HBT Financial acquired 100% of the issued and outstanding shares of Lincoln S.B. Corp. common stock wereof NXT Bancorporation, Inc. (“NXT”), the holding company for NXT Bank, pursuant to an Agreement and Plan of Merger dated June 7, 2021. Under the Agreement and Plan of Merger, NXT merged with and into HBT Financial, with HBT Financial as the surviving entity, on October 1, 2021. Additionally, NXT Bank was merged with and into Heartland Bank, with Heartland Bank as the surviving entity, in December 2021.
At the effective time of the merger, each share of NXT was converted into 1,382,560the right to receive 67.6783 shares of HBT Financial Inc. Series A common stock, and approximately $6,000 paidcash in cash for fractional shares. In addition to the shares exchanged and cash paid forlieu of fractional shares, an additional $500,000and $400 in cash was deposited into an escrow account. After 12 months, the escrow agreement shall expire, and the funds held in escrow shall be distributed to the Lincoln S.B. Corp. shareholders.
The voting ownershipcash. There were 1,799,016 shares of HBT Financial Inc. and Lincoln S.B. Corp. were considered under common controlstock issued at the effective time of the acquisition with an aggregate market value of $29.3 million, based on the effective dateclosing stock price of the transaction and for all periods presented in the consolidated financial statements.
11
$16.27 on October 1, 2021. This transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair values on the date of acquisition. Goodwill of $5.7 million was recorded in the acquisition, which reflects expected synergies from combining the operations of HBT Financial and NXT, and is nondeductible for tax purposes.
The acquisition of NXT provided an opportunity to utilize Heartland Bank’s excess liquidity at the time of acquisition to replace NXT Bank’s higher-cost funding. Additionally, Heartland Bank’s broader range of products and services, as well as a change in reporting entity and, accordingly, HBT Financial, Inc., the receiving entity, recognized assets and liabilities transferred at their carrying amounts in the accounts of Lincoln S.B. Corp., the transferring entity, on the effective date of the transaction. The results of operations are reported as though the exchange of equity interests had occurred at the beginning of the periods presented. For similar assets and liabilities accounted for using different accounting methods, the carrying amounts have been retrospectively adjustedgreater ability to the basis of accounting used by HBT Financial, Inc. Significant intra-entity transactions and accounts have been eliminated in consolidation.meet larger borrowing needs, has provided an opportunity to expand NXT Bank’s customer relationships.
NOTE 3 – SECURITIES
Securities as shown in these consolidated financial statements reflect revised categories as required by the Company’s adoption of ASU 2016‑01 on January 1, 2018. That new guidance refined the definition of equity securities and required their segregation from debt securities available-for-sale.
While changes in the fair value of debt securities available-for-sale continue to be recorded in accumulated other comprehensive income (loss), the new guidance requires changes in the fair value of equity securities to be recorded in current earnings. As required by the new guidance, the unrealized gain in fair value on equity securities (recorded in accumulated other comprehensive loss at December 31, 2017) was reclassified to retained earnings on January 1, 2018. The amount of the reclassification was $122,000.
The carrying balances of the securities were as follows:
|
|
|
|
|
|
|
|
| September 30, |
| December 31, | ||
|
| 2019 |
| 2018 | ||
|
| (dollars in thousands) | ||||
Securities available-for-sale |
| $ | 618,120 |
| $ | 679,526 |
Securities held-to-maturity |
|
| 99,861 |
|
| 121,715 |
Equity securities: |
|
|
|
|
|
|
Readily determinable fair value |
|
| 3,251 |
|
| 3,081 |
No readily determinable fair value |
|
| 1,185 |
|
| 180 |
Total securities |
| $ | 722,417 |
| $ | 804,502 |
The Company has elected to measure the equity securities with no readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes for identical or similar securities of the same issuer. During the three and nine months ended September 30, 2019, the Company recognized a $(128,000) adjustment2021, HBT Financial incurred $0.4 million and $0.5 million, respectively, in pre-tax acquisition expenses related to the carrying valueacquisition of equity securities withNXT, comprised primarily of professional fees and data processing expense. These expenses are reflected in noninterest expense on the consolidated statements of income. There were no readily determinable fair value based on an observable price changeacquisition expenses related to the acquisition of an identical investment.
NXT during the three and nine months ended September 30, 2022.
1213
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The fair value of the assets acquired and liabilities assumed from NXT on the acquisition date were as follows (dollars in thousands):
| | | |
|
| Fair Value | |
Assets acquired: | | | |
Cash and cash equivalents | | $ | 5,862 |
Interest-bearing time deposits with banks | | | 739 |
Debt securities | | | 18,295 |
Equity securities with readily determinable fair value | | | 43 |
Restricted stock | | | 796 |
Loans | | | 194,576 |
Bank owned life insurance | | | 7,352 |
Bank premises and equipment | | | 3,667 |
Core deposit intangible assets | | | 199 |
Mortgage servicing rights | | | 370 |
Accrued interest receivable | | | 886 |
Other assets | | | 1,340 |
Total assets acquired | | | 234,125 |
| | | |
Liabilities assumed: | | | |
Deposits | | | 181,586 |
Securities sold under agreements to repurchase | | | 4,080 |
FHLB advances | | | 12,625 |
Other liabilities | | | 1,633 |
Total liabilities assumed | | | 199,924 |
Net assets acquired | | $ | 34,201 |
| | | |
Consideration paid: | | | |
Cash | | $ | 10,633 |
Common stock | | | 29,270 |
Total consideration paid | | $ | 39,903 |
| | | |
Goodwill | | $ | 5,702 |
(Unaudited)The following table presents the acquired non-impaired loans as of the acquisition date (dollars in thousands):
| | | |
Fair Value | | $ | 194,576 |
Gross contractual amounts receivable | | | 196,104 |
Estimate of contractual cash flows not expected to be collected | | | 1,045 |
There were no loans acquired with deteriorated credit quality from NXT.
14
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table provides the pro forma information for the results of operations for the three and nine months ended September 30, 2021, as if the acquisition had occurred on January 1, 2020. The pro forma results combine the historical results of NXT into HBT Financial’s consolidated statements of income, including the impact of certain acquisition accounting adjustments, which include loan discount accretion, intangible assets amortization, deposit premium amortization, and borrowing premium amortization. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results that would have been obtained had the acquisition actually occurred on January 1, 2020. No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, provision for loan losses, expense efficiencies or asset dispositions. The acquisition-related expenses that have been recognized are included in net income in the following table.
| | | | | | |
| | Pro Forma | ||||
| | Three Months Ended | | Nine Months Ended | ||
(dollars in thousands, except per share data) | | September 30, 2021 | | September 30, 2021 | ||
Total revenues (net interest income and noninterest income) | | $ | 41,296 | | $ | 124,460 |
Net income | | | 14,093 | | | 44,285 |
Earnings per share - basic | | | 0.48 | | | 1.52 |
Earnings per share - diluted | | | 0.48 | | | 1.51 |
15
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 – SECURITIES
Debt Securities
The amortized cost and fair values of debt securities, available-for-sale, with gross unrealized gains and losses, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
| Amortized |
| Gross |
| Gross |
| Fair Value | ||||
Available-for-sale: |
| (dollars in thousands) | ||||||||||
U.S. government agency |
| $ | 38,633 |
| $ | 947 |
| $ | (6) |
| $ | 39,574 |
Municipal |
|
| 150,058 |
|
| 2,451 |
|
| (10) |
|
| 152,499 |
Mortgage-backed: |
|
|
|
|
|
|
|
|
|
|
|
|
Agency residential |
|
| 215,303 |
|
| 3,182 |
|
| (239) |
|
| 218,246 |
Agency commercial |
|
| 127,550 |
|
| 2,084 |
|
| (185) |
|
| 129,449 |
Private-label |
|
| 22 |
|
| — |
|
| — |
|
| 22 |
Corporate |
|
| 77,202 |
|
| 1,135 |
|
| (7) |
|
| 78,330 |
Total |
| $ | 608,768 |
| $ | 9,799 |
| $ | (447) |
| $ | 618,120 |
| | | | | | | | | | | | | ||||||||||||
September 30, 2022 |
| Amortized |
| Gross |
| Gross |
| Fair Value | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
December 31, 2018 |
| Amortized |
| Gross |
| Gross |
| Fair Value | ||||||||||||||||
Available-for-sale: |
| (dollars in thousands) | | (dollars in thousands) | ||||||||||||||||||||
U.S. Treasury | | $ | 169,895 | | $ | — | | $ | (16,323) | | $ | 153,572 | ||||||||||||
U.S. government agency |
| $ | 46,977 |
| $ | 250 |
| $ | (361) |
| $ | 46,866 | | | 61,428 | | | 1 | | | (4,406) | | | 57,023 |
Municipal |
|
| 161,957 |
|
| 761 |
|
| (1,268) |
|
| 161,450 | | | 279,711 | | | 4 | | | (37,804) | | | 241,911 |
Mortgage-backed: |
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | |
Agency residential |
|
| 235,903 |
|
| 788 |
|
| (2,388) |
|
| 234,303 | | | 223,738 | | | 20 | | | (18,851) | | | 204,907 |
Agency commercial |
|
| 151,878 |
|
| 285 |
|
| (2,082) |
|
| 150,081 | | | 154,677 | | | 1 | | | (17,302) | | | 137,376 |
Private-label |
|
| 254 |
|
| 2 |
|
| — |
|
| 256 | ||||||||||||
Corporate |
|
| 87,118 |
|
| 207 |
|
| (755) |
|
| 86,570 | | | 62,695 | | | 16 | | | (3,760) | | | 58,951 |
Total |
| $ | 684,087 |
| $ | 2,293 |
| $ | (6,854) |
| $ | 679,526 | ||||||||||||
Total available-for-sale | | | 952,144 | | | 42 | | | (98,446) | | | 853,740 | ||||||||||||
Held-to-maturity: | | | | | | | | | | | | | ||||||||||||
U.S. government agency | | | 88,418 | | | — | | | (10,342) | | | 78,076 | ||||||||||||
Municipal | | | 42,844 | | | 50 | | | (1,357) | | | 41,537 | ||||||||||||
Mortgage-backed: | | | | | | | | | | | | | ||||||||||||
Agency residential | | | 105,330 | | | — | | | (6,491) | | | 98,839 | ||||||||||||
Agency commercial | | | 310,102 | | | — | | | (46,862) | | | 263,240 | ||||||||||||
Total held-to-maturity | | | 546,694 | | | 50 | | | (65,052) | | | 481,692 | ||||||||||||
Total debt securities | | $ | 1,498,838 | | $ | 92 | | $ | (163,498) | | $ | 1,335,432 | ||||||||||||
| | | | | | | | | | | | |
December 31, 2021 |
| Amortized |
| Gross |
| Gross |
| Fair Value | ||||
Available-for-sale: | | (dollars in thousands) | ||||||||||
U.S. Treasury | | $ | 109,002 | | $ | 328 | | $ | (354) | | $ | 108,976 |
U.S. government agency | | | 129,269 | | | 1,303 | | | (2,467) | | | 128,105 |
Municipal | | | 293,837 | | | 6,144 | | | (2,904) | | | 297,077 |
Mortgage-backed: | | | | | | | | | | | | |
Agency residential | | | 178,236 | | | 2,149 | | | (919) | | | 179,466 |
Agency commercial | | | 164,875 | | | 1,234 | | | (2,048) | | | 164,061 |
Corporate | | | 63,141 | | | 1,638 | | | (296) | | | 64,483 |
Total available-for-sale | | | 938,360 | | | 12,796 | | | (8,988) | | | 942,168 |
Held-to-maturity: | | | | | | | | | | | | |
U.S. government agency | | | 12,349 | | | 42 | | | (51) | | | 12,340 |
Municipal | | | 15,666 | | | 809 | | | — | | | 16,475 |
Mortgage-backed: | | | | | | | | | | | | |
Agency residential | | | 20,555 | | | 196 | | | (102) | | | 20,649 |
Agency commercial | | | 287,615 | | | 1,749 | | | (2,801) | | | 286,563 |
Total held-to-maturity | | | 336,185 | | | 2,796 | | | (2,954) | | | 336,027 |
Total debt securities | | $ | 1,274,545 | | $ | 15,592 | | $ | (11,942) | | $ | 1,278,195 |
16
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On March 31, 2022, June 30, 2021, and March 31, 2021, the Company transferred certain debt securities from the available-for-sale category to the held-to-maturity category in order to better reflect the revised intentions of the Company due to possible market value volatility, resulting from a potential rise in interest rates. The carrying valuefollowing is a summary of the amortized cost and fair value of securities transferred to the held-to-maturity category:
| | | | | | | | | | | | | | | | | | |
| | March 31, 2022 | | June 30, 2021 | | March 31, 2021 | ||||||||||||
| | Amortized | | | | Amortized | | | | Amortized | | | ||||||
|
| Cost |
| Fair Value |
| Cost |
| Fair Value |
| Cost |
| Fair Value | ||||||
| | (dollars in thousands) | ||||||||||||||||
U.S. government agency | | $ | 78,841 | | $ | 71,048 | | $ | — | | $ | — | | $ | 7,593 | | $ | 7,323 |
Mortgage-backed: | | | | | | | | | | | | | | | | | | |
Agency residential | | | 8,175 | | | 7,651 | | | — | | | — | | | 8,776 | | | 8,536 |
Agency commercial | | | 27,834 | | | 25,432 | | | 99,271 | | | 99,275 | | | 118,792 | | | 113,861 |
Total | | $ | 114,850 | | $ | 104,131 | | $ | 99,271 | | $ | 99,275 | | $ | 135,161 | | $ | 129,720 |
The debt securities were transferred between categories at fair value, with grossthe transfer date fair value becoming the new amortized cost for each security transferred. The unrealized gains and losses, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
| Carrying |
| Gross |
| Gross |
| Fair Value | ||||
Held-to-maturity: |
| (dollars in thousands) | ||||||||||
Municipal |
| $ | 55,182 |
| $ | 1,424 |
| $ | — |
| $ | 56,606 |
Mortgage-backed: |
|
|
|
|
|
|
|
|
|
|
|
|
Agency residential |
|
| 20,336 |
|
| 163 |
|
| (145) |
|
| 20,354 |
Agency commercial |
|
| 24,343 |
|
| 1,093 |
|
| (18) |
|
| 25,418 |
Total |
| $ | 99,861 |
| $ | 2,680 |
| $ | (163) |
| $ | 102,378 |
13
Tablegain (loss), net of Contents
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
| Carrying |
| Gross |
| Gross |
| Fair Value | ||||
Held-to-maturity: |
| (dollars in thousands) | ||||||||||
Municipal |
| $ | 73,176 |
| $ | 1,149 |
| $ | (42) |
| $ | 74,283 |
Mortgage-backed: |
|
|
|
|
|
|
|
|
|
|
|
|
Agency residential |
|
| 23,192 |
|
| — |
|
| (998) |
|
| 22,194 |
Agency commercial |
|
| 25,347 |
|
| 177 |
|
| (495) |
|
| 25,029 |
Total |
| $ | 121,715 |
| $ | 1,326 |
| $ | (1,535) |
| $ | 121,506 |
Amortized costtax, at the date of securities held-to-maturity amounted to $55,221,000 and $72,982,000 for municipal securities and $44,739,000 and $48,611,000 for mortgage-backedtransfer remains a component of accumulated other comprehensive income, but will be amortized over the remaining life of the debt securities as an adjustment of September 30, 2019 and December 31, 2018, respectively.yield in a manner consistent with amortization of any premium or discount. As a result, the amortization of an unrealized gain (loss) reported in accumulated other comprehensive income will offset or mitigate the effect on interest income of the amortization of the premium or discount for that held-to-maturity debt security.
As of September 30, 20192022 and December 31, 2018,2021, the BanksBank had debt securities with a carrying value of $288,305,000$413.4 million and $291,404,000,$353.3 million, respectively, which were pledged to secure public and trust deposits, securities sold under agreements to repurchase, and for other purposes required or permitted by law.
The Company has no direct exposure to the State of Illinois, but approximately 56%49% of the obligations of local municipalitiesmunicipal portfolio consists of debt securities issued by municipalities located in Illinois as of September 30, 2019.2022. Approximately 91%81% of such debt securities were general obligation issues as of September 30, 2019.2022.
The amortized cost and fair value of debt securities available-for-sale and the carrying value and fair value of securities held-to-maturity,by contractual maturity, as of September 30, 2019, by contractual maturity,2022, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Available-for-Sale |
| Held-to-Maturity | ||||||||
|
| Amortized |
| Fair Value |
| Carrying |
| Fair Value | ||||
|
| (dollars in thousands) | ||||||||||
Due in 1 year or less |
| $ | 55,909 |
| $ | 55,967 |
| $ | 146 |
| $ | 147 |
Due after 1 year through 5 years |
|
| 112,593 |
|
| 114,296 |
|
| 25,160 |
|
| 25,684 |
Due after 5 years through 10 years |
|
| 89,863 |
|
| 92,422 |
|
| 26,209 |
|
| 26,941 |
Due after 10 years |
|
| 7,528 |
|
| 7,718 |
|
| 3,667 |
|
| 3,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed: |
|
|
|
|
|
|
|
|
|
|
|
|
Agency residential |
|
| 215,303 |
|
| 218,246 |
|
| 20,336 |
|
| 20,354 |
Agency commercial |
|
| 127,550 |
|
| 129,449 |
|
| 24,343 |
|
| 25,418 |
Private-label |
|
| 22 |
|
| 22 |
|
| — |
|
| — |
Total |
| $ | 608,768 |
| $ | 618,120 |
| $ | 99,861 |
| $ | 102,378 |
| | | | | | | | | | | | |
| | Available-for-Sale | | Held-to-Maturity | ||||||||
|
| Amortized |
| Fair Value |
| Amortized |
| Fair Value | ||||
| | (dollars in thousands) | ||||||||||
Due in 1 year or less | | $ | 12,575 | | $ | 12,506 | | $ | 2,492 | | $ | 2,494 |
Due after 1 year through 5 years | | | 235,438 | | | 220,181 | | | 25,934 | | | 24,801 |
Due after 5 years through 10 years | | | 250,903 | | | 216,108 | | | 79,440 | | | 71,686 |
Due after 10 years | | | 74,813 | | | 62,662 | | | 23,396 | | | 20,632 |
| | | | | | | | | | | | |
Mortgage-backed: | | | | | | | | | | | | |
Agency residential | | | 223,738 | | | 204,907 | | | 105,330 | | | 98,839 |
Agency commercial | | | 154,677 | | | 137,376 | | | 310,102 | | | 263,240 |
Total | | $ | 952,144 | | $ | 853,740 | | $ | 546,694 | | $ | 481,692 |
1417
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Sales of securities available-for-sale were as follows during the three and nine months ended September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
|
| (dollars in thousands) | ||||||||||
Proceeds from sales |
| $ | — |
| $ | 15,665 |
| $ | — |
| $ | 15,665 |
Gross realized gains |
|
| — |
|
| 280 |
|
| — |
|
| 280 |
Gross realized losses |
|
| — |
|
| (18) |
|
| — |
|
| (18) |
Gains (losses) on securities were as follows during the three and nine months ended September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
|
| (dollars in thousands) | ||||||||||
Net realized gains on sales |
| $ | — |
| $ | 262 |
| $ | — |
| $ | 262 |
Net unrealized gains (losses) on equities: |
|
|
|
|
|
|
|
|
|
|
|
|
Readily determinable fair value |
|
| 55 |
|
| (82) |
|
| 170 |
|
| (112) |
No readily determinable fair value |
|
| (128) |
|
| — |
|
| (128) |
|
| — |
Gains (losses) on securities |
| $ | (73) |
| $ | 180 |
| $ | 42 |
| $ | 150 |
The following tables present gross unrealized losses and fair value of investments,debt securities, aggregated by investment category and length of time that individual debt securities have been in a continuous unrealized loss position, as of September 30, 20192022 and December 31, 2018:2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Investments in a Continuous Unrealized Loss Position | ||||||||||||||||
|
| Less than 12 Months |
| 12 Months or More |
| Total | ||||||||||||
September 30, 2019 |
| Unrealized |
| Fair Value |
| Unrealized |
| Fair Value |
| Unrealized |
| Fair Value | ||||||
Available-for-sale: |
| (dollars in thousands) | ||||||||||||||||
U.S. government agency |
| $ | — |
| $ | — |
| $ | (6) |
| $ | 1,991 |
| $ | (6) |
| $ | 1,991 |
Municipal |
|
| (7) |
|
| 4,480 |
|
| (3) |
|
| 1,111 |
|
| (10) |
|
| 5,591 |
Mortgage-backed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency residential |
|
| (21) |
|
| 17,348 |
|
| (218) |
|
| 31,241 |
|
| (239) |
|
| 48,589 |
Agency commercial |
|
| — |
|
| — |
|
| (185) |
|
| 16,678 |
|
| (185) |
|
| 16,678 |
Corporate |
|
| (5) |
|
| 14,990 |
|
| (2) |
|
| 4,995 |
|
| (7) |
|
| 19,985 |
Total |
| $ | (33) |
| $ | 36,818 |
| $ | (414) |
| $ | 56,016 |
| $ | (447) |
| $ | 92,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency residential |
| $ | (16) |
| $ | 3,225 |
| $ | (129) |
| $ | 9,760 |
| $ | (145) |
| $ | 12,985 |
Agency commercial |
|
| (11) |
|
| 2,226 |
|
| (7) |
|
| 622 |
|
| (18) |
|
| 2,848 |
Total |
| $ | (27) |
| $ | 5,451 |
| $ | (136) |
| $ | 10,382 |
| $ | (163) |
| $ | 15,833 |
| | | | | | | | | | | | | | | | | | |
| | Investments in a Continuous Unrealized Loss Position | ||||||||||||||||
| | Less than 12 Months | | 12 Months or More | | Total | ||||||||||||
September 30, 2022 |
| Unrealized |
| Fair Value |
| Unrealized |
| Fair Value |
| Unrealized |
| Fair Value | ||||||
Available-for-sale: | | (dollars in thousands) | ||||||||||||||||
U.S. Treasury | | $ | (15,245) | | $ | 144,691 | | $ | (1,078) | | $ | 8,881 | | $ | (16,323) | | $ | 153,572 |
U.S. government agency | | | (3,831) | | | 51,799 | | | (575) | | | 3,394 | | | (4,406) | | | 55,193 |
Municipal | | | (16,557) | | | 157,183 | | | (21,247) | | | 82,613 | | | (37,804) | | | 239,796 |
Mortgage-backed: | | | | | | | | | | | | | | | | | | |
Agency residential | | | (15,072) | | | 176,467 | | | (3,779) | | | 24,808 | | | (18,851) | | | 201,275 |
Agency commercial | | | (9,292) | | | 89,378 | | | (8,010) | | | 45,474 | | | (17,302) | | | 134,852 |
Corporate | | | (2,527) | | | 53,213 | | | (1,233) | | | 3,730 | | | (3,760) | | | 56,943 |
Total available-for-sale | | | (62,524) | | | 672,731 | | | (35,922) | | | 168,900 | | | (98,446) | | | 841,631 |
Held-to-maturity: | | | | | | | | | | | | | | | | | | |
U.S. government agency | | | (2,316) | | | 20,176 | | | (8,026) | | | 57,900 | | | (10,342) | | | 78,076 |
Municipal | | | (1,357) | | | 35,066 | | | — | | | — | | | (1,357) | | | 35,066 |
Mortgage-backed: | | | | | | | | | | | | | | | | | | |
Agency residential | | | (6,320) | | | 97,876 | | | (171) | | | 963 | | | (6,491) | | | 98,839 |
Agency commercial | | | (24,304) | | | 150,113 | | | (22,558) | | | 113,127 | | | (46,862) | | | 263,240 |
Total held-to-maturity | | | (34,297) | | | 303,231 | | | (30,755) | | | 171,990 | | | (65,052) | | | 475,221 |
Total debt securities | | $ | (96,821) | | $ | 975,962 | | $ | (66,677) | | $ | 340,890 | | $ | (163,498) | | $ | 1,316,852 |
| | | | | | | | | | | | | | | | | | |
| | Investments in a Continuous Unrealized Loss Position | ||||||||||||||||
| | Less than 12 Months | | 12 Months or More | | Total | ||||||||||||
December 31, 2021 |
| Unrealized |
| Fair Value |
| Unrealized |
| Fair Value |
| Unrealized |
| Fair Value | ||||||
Available-for-sale: | | (dollars in thousands) | ||||||||||||||||
U.S. Treasury | | $ | (354) | | $ | 68,410 | | $ | — | | $ | — | | $ | (354) | | $ | 68,410 |
U.S. government agency | | | (2,183) | | | 80,219 | | | (284) | | | 5,578 | | | (2,467) | | | 85,797 |
Municipal | | | (2,018) | | | 89,424 | | | (886) | | | 17,327 | | | (2,904) | | | 106,751 |
Mortgage-backed: | | | | | | | | | | | | | | | | | | |
Agency residential | | | (851) | | | 91,703 | | | (68) | | | 4,305 | | | (919) | | | 96,008 |
Agency commercial | | | (1,921) | | | 113,111 | | | (127) | | | 6,443 | | | (2,048) | | | 119,554 |
Corporate | | | (7) | | | 2,737 | | | (289) | | | 4,671 | | | (296) | | | 7,408 |
Total available-for-sale | | | (7,334) | | | 445,604 | | | (1,654) | | | 38,324 | | | (8,988) | | | 483,928 |
Held-to-maturity: | | | | | | | | | | | | | | | | | | |
U.S. government agency | | | (51) | | | 4,949 | | | — | | | — | | | (51) | | | 4,949 |
Mortgage-backed: | | | | | | | | | | | | | | | | | | |
Agency residential | | | (102) | | | 14,932 | | | — | | | — | | | (102) | | | 14,932 |
Agency commercial | | | (2,673) | | | 174,428 | | | (128) | | | 2,776 | | | (2,801) | | | 177,204 |
Total held-to-maturity | | | (2,826) | | | 194,309 | | | (128) | | | 2,776 | | | (2,954) | | | 197,085 |
Total debt securities | | $ | (10,160) | | $ | 639,913 | | $ | (1,782) | | $ | 41,100 | | $ | (11,942) | | $ | 681,013 |
1518
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Investments in a Continuous Unrealized Loss Position | ||||||||||||||||
|
| Less than 12 Months |
| 12 Months or More |
| Total | ||||||||||||
December 31, 2018 |
| Unrealized |
| Fair Value |
| Unrealized |
| Fair Value |
| Unrealized |
| Fair Value | ||||||
Available-for-sale: |
| (dollars in thousands) | ||||||||||||||||
U.S. government agency |
| $ | (302) |
| $ | 19,079 |
| $ | (59) |
| $ | 7,938 |
| $ | (361) |
| $ | 27,017 |
Municipal |
|
| (230) |
|
| 31,034 |
|
| (1,038) |
|
| 59,702 |
|
| (1,268) |
|
| 90,736 |
Mortgage-backed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency residential |
|
| (299) |
|
| 40,864 |
|
| (2,089) |
|
| 99,967 |
|
| (2,388) |
|
| 140,831 |
Agency commercial |
|
| (262) |
|
| 35,462 |
|
| (1,820) |
|
| 81,899 |
|
| (2,082) |
|
| 117,361 |
Corporate |
|
| (263) |
|
| 20,734 |
|
| (492) |
|
| 39,054 |
|
| (755) |
|
| 59,788 |
Total |
| $ | (1,356) |
| $ | 147,173 |
| $ | (5,498) |
| $ | 288,560 |
| $ | (6,854) |
| $ | 435,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal |
| $ | (32) |
| $ | 4,166 |
| $ | (10) |
| $ | 1,856 |
| $ | (42) |
| $ | 6,022 |
Mortgage-backed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency residential |
|
| (59) |
|
| 4,046 |
|
| (939) |
|
| 17,564 |
|
| (998) |
|
| 21,610 |
Agency commercial |
|
| (67) |
|
| 8,910 |
|
| (428) |
|
| 10,413 |
|
| (495) |
|
| 19,323 |
Total |
| $ | (158) |
| $ | 17,122 |
| $ | (1,377) |
| $ | 29,833 |
| $ | (1,535) |
| $ | 46,955 |
As of September 30, 2019,2022, there were 74183 debt securities in an unrealized loss position for a period of twelve months or more, and 36641 debt securities in an unrealized loss position for a period of less than twelve months. These unrealized losses are primarily a result of fluctuations in market interest rates in the bond market.rates. In analyzing an issuer’s financial condition, management considers whether the debt securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports. Management believes that all declines in value of these debt securities are deemed to be temporary.
There were no sales of debt securities during the three and nine months ended September 30, 2022 and 2021.
Equity Securities
Equity securities with readily determinable fair values are measured at fair value with changes in fair value recognized in gains (losses) on securities on the consolidated statements of income.
The Company has elected to measure equity securities with no readily determinable fair value at cost minus impairment, if any, plus or minus changes resulting from observable price changes for identical or similar securities of the same issuer.
The initial cost and carrying values of equity securities, with cumulative net unrealized gains and losses are as follows:
| | | | | | |
| | Readily | | No Readily | ||
| | Determinable | | Determinable | ||
September 30, 2022 |
| Fair Value |
| Fair Value | ||
| | (dollars in thousands) | ||||
Initial cost | | $ | 3,142 | | $ | 2,142 |
Cumulative net unrealized losses | | | (146) | | | (165) |
Carrying value | | $ | 2,996 | | $ | 1,977 |
| | | | | | |
| | Readily | | No Readily | ||
| | Determinable | | Determinable | ||
December 31, 2021 |
| Fair Value |
| Fair Value | ||
| | (dollars in thousands) | ||||
Initial cost | | $ | 3,142 | | $ | 2,092 |
Cumulative net unrealized gains (losses) | | | 301 | | | (165) |
Carrying value | | $ | 3,443 | | $ | 1,927 |
As of September 30, 2022 and December 31, 2021, the cumulative net unrealized losses on equity securities with no readily determinable fair value reflect downward adjustments based on observable price changes of an identical investment. There have been no impairments or upward adjustments based on observable price changes to equity securities with no readily determinable fair value.
19
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
There were no sales of equity securities during the three and nine months ended September 30, 2022 and 2021. Unrealized gains (losses) on equity securities were as follows during the three and nine months ended September 30, 2022:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2022 |
| 2021 | | 2022 |
| 2021 | ||||
| | (dollars in thousands) | ||||||||||
Readily determinable fair value | | $ | (107) | | $ | 28 | | $ | (447) | | $ | 74 |
No readily determinable fair value | | | — | | | — | | | — | | | — |
Unrealized gains (losses) on equity securities | | $ | (107) | | $ | 28 | | $ | (447) | | $ | 74 |
NOTE 4 – LOANS AND THE ALLOWANCE FOR LOAN LOSSES
Major categories of loans as of September 30, 2019 and December 31, 2018 are summarized as follows:
|
|
|
|
|
|
|
|
| September 30, |
| December 31, | ||
|
| 2019 |
| 2018 | ||
|
| (dollars in thousands) | ||||
Commercial and industrial |
| $ | 340,650 |
| $ | 360,501 |
Agricultural and farmland |
|
| 205,041 |
|
| 209,875 |
Commercial real estate - owner occupied |
|
| 239,805 |
|
| 255,074 |
Commercial real estate - non-owner occupied |
|
| 552,262 |
|
| 533,910 |
Multi-family |
|
| 191,646 |
|
| 135,925 |
Construction and land development |
|
| 210,939 |
|
| 237,275 |
One-to-four family residential |
|
| 321,947 |
|
| 313,108 |
Municipal, consumer, and other |
|
| 108,724 |
|
| 98,589 |
Total loans, before allowance for loan losses |
|
| 2,171,014 |
|
| 2,144,257 |
Allowance for loan losses |
|
| (22,761) |
|
| (20,509) |
Loans, net of allowance for loan losses |
| $ | 2,148,253 |
| $ | 2,123,748 |
| | | | | | |
|
| September 30, 2022 |
| December 31, 2021 | ||
| | (dollars in thousands) | ||||
Commercial and industrial | | $ | 240,671 | | $ | 286,946 |
Agricultural and farmland | | | 245,234 | | | 247,796 |
Commercial real estate - owner occupied | | | 226,524 | | | 234,544 |
Commercial real estate - non-owner occupied | | | 718,089 | | | 684,023 |
Multi-family | | | 260,630 | | | 263,911 |
Construction and land development | | | 364,290 | | | 298,048 |
One-to-four family residential | | | 328,667 | | | 327,837 |
Municipal, consumer, and other | | | 195,823 | | | 156,584 |
Loans, before allowance for loan losses | | | 2,579,928 | | | 2,499,689 |
Allowance for loan losses | | | (25,060) | | | (23,936) |
Loans, net of allowance for loan losses | | $ | 2,554,868 | | $ | 2,475,753 |
| | | | | | |
Paycheck Protection Program (PPP) loans (included above) | | | | | | |
Commercial and industrial | | $ | 65 | | $ | 28,404 |
Agricultural and farmland | | | — | | | 913 |
Municipal, consumer, and other | | | — | | | 171 |
Total PPP loans | | $ | 65 | | $ | 29,488 |
1620
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables detail activity in the allowance for loan losses for the three and nine months ended September 30, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
| Commercial |
|
|
|
|
|
|
|
|
|
| Municipal, |
|
|
| |||
|
| Commercial |
| Agricultural |
| Real Estate |
| Real Estate |
|
|
|
| Construction |
| One-to-four |
| Consumer, |
|
|
| |||||||
|
| and |
| and |
| Owner |
| Non-owner |
|
|
|
| and Land |
| Family |
| and |
|
|
| |||||||
Three Months Ended September 30, 2019 |
| Industrial |
| Farmland |
| Occupied |
| Occupied |
| Multi‑Family |
| Development |
| Residential |
| Other |
| Total | |||||||||
Allowance for loan losses: |
| (dollars in thousands) | |||||||||||||||||||||||||
Balance, June 30, 2019 |
| $ | 5,187 |
| $ | 2,862 |
| $ | 2,487 |
| $ | 2,721 |
| $ | 1,153 |
| $ | 3,723 |
| $ | 3,569 |
| $ | 840 |
| $ | 22,542 |
Provision for loan losses |
|
| (915) |
|
| (133) |
|
| (482) |
|
| 521 |
|
| (182) |
|
| (601) |
|
| (692) |
|
| 3,168 |
|
| 684 |
Charge-offs |
|
| (32) |
|
| — |
|
| (216) |
|
| (111) |
|
| (41) |
|
| — |
|
| (387) |
|
| (150) |
|
| (937) |
Recoveries |
|
| 313 |
|
| — |
|
| 26 |
|
| 5 |
|
| — |
|
| 1 |
|
| 42 |
|
| 85 |
|
| 472 |
Balance, September 30, 2019 |
| $ | 4,553 |
| $ | 2,729 |
| $ | 1,815 |
| $ | 3,136 |
| $ | 930 |
| $ | 3,123 |
| $ | 2,532 |
| $ | 3,943 |
| $ | 22,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
| Commercial |
|
|
|
|
|
|
|
|
|
| Municipal, |
|
|
| |||
|
| Commercial |
| Agricultural |
| Real Estate |
| Real Estate |
|
|
|
| Construction |
| One-to-four |
| Consumer, |
|
|
| |||||||
|
| and |
| and |
| Owner |
| Non-owner |
|
|
|
| and Land |
| Family |
| and |
|
|
| |||||||
Three Months Ended September 30, 2018 |
| Industrial |
| Farmland |
| Occupied |
| Occupied |
| Multi‑Family |
| Development |
| Residential |
| Other |
| Total | |||||||||
Allowance for loan losses: |
| (dollars in thousands) | |||||||||||||||||||||||||
Balance, June 30, 2018 |
| $ | 4,927 |
| $ | 2,375 |
| $ | 1,616 |
| $ | 2,930 |
| $ | 920 |
| $ | 3,345 |
| $ | 3,062 |
| $ | 1,170 |
| $ | 20,345 |
Provision for loan losses |
|
| 220 |
|
| 319 |
|
| 47 |
|
| (36) |
|
| (13) |
|
| 365 |
|
| 213 |
|
| 123 |
|
| 1,238 |
Charge-offs |
|
| (43) |
|
| — |
|
| (44) |
|
| — |
|
| — |
|
| — |
|
| (439) |
|
| (136) |
|
| (662) |
Recoveries |
|
| 30 |
|
| — |
|
| 45 |
|
| 5 |
|
| — |
|
| 2 |
|
| 109 |
|
| 59 |
|
| 250 |
Balance, September 30, 2018 |
| $ | 5,134 |
| $ | 2,694 |
| $ | 1,664 |
| $ | 2,899 |
| $ | 907 |
| $ | 3,712 |
| $ | 2,945 |
| $ | 1,216 |
| $ | 21,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
| Commercial |
|
|
|
|
|
|
|
|
|
| Municipal, |
|
|
| |||
|
| Commercial |
| Agricultural |
| Real Estate |
| Real Estate |
|
|
|
| Construction |
| One-to-four |
| Consumer, |
|
|
| |||||||
|
| and |
| and |
| Owner |
| Non-owner |
|
|
|
| and Land |
| Family |
| and |
|
|
| |||||||
Nine Months Ended September 30, 2019 |
| Industrial |
| Farmland |
| Occupied |
| Occupied |
| Multi‑Family |
| Development |
| Residential |
| Other |
| Total | |||||||||
Allowance for loan losses: |
| (dollars in thousands) | |||||||||||||||||||||||||
Balance, December 31, 2018 |
| $ | 3,748 |
| $ | 2,650 |
| $ | 2,506 |
| $ | 2,644 |
| $ | 912 |
| $ | 4,176 |
| $ | 2,782 |
| $ | 1,091 |
| $ | 20,509 |
Provision for loan losses |
|
| 700 |
|
| 109 |
|
| (356) |
|
| 588 |
|
| 59 |
|
| (1,478) |
|
| 541 |
|
| 3,103 |
|
| 3,266 |
Charge-offs |
|
| (315) |
|
| (30) |
|
| (382) |
|
| (111) |
|
| (41) |
|
| (9) |
|
| (1,026) |
|
| (522) |
|
| (2,436) |
Recoveries |
|
| 420 |
|
| — |
|
| 47 |
|
| 15 |
|
| — |
|
| 434 |
|
| 235 |
|
| 271 |
|
| 1,422 |
Balance, September 30, 2019 |
| $ | 4,553 |
| $ | 2,729 |
| $ | 1,815 |
| $ | 3,136 |
| $ | 930 |
| $ | 3,123 |
| $ | 2,532 |
| $ | 3,943 |
| $ | 22,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Commercial |
| Agricultural |
| Real Estate |
| Real Estate |
|
|
|
|
|
|
|
|
|
| Consumer |
|
|
| |||||
|
| and |
| and |
| Owner |
| Non-owner |
|
|
|
| Construction |
| Residential |
| and |
|
|
| |||||||
Nine Months Ended September 30, 2018 |
| Industrial |
| Farmland |
| Occupied |
| Occupied |
| Multi‑Family |
| and Land |
| Real Estate |
| Other |
| Total | |||||||||
Allowance for loan losses: |
| (dollars in thousands) | |||||||||||||||||||||||||
Balance, December 31, 2017 |
| $ | 5,411 |
| $ | 2,385 |
| $ | 1,510 |
| $ | 2,476 |
| $ | 997 |
| $ | 2,981 |
| $ | 2,723 |
| $ | 1,282 |
| $ | 19,765 |
Provision for loan losses |
|
| (213) |
|
| 309 |
|
| 149 |
|
| 356 |
|
| (90) |
|
| 528 |
|
| 553 |
|
| 199 |
|
| 1,791 |
Charge-offs |
|
| (178) |
|
| — |
|
| (46) |
|
| (69) |
|
| — |
|
| (53) |
|
| (727) |
|
| (459) |
|
| (1,532) |
Recoveries |
|
| 114 |
|
| — |
|
| 51 |
|
| 136 |
|
| — |
|
| 256 |
|
| 396 |
|
| 194 |
|
| 1,147 |
Balance, September 30, 2018 |
| $ | 5,134 |
| $ | 2,694 |
| $ | 1,664 |
| $ | 2,899 |
| $ | 907 |
| $ | 3,712 |
| $ | 2,945 |
| $ | 1,216 |
| $ | 21,171 |
30:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Commercial | | Commercial | | | | | | | | | | | Municipal, | | | | |||
| | Commercial | | Agricultural | | Real Estate | | Real Estate | | | | | Construction | | One-to-four | | Consumer, | | | | |||||||
| | and | | and | | Owner | | Non-owner | | | | | and Land | | Family | | and | | | | |||||||
Three Months Ended September 30, 2022 |
| Industrial |
| Farmland |
| Occupied |
| Occupied |
| Multi-Family |
| Development |
| Residential |
| Other |
| Total | |||||||||
Allowance for loan losses: | | (dollars in thousands) | |||||||||||||||||||||||||
Balance, June 30, 2022 | | $ | 2,981 | | $ | 924 | | $ | 1,224 | | $ | 6,611 | | $ | 1,375 | | $ | 4,059 | | $ | 1,696 | | $ | 5,864 | | $ | 24,734 |
Provision for loan losses | | | 14 | | | (83) | | | (65) | | | 268 | | | (52) | | | 316 | | | (78) | | | 66 | | | 386 |
Charge-offs | | | (17) | | | — | | | — | | | — | | | — | | | — | | | (18) | | | (187) | | | (222) |
Recoveries | | | 6 | | | — | | | 1 | | | 3 | | | — | | | 1 | | | 60 | | | 91 | | | 162 |
Balance, September 30, 2022 | | $ | 2,984 | | $ | 841 | | $ | 1,160 | | $ | 6,882 | | $ | 1,323 | | $ | 4,376 | | $ | 1,660 | | $ | 5,834 | | $ | 25,060 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Commercial | | Commercial | | | | | | | | | | | Municipal, | | | | |||
| | Commercial | | Agricultural | | Real Estate | | Real Estate | | | | | Construction | | One-to-four | | Consumer, | | | | |||||||
| | and | | and | | Owner | | Non-owner | | | | | and Land | | Family | | and | | | | |||||||
Three Months Ended September 30, 2021 |
| Industrial |
| Farmland |
| Occupied |
| Occupied |
| Multi-Family |
| Development |
| Residential |
| Other |
| Total | |||||||||
Allowance for loan losses: | | (dollars in thousands) | |||||||||||||||||||||||||
Balance, June 30, 2021 | | $ | 2,717 | | $ | 781 | | $ | 1,946 | | $ | 9,825 | | $ | 2,009 | | $ | 3,924 | | $ | 1,520 | | $ | 3,785 | | $ | 26,507 |
Provision for loan losses | | | 162 | | | (26) | | | (395) | | | (710) | | | (228) | | | 413 | | | (499) | | | (384) | | | (1,667) |
Charge-offs | | | (135) | | | — | | | — | | | — | | | — | | | — | | | (48) | | | (95) | | | (278) |
Recoveries | | | 114 | | | — | | | — | | | 6 | | | — | | | 1 | | | 135 | | | 43 | | | 299 |
Balance, September 30, 2021 | | $ | 2,858 | | $ | 755 | | $ | 1,551 | | $ | 9,121 | | $ | 1,781 | | $ | 4,338 | | $ | 1,108 | | $ | 3,349 | | $ | 24,861 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Commercial | | Commercial | | | | | | | | | | | Municipal, | | | | |||
| | Commercial | | Agricultural | | Real Estate | | Real Estate | | | | | Construction | | One-to-four | | Consumer, | | | | |||||||
| | and | | and | | Owner | | Non-owner | | | | | and Land | | Family | | and | | | | |||||||
Nine Months Ended September 30, 2022 |
| Industrial |
| Farmland |
| Occupied |
| Occupied |
| Multi-Family |
| Development |
| Residential |
| Other |
| Total | |||||||||
Allowance for loan losses: | | (dollars in thousands) | |||||||||||||||||||||||||
Balance, December 31, 2021 | | $ | 2,440 | | $ | 845 | | $ | 1,840 | | $ | 8,145 | | $ | 1,263 | | $ | 4,914 | | $ | 1,311 | | $ | 3,178 | | $ | 23,936 |
Provision for loan losses | | | (189) | | | (4) | | | (781) | | | (1,536) | | | 60 | | | (539) | | | 93 | | | 2,843 | | | (53) |
Charge-offs | | | (22) | | | — | | | — | | | — | | | — | | | — | | | (67) | | | (426) | | | (515) |
Recoveries | | | 755 | | | — | | | 101 | | | 273 | | | — | | | 1 | | | 323 | | | 239 | | | 1,692 |
Balance, September 30, 2022 | | $ | 2,984 | | $ | 841 | | $ | 1,160 | | $ | 6,882 | | $ | 1,323 | | $ | 4,376 | | $ | 1,660 | | $ | 5,834 | | $ | 25,060 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Commercial | | Commercial | | | | | | | | | | | Municipal, | | | | |||
| | Commercial | | Agricultural | | Real Estate | | Real Estate | | | | | | | | | | | Consumer | | | | |||||
| | and | | and | | Owner | | Non-owner | | | | | Construction | | Residential | | and | | | | |||||||
Nine Months Ended September 30, 2021 |
| Industrial |
| Farmland |
| Occupied |
| Occupied |
| Multi-Family |
| and Land |
| Real Estate |
| Other |
| Total | |||||||||
Allowance for loan losses: | | (dollars in thousands) | |||||||||||||||||||||||||
Balance, December 31, 2020 | | $ | 3,929 | | $ | 793 | | $ | 3,141 | | $ | 11,251 | | $ | 1,957 | | $ | 4,232 | | $ | 1,801 | | $ | 4,734 | | $ | 31,838 |
Provision for loan losses | | | (1,062) | | | (38) | | | (1,590) | | | (2,149) | | | (176) | | | (164) | | | (742) | | | (1,313) | | | (7,234) |
Charge-offs | | | (430) | | | — | | | — | | | — | | | — | | | — | | | (161) | | | (284) | | | (875) |
Recoveries | | | 421 | | | — | | | — | | | 19 | | | — | | | 270 | | | 210 | | | 212 | | | 1,132 |
Balance, September 30, 2021 | | $ | 2,858 | | $ | 755 | | $ | 1,551 | | $ | 9,121 | | $ | 1,781 | | $ | 4,338 | | $ | 1,108 | | $ | 3,349 | | $ | 24,861 |
1721
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present the recorded investments in loans and the allowance for loan losses by category as of September 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
| Commercial |
|
|
|
|
|
|
|
|
|
| Municipal, |
|
|
| |||
|
| Commercial |
| Agricultural |
| Real Estate |
| Real Estate |
|
|
|
| Construction |
| One-to-four |
| Consumer, |
|
|
| |||||||
|
| and |
| and |
| Owner |
| Non-owner |
|
|
|
| and Land |
| Family |
| and |
|
|
| |||||||
September 30, 2019 |
| Industrial |
| Farmland |
| Occupied |
| Occupied |
| Multi‑Family |
| Development |
| Residential |
| Other |
| Total | |||||||||
Loan balances: |
| (dollars in thousands) | |||||||||||||||||||||||||
Collectively evaluated for impairment |
| $ | 328,063 |
| $ | 188,068 |
| $ | 218,223 |
| $ | 529,096 |
| $ | 188,715 |
| $ | 204,553 |
| $ | 298,978 |
| $ | 94,654 |
| $ | 2,050,350 |
Individually evaluated for impairment |
|
| 10,163 |
|
| 15,860 |
|
| 12,441 |
|
| 3,835 |
|
| 1,334 |
|
| 2,694 |
|
| 11,810 |
|
| 13,970 |
|
| 72,107 |
Acquired with deteriorated credit quality |
|
| 2,424 |
|
| 1,113 |
|
| 9,141 |
|
| 19,331 |
|
| 1,597 |
|
| 3,692 |
|
| 11,159 |
|
| 100 |
|
| 48,557 |
Total |
| $ | 340,650 |
| $ | 205,041 |
| $ | 239,805 |
| $ | 552,262 |
| $ | 191,646 |
| $ | 210,939 |
| $ | 321,947 |
| $ | 108,724 |
| $ | 2,171,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment |
| $ | 2,044 |
| $ | 2,503 |
| $ | 1,431 |
| $ | 2,761 |
| $ | 921 |
| $ | 1,697 |
| $ | 1,560 |
| $ | 860 |
| $ | 13,777 |
Individually evaluated for impairment |
|
| 2,509 |
|
| 73 |
|
| 323 |
|
| 71 |
|
| — |
|
| 1,262 |
|
| 853 |
|
| 3,082 |
|
| 8,173 |
Acquired with deteriorated credit quality |
|
| — |
|
| 153 |
|
| 61 |
|
| 304 |
|
| 9 |
|
| 164 |
|
| 119 |
|
| 1 |
|
| 811 |
Total |
| $ | 4,553 |
| $ | 2,729 |
| $ | 1,815 |
| $ | 3,136 |
| $ | 930 |
| $ | 3,123 |
| $ | 2,532 |
| $ | 3,943 |
| $ | 22,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
| Commercial |
|
|
|
|
|
|
|
|
|
| Municipal, |
|
|
| |||
|
| Commercial |
| Agricultural |
| Real Estate |
| Real Estate |
|
|
|
| Construction |
| One-to-four |
| Consumer, |
|
|
| |||||||
|
| and |
| and |
| Owner |
| Non-owner |
|
|
|
| and Land |
| Family |
| and |
|
|
| |||||||
December 31, 2018 |
| Industrial |
| Farmland |
| Occupied |
| Occupied |
| Multi‑Family |
| Development |
| Residential |
| Other |
| Total | |||||||||
Loan balances: |
| (dollars in thousands) | |||||||||||||||||||||||||
Collectively evaluated for impairment |
| $ | 350,435 |
| $ | 197,414 |
| $ | 226,068 |
| $ | 504,368 |
| $ | 132,379 |
| $ | 229,626 |
| $ | 287,173 |
| $ | 98,059 |
| $ | 2,025,522 |
Individually evaluated for impairment |
|
| 7,488 |
|
| 11,295 |
|
| 19,202 |
|
| 7,820 |
|
| 1,678 |
|
| 3,331 |
|
| 12,837 |
|
| 416 |
|
| 64,067 |
Acquired with deteriorated credit quality |
|
| 2,578 |
|
| 1,166 |
|
| 9,804 |
|
| 21,722 |
|
| 1,868 |
|
| 4,318 |
|
| 13,098 |
|
| 114 |
|
| 54,668 |
Total |
| $ | 360,501 |
| $ | 209,875 |
| $ | 255,074 |
| $ | 533,910 |
| $ | 135,925 |
| $ | 237,275 |
| $ | 313,108 |
| $ | 98,589 |
| $ | 2,144,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment |
| $ | 2,188 |
| $ | 2,611 |
| $ | 1,423 |
| $ | 2,566 |
| $ | 640 |
| $ | 2,024 |
| $ | 1,464 |
| $ | 1,024 |
| $ | 13,940 |
Individually evaluated for impairment |
|
| 1,554 |
|
| 39 |
|
| 1,066 |
|
| 73 |
|
| 267 |
|
| 1,714 |
|
| 1,265 |
|
| 67 |
|
| 6,045 |
Acquired with deteriorated credit quality |
|
| 6 |
|
| — |
|
| 17 |
|
| 5 |
|
| 5 |
|
| 438 |
|
| 53 |
|
| — |
|
| 524 |
Total |
| $ | 3,748 |
| $ | 2,650 |
| $ | 2,506 |
| $ | 2,644 |
| $ | 912 |
| $ | 4,176 |
| $ | 2,782 |
| $ | 1,091 |
| $ | 20,509 |
category:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Commercial | | Commercial | | | | | | | | | | | Municipal, | | | | |||
| | Commercial | | Agricultural | | Real Estate | | Real Estate | | | | | Construction | | One-to-four | | Consumer, | | | | |||||||
| | and | | and | | Owner | | Non-owner | | | | | and Land | | Family | | and | | | | |||||||
September 30, 2022 |
| Industrial |
| Farmland |
| Occupied |
| Occupied |
| Multi-Family |
| Development |
| Residential |
| Other |
| Total | |||||||||
Loan balances: | | (dollars in thousands) | |||||||||||||||||||||||||
Collectively evaluated for impairment | | $ | 237,839 | | $ | 244,236 | | $ | 210,461 | | $ | 675,121 | | $ | 260,060 | | $ | 361,305 | | $ | 315,209 | | $ | 183,181 | | $ | 2,487,412 |
Individually evaluated for impairment | | | 2,702 | | | 385 | | | 11,607 | | | 31,553 | | | — | | | 2,007 | | | 8,427 | | | 12,622 | | | 69,303 |
Acquired with deteriorated credit quality | | | 130 | | | 613 | | | 4,456 | | | 11,415 | | | 570 | | | 978 | | | 5,031 | | | 20 | | | 23,213 |
Total | | $ | 240,671 | | $ | 245,234 | | $ | 226,524 | | $ | 718,089 | | $ | 260,630 | | $ | 364,290 | | $ | 328,667 | | $ | 195,823 | | $ | 2,579,928 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Collectively evaluated for impairment | | $ | 2,826 | | $ | 841 | | $ | 930 | | $ | 4,416 | | $ | 1,320 | | $ | 4,374 | | $ | 1,619 | | $ | 2,342 | | $ | 18,668 |
Individually evaluated for impairment | | | 158 | | | — | | | 208 | | | 2,465 | | | — | | | — | | | 39 | | | 3,492 | | | 6,362 |
Acquired with deteriorated credit quality | | | — | | | — | | | 22 | | | 1 | | | 3 | | | 2 | | | 2 | | | — | | | 30 |
Total | | $ | 2,984 | | $ | 841 | | $ | 1,160 | | $ | 6,882 | | $ | 1,323 | | $ | 4,376 | | $ | 1,660 | | $ | 5,834 | | $ | 25,060 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Commercial | | Commercial | | | | | | | | | | | Municipal, | | | | |||
| | Commercial | | Agricultural | | Real Estate | | Real Estate | | | | | Construction | | One-to-four | | Consumer, | | | | |||||||
| | and | | and | | Owner | | Non-owner | | | | | and Land | | Family | | and | | | | |||||||
December 31, 2021 |
| Industrial |
| Farmland |
| Occupied |
| Occupied |
| Multi-Family |
| Development |
| Residential |
| Other |
| Total | |||||||||
Loan balances: | | (dollars in thousands) | |||||||||||||||||||||||||
Collectively evaluated for impairment | | $ | 272,064 | | $ | 247,021 | | $ | 216,794 | | $ | 641,555 | | $ | 262,701 | | $ | 293,548 | | $ | 314,807 | | $ | 143,510 | | $ | 2,392,000 |
Individually evaluated for impairment | | | 14,744 | | | 12 | | | 12,332 | | | 29,575 | | | — | | | 2,018 | | | 6,897 | | | 13,041 | | | 78,619 |
Acquired with deteriorated credit quality | | | 138 | | | 763 | | | 5,418 | | | 12,893 | | | 1,210 | | | 2,482 | | | 6,133 | | | 33 | | | 29,070 |
Total | | $ | 286,946 | | $ | 247,796 | | $ | 234,544 | | $ | 684,023 | | $ | 263,911 | | $ | 298,048 | | $ | 327,837 | | $ | 156,584 | | $ | 2,499,689 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Collectively evaluated for impairment | | $ | 2,253 | | $ | 845 | | $ | 1,480 | | $ | 5,138 | | $ | 1,259 | | $ | 4,895 | | $ | 1,099 | | $ | 1,302 | | $ | 18,271 |
Individually evaluated for impairment | | | 187 | | | — | | | 327 | | | 2,999 | | | — | | | — | | | 210 | | | 1,875 | | | 5,598 |
Acquired with deteriorated credit quality | | | — | | | — | | | 33 | | | 8 | | | 4 | | | 19 | | | 2 | | | 1 | | | 67 |
Total | | $ | 2,440 | | $ | 845 | | $ | 1,840 | | $ | 8,145 | | $ | 1,263 | | $ | 4,914 | | $ | 1,311 | | $ | 3,178 | | $ | 23,936 |
1822
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present loans individually evaluated for impairment by category of loans as of September 30, 2019 and December 31, 2018:loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unpaid |
|
|
|
|
|
|
| Average |
| Interest | |||
|
| Principal |
| Recorded |
| Related |
| Recorded |
| Income | |||||
September 30, 2019 |
| Balance |
| Investment |
| Allowance |
| Investment |
| Recognized | |||||
With an allowance recorded: |
| (dollars in thousands) | |||||||||||||
Commercial and industrial |
| $ | 4,902 |
| $ | 4,902 |
| $ | 2,509 |
| $ | 5,081 |
| $ | 115 |
Agricultural and farmland |
|
| 490 |
|
| 490 |
|
| 73 |
|
| 404 |
|
| 12 |
Commercial real estate - owner occupied |
|
| 1,953 |
|
| 1,953 |
|
| 323 |
|
| 1,998 |
|
| 90 |
Commercial real estate - non-owner occupied |
|
| 101 |
|
| 100 |
|
| 71 |
|
| 102 |
|
| 5 |
Multi-family |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Construction and land development |
|
| 2,591 |
|
| 2,590 |
|
| 1,262 |
|
| 2,842 |
|
| 131 |
One-to-four family residential |
|
| 2,095 |
|
| 2,087 |
|
| 853 |
|
| 2,091 |
|
| 65 |
Municipal, consumer, and other |
|
| 9,202 |
|
| 9,175 |
|
| 3,082 |
|
| 9,202 |
|
| 103 |
Total |
| $ | 21,334 |
| $ | 21,297 |
| $ | 8,173 |
| $ | 21,720 |
| $ | 521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no related allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
| $ | 5,258 |
| $ | 5,261 |
| $ | — |
| $ | 5,681 |
| $ | 150 |
Agricultural and farmland |
|
| 15,369 |
|
| 15,370 |
|
| — |
|
| 15,889 |
|
| 352 |
Commercial real estate - owner occupied |
|
| 10,479 |
|
| 10,488 |
|
| — |
|
| 10,640 |
|
| 360 |
Commercial real estate - non-owner occupied |
|
| 3,730 |
|
| 3,735 |
|
| — |
|
| 4,000 |
|
| 111 |
Multi-family |
|
| 1,337 |
|
| 1,334 |
|
| — |
|
| 1,349 |
|
| 9 |
Construction and land development |
|
| 105 |
|
| 104 |
|
| — |
|
| 107 |
|
| 3 |
One-to-four family residential |
|
| 9,751 |
|
| 9,723 |
|
| — |
|
| 10,107 |
|
| 194 |
Municipal, consumer, and other |
|
| 4,809 |
|
| 4,795 |
|
| — |
|
| 4,871 |
|
| 71 |
Total |
| $ | 50,838 |
| $ | 50,810 |
| $ | — |
| $ | 52,644 |
| $ | 1,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
| $ | 10,160 |
| $ | 10,163 |
| $ | 2,509 |
| $ | 10,762 |
| $ | 265 |
Agricultural and farmland |
|
| 15,859 |
|
| 15,860 |
|
| 73 |
|
| 16,293 |
|
| 364 |
Commercial real estate - owner occupied |
|
| 12,432 |
|
| 12,441 |
|
| 323 |
|
| 12,638 |
|
| 450 |
Commercial real estate - non-owner occupied |
|
| 3,831 |
|
| 3,835 |
|
| 71 |
|
| 4,102 |
|
| 116 |
Multi-family |
|
| 1,337 |
|
| 1,334 |
|
| — |
|
| 1,349 |
|
| 9 |
Construction and land development |
|
| 2,696 |
|
| 2,694 |
|
| 1,262 |
|
| 2,949 |
|
| 134 |
One-to-four family residential |
|
| 11,846 |
|
| 11,810 |
|
| 853 |
|
| 12,198 |
|
| 259 |
Municipal, consumer, and other |
|
| 14,011 |
|
| 13,970 |
|
| 3,082 |
|
| 14,073 |
|
| 174 |
Total |
| $ | 72,172 |
| $ | 72,107 |
| $ | 8,173 |
| $ | 74,364 |
| $ | 1,771 |
| | | | | | | | | |
|
| Unpaid | | | |
| | | |
| | Principal | | Recorded | | Related | |||
September 30, 2022 |
| Balance |
| Investment |
| Allowance | |||
With an allowance recorded: | | (dollars in thousands) | |||||||
Commercial and industrial | | $ | 256 | | $ | 256 | | $ | 158 |
Agricultural and farmland | | | — | | | — | | | — |
Commercial real estate - owner occupied | | | 734 | | | 734 | | | 208 |
Commercial real estate - non-owner occupied | | | 14,359 | | | 14,348 | | | 2,465 |
Multi-family | | | — | | | — | | | — |
Construction and land development | | | — | | | — | | | — |
One-to-four family residential | | | 350 | | | 340 | | | 39 |
Municipal, consumer, and other | | | 8,223 | | | 8,201 | | | 3,492 |
Total | | $ | 23,922 | | $ | 23,879 | | $ | 6,362 |
| | | | | | | | | |
With no related allowance: | | | | | | | | | |
Commercial and industrial | | $ | 2,460 | | $ | 2,446 | | $ | — |
Agricultural and farmland | | | 385 | | | 385 | | | — |
Commercial real estate - owner occupied | | | 11,030 | | | 10,873 | | | — |
Commercial real estate - non-owner occupied | | | 17,284 | | | 17,205 | | | — |
Multi-family | | | — | | | — | | | — |
Construction and land development | | | 2,107 | | | 2,007 | | | — |
One-to-four family residential | | | 9,403 | | | 8,087 | | | — |
Municipal, consumer, and other | | | 4,455 | | | 4,421 | | | — |
Total | | $ | 47,124 | | $ | 45,424 | | $ | — |
| | | | | | | | | |
Total loans individually evaluated for impairment: | | | | | | | | | |
Commercial and industrial | | $ | 2,716 | | $ | 2,702 | | $ | 158 |
Agricultural and farmland | | | 385 | | | 385 | | | — |
Commercial real estate - owner occupied | | | 11,764 | | | 11,607 | | | 208 |
Commercial real estate - non-owner occupied | | | 31,643 | | | 31,553 | | | 2,465 |
Multi-family | | | — | | | — | | | — |
Construction and land development | | | 2,107 | | | 2,007 | | | — |
One-to-four family residential | | | 9,753 | | | 8,427 | | | 39 |
Municipal, consumer, and other | | | 12,678 | | | 12,622 | | | 3,492 |
Total | | $ | 71,046 | | $ | 69,303 | | $ | 6,362 |
1923
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| | | | | | | | | |
| | Unpaid | | | | | | | |
| | Principal | | Recorded | | Related | |||
December 31, 2021 |
| Balance |
| Investment |
| Allowance | |||
With an allowance recorded: | | (dollars in thousands) | |||||||
Commercial and industrial | | $ | 303 | | $ | 303 | | $ | 187 |
Agricultural and farmland | | | — | | | — | | | — |
Commercial real estate - owner occupied | | | 3,013 | | | 3,013 | | | 327 |
Commercial real estate - non-owner occupied | | | 14,912 | | | 14,893 | | | 2,999 |
Multi-family | | | — | | | — | | | — |
Construction and land development | | | — | | | — | | | — |
One-to-four family residential | | | 1,421 | | | 1,314 | | | 210 |
Municipal, consumer, and other | | | 8,523 | | | 8,498 | | | 1,875 |
Total | | $ | 28,172 | | $ | 28,021 | | $ | 5,598 |
| | | | | | | | | |
With no related allowance: | | | | | | | | | |
Commercial and industrial | | $ | 14,452 | | $ | 14,441 | | $ | — |
Agricultural and farmland | | | 12 | | | 12 | | | — |
Commercial real estate - owner occupied | | | 9,534 | | | 9,319 | | | — |
Commercial real estate - non-owner occupied | | | 14,755 | | | 14,682 | | | — |
Multi-family | | | — | | | — | | | — |
Construction and land development | | | 2,112 | | | 2,018 | | | — |
One-to-four family residential | | | 7,129 | | | 5,583 | | | — |
Municipal, consumer, and other | | | 4,603 | | | 4,543 | | | — |
Total | | $ | 52,597 | | $ | 50,598 | | $ | — |
| | | | | | | | | |
Total loans individually evaluated for impairment: | | | | | | | | | |
Commercial and industrial | | $ | 14,755 | | $ | 14,744 | | $ | 187 |
Agricultural and farmland | | | 12 | | | 12 | | | — |
Commercial real estate - owner occupied | | | 12,547 | | | 12,332 | | | 327 |
Commercial real estate - non-owner occupied | | | 29,667 | | | 29,575 | | | 2,999 |
Multi-family | | | — | | | — | | | — |
Construction and land development | | | 2,112 | | | 2,018 | | | — |
One-to-four family residential | | | 8,550 | | | 6,897 | | | 210 |
Municipal, consumer, and other | | | 13,126 | | | 13,041 | | | 1,875 |
Total | | $ | 80,769 | | $ | 78,619 | | $ | 5,598 |
(Unaudited)
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unpaid |
|
|
|
|
|
|
| Average |
| Interest | |||
|
| Principal |
| Recorded |
| Related |
| Recorded |
| Income | |||||
December 31, 2018 |
| Balance |
| Investment |
| Allowance |
| Investment |
| Recognized | |||||
With an allowance recorded: |
| (dollars in thousands) | |||||||||||||
Commercial and industrial |
| $ | 2,833 |
| $ | 2,833 |
| $ | 1,554 |
| $ | 4,274 |
| $ | 106 |
Agricultural and farmland |
|
| 406 |
|
| 406 |
|
| 39 |
|
| 566 |
|
| 16 |
Commercial real estate - owner occupied |
|
| 2,323 |
|
| 2,322 |
|
| 1,066 |
|
| 3,574 |
|
| 67 |
Commercial real estate - non-owner occupied |
|
| 103 |
|
| 103 |
|
| 73 |
|
| 640 |
|
| 7 |
Multi-family |
|
| 1,362 |
|
| 1,362 |
|
| 267 |
|
| 1,472 |
|
| 66 |
Construction and land development |
|
| 3,136 |
|
| 3,135 |
|
| 1,714 |
|
| 2,593 |
|
| 161 |
One-to-four family residential |
|
| 3,022 |
|
| 3,008 |
|
| 1,265 |
|
| 3,377 |
|
| 82 |
Municipal, consumer, and other |
|
| 230 |
|
| 231 |
|
| 67 |
|
| 302 |
|
| 5 |
Total |
| $ | 13,415 |
| $ | 13,400 |
| $ | 6,045 |
| $ | 16,798 |
| $ | 510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no related allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
| $ | 4,651 |
| $ | 4,655 |
| $ | — |
| $ | 5,093 |
| $ | 59 |
Agricultural and farmland |
|
| 10,888 |
|
| 10,889 |
|
| — |
|
| 8,815 |
|
| 526 |
Commercial real estate - owner occupied |
|
| 16,891 |
|
| 16,880 |
|
| — |
|
| 12,217 |
|
| 384 |
Commercial real estate - non-owner occupied |
|
| 7,715 |
|
| 7,717 |
|
| — |
|
| 7,110 |
|
| 147 |
Multi-family |
|
| 316 |
|
| 316 |
|
| — |
|
| 355 |
|
| 17 |
Construction and land development |
|
| 198 |
|
| 196 |
|
| — |
|
| 528 |
|
| 3 |
One-to-four family residential |
|
| 9,874 |
|
| 9,829 |
|
| — |
|
| 10,706 |
|
| 168 |
Municipal, consumer, and other |
|
| 184 |
|
| 185 |
|
| — |
|
| 297 |
|
| 5 |
Total |
| $ | 50,717 |
| $ | 50,667 |
| $ | — |
| $ | 45,121 |
| $ | 1,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
| $ | 7,484 |
| $ | 7,488 |
| $ | 1,554 |
| $ | 9,367 |
| $ | 165 |
Agricultural and farmland |
|
| 11,294 |
|
| 11,295 |
|
| 39 |
|
| 9,381 |
|
| 542 |
Commercial real estate - owner occupied |
|
| 19,214 |
|
| 19,202 |
|
| 1,066 |
|
| 15,791 |
|
| 451 |
Commercial real estate - non-owner occupied |
|
| 7,818 |
|
| 7,820 |
|
| 73 |
|
| 7,750 |
|
| 154 |
Multi-family |
|
| 1,678 |
|
| 1,678 |
|
| 267 |
|
| 1,827 |
|
| 83 |
Construction and land development |
|
| 3,334 |
|
| 3,331 |
|
| 1,714 |
|
| 3,121 |
|
| 164 |
One-to-four family residential |
|
| 12,896 |
|
| 12,837 |
|
| 1,265 |
|
| 14,083 |
|
| 250 |
Municipal, consumer, and other |
|
| 414 |
|
| 416 |
|
| 67 |
|
| 599 |
|
| 10 |
Total |
| $ | 64,132 |
| $ | 64,067 |
| $ | 6,045 |
| $ | 61,919 |
| $ | 1,819 |
20
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present the average recorded investment and interest income recognized for loans individually evaluated for impairment by category of loans:
(Unaudited)
| | | | | | | | | | | | |
| | Three Months Ended September 30, | ||||||||||
| | 2022 | | 2021 | ||||||||
|
| Average | | Interest | | Average |
| Interest | ||||
| | Recorded | | Income | | Recorded | | Income | ||||
|
| Investment |
| Recognized |
| Investment |
| Recognized | ||||
With an allowance recorded: | | (dollars in thousands) | ||||||||||
Commercial and industrial | | $ | 258 | | $ | 5 | | $ | 1,925 | | $ | 26 |
Agricultural and farmland | | | — | | | — | | | — | | | — |
Commercial real estate - owner occupied | | | 739 | | | 11 | | | 3,192 | | | 45 |
Commercial real estate - non-owner occupied | | | 14,441 | | | 185 | | | 15,136 | | | 194 |
Multi-family | | | — | | | — | | | — | | | — |
Construction and land development | | | — | | | — | | | — | | | — |
One-to-four family residential | | | 349 | | | 2 | | | 1,827 | | | 18 |
Municipal, consumer, and other | | | 8,254 | | | 66 | | | 8,641 | | | 40 |
Total | | $ | 24,041 | | $ | 269 | | $ | 30,721 | | $ | 323 |
| | | | | | | | | | | | |
With no related allowance: | | | | | | | | | | | | |
Commercial and industrial | | $ | 3,894 | | $ | 41 | | $ | 7,137 | | $ | 115 |
Agricultural and farmland | | | 425 | | | 5 | | | 385 | | | 6 |
Commercial real estate - owner occupied | | | 11,651 | | | 141 | | | 6,551 | | | 81 |
Commercial real estate - non-owner occupied | | | 17,220 | | | 369 | | | 15,283 | | | 101 |
Multi-family | | | — | | | — | | | — | | | — |
Construction and land development | | | 2,010 | | | 57 | | | 2,439 | | | 1 |
One-to-four family residential | | | 8,119 | | | 99 | | | 5,713 | | | 45 |
Municipal, consumer, and other | | | 4,457 | | | 44 | | | 4,635 | | | 21 |
Total | | $ | 47,776 | | $ | 756 | | $ | 42,143 | | $ | 370 |
| | | | | | | | | | | | |
Total loans individually evaluated for impairment: | | | | | | | | | | | | |
Commercial and industrial | | $ | 4,152 | | $ | 46 | | $ | 9,062 | | $ | 141 |
Agricultural and farmland | | | 425 | | | 5 | | | 385 | | | 6 |
Commercial real estate - owner occupied | | | 12,390 | | | 152 | | | 9,743 | | | 126 |
Commercial real estate - non-owner occupied | | | 31,661 | | | 554 | | | 30,419 | | | 295 |
Multi-family | | | — | | | — | | | — | | | — |
Construction and land development | | | 2,010 | | | 57 | | | 2,439 | | | 1 |
One-to-four family residential | | | 8,468 | | | 101 | | | 7,540 | | | 63 |
Municipal, consumer, and other | | | 12,711 | | | 110 | | | 13,276 | | | 61 |
Total | | $ | 71,817 | | $ | 1,025 | | $ | 72,864 | | $ | 693 |
25
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| | | | | | | | | | | | |
| | Nine Months Ended September 30, | ||||||||||
| | 2022 | | 2021 | ||||||||
|
| Average | | Interest | | Average |
| Interest | ||||
| | Recorded | | Income | | Recorded | | Income | ||||
|
| Investment |
| Recognized |
| Investment |
| Recognized | ||||
With an allowance recorded: | | (dollars in thousands) | ||||||||||
Commercial and industrial | | $ | 272 | | $ | 13 | | $ | 2,025 | | $ | 84 |
Agricultural and farmland | | | — | | | — | | | 110 | | | 4 |
Commercial real estate - owner occupied | | | 1,297 | | | 55 | | | 3,060 | | | 132 |
Commercial real estate - non-owner occupied | | | 14,631 | | | 556 | | | 17,001 | | | 599 |
Multi-family | | | — | | | — | | | — | | | — |
Construction and land development | | | — | | | — | | | 741 | | | 27 |
One-to-four family residential | | | 513 | | | 11 | | | 2,209 | | | 64 |
Municipal, consumer, and other | | | 8,368 | | | 151 | | | 8,722 | | | 119 |
Total | | $ | 25,081 | | $ | 786 | | $ | 33,868 | | $ | 1,029 |
| | | | | | | | | | | | |
With no related allowance: | | | | | | | | | | | | |
Commercial and industrial | | $ | 12,793 | | $ | 397 | | $ | 5,222 | | $ | 205 |
Agricultural and farmland | | | 305 | | | 8 | | | 384 | | | 17 |
Commercial real estate - owner occupied | | | 11,524 | | | 388 | | | 7,216 | | | 273 |
Commercial real estate - non-owner occupied | | | 16,894 | | | 907 | | | 8,880 | | | 239 |
Multi-family | | | — | | | — | | | 580 | | | 10 |
Construction and land development | | | 2,012 | | | 105 | | | 2,060 | | | 27 |
One-to-four family residential | | | 8,341 | | | 240 | | | 6,427 | | | 142 |
Municipal, consumer, and other | | | 4,493 | | | 98 | | | 4,695 | | | 65 |
Total | | $ | 56,362 | | $ | 2,143 | | $ | 35,464 | | $ | 978 |
| | | | | | | | | | | | |
Total loans individually evaluated for impairment: | | | | | | | | | | | | |
Commercial and industrial | | $ | 13,065 | | $ | 410 | | $ | 7,247 | | $ | 289 |
Agricultural and farmland | | | 305 | | | 8 | | | 494 | | | 21 |
Commercial real estate - owner occupied | | | 12,821 | | | 443 | | | 10,276 | | | 405 |
Commercial real estate - non-owner occupied | | | 31,525 | | | 1,463 | | | 25,881 | | | 838 |
Multi-family | | | — | | | — | | | 580 | | | 10 |
Construction and land development | | | 2,012 | | | 105 | | | 2,801 | | | 54 |
One-to-four family residential | | | 8,854 | | | 251 | | | 8,636 | | | 206 |
Municipal, consumer, and other | | | 12,861 | | | 249 | | | 13,417 | | | 184 |
Total | | $ | 81,443 | | $ | 2,929 | | $ | 69,332 | | $ | 2,007 |
26
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present the recorded investment in loans by category based on current payment and accrual status asstatus:
| | | | | | | | | | | | | | | |
| | Accruing Interest | | | | | | | |||||||
| | | | | 30 - 89 Days | | 90+ Days | | | | | Total | |||
September 30, 2022 |
| Current |
| Past Due |
| Past Due |
| Nonaccrual |
| Loans | |||||
| | (dollars in thousands) | |||||||||||||
Commercial and industrial | | $ | 240,391 | | $ | 191 | | $ | — | | $ | 89 | | $ | 240,671 |
Agricultural and farmland | | | 245,234 | | | — | | | — | | | — | | | 245,234 |
Commercial real estate - owner occupied | | | 226,424 | | | 100 | | | — | | | — | | | 226,524 |
Commercial real estate - non-owner occupied | | | 717,085 | | | — | | | — | | | 1,004 | | | 718,089 |
Multi-family | | | 260,630 | | | — | | | — | | | — | | | 260,630 |
Construction and land development | | | 362,367 | | | 1,429 | | | — | | | 494 | | | 364,290 |
One-to-four family residential | | | 325,926 | | | 1,159 | | | 22 | | | 1,560 | | | 328,667 |
Municipal, consumer, and other | | | 195,651 | | | 113 | | | — | | | 59 | | | 195,823 |
Total | | $ | 2,573,708 | | $ | 2,992 | | $ | 22 | | $ | 3,206 | | $ | 2,579,928 |
| | | | | | | | | | | | | | | |
| | Accruing Interest | | | | | | | |||||||
| | | | | 30 - 89 Days | | 90+ Days | | | | | Total | |||
December 31, 2021 |
| Current |
| Past Due |
| Past Due |
| Nonaccrual |
| Loans | |||||
| | (dollars in thousands) | |||||||||||||
Commercial and industrial | | $ | 286,563 | | $ | 9 | | $ | — | | $ | 374 | | $ | 286,946 |
Agricultural and farmland | | | 247,772 | | | 24 | | | — | | | — | | | 247,796 |
Commercial real estate - owner occupied | | | 234,441 | | | 103 | | | — | | | — | | | 234,544 |
Commercial real estate - non-owner occupied | | | 683,029 | | | 823 | | | — | | | 171 | | | 684,023 |
Multi-family | | | 263,911 | | | — | | | — | | | — | | | 263,911 |
Construction and land development | | | 297,465 | | | 64 | | | — | | | 519 | | | 298,048 |
One-to-four family residential | | | 325,780 | | | 383 | | | 32 | | | 1,642 | | | 327,837 |
Municipal, consumer, and other | | | 156,297 | | | 214 | | | 16 | | | 57 | | | 156,584 |
Total | | $ | 2,495,258 | | $ | 1,620 | | $ | 48 | | $ | 2,763 | | $ | 2,499,689 |
27
Table of September 30, 2019 and December 31, 2018:Contents
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accruing Interest |
|
|
|
|
|
| |||||||
|
|
|
|
| 30 - 89 Days |
| 90+ Days |
|
|
|
| Total | |||
September 30, 2019 |
| Current |
| Past Due |
| Past Due |
| Nonaccrual |
| Loans | |||||
|
| (dollars in thousands) | |||||||||||||
Commercial and industrial |
| $ | 334,983 |
| $ | 811 |
| $ | 29 |
| $ | 4,827 |
| $ | 340,650 |
Agricultural and farmland |
|
| 198,506 |
|
| 370 |
|
| — |
|
| 6,165 |
|
| 205,041 |
Commercial real estate - owner occupied |
|
| 235,322 |
|
| 3,118 |
|
| 184 |
|
| 1,181 |
|
| 239,805 |
Commercial real estate - non-owner occupied |
|
| 551,393 |
|
| 225 |
|
| 66 |
|
| 578 |
|
| 552,262 |
Multi-family |
|
| 190,157 |
|
| — |
|
| 155 |
|
| 1,334 |
|
| 191,646 |
Construction and land development |
|
| 210,746 |
|
| 140 |
|
| — |
|
| 53 |
|
| 210,939 |
One-to-four family residential |
|
| 314,807 |
|
| 2,145 |
|
| 357 |
|
| 4,638 |
|
| 321,947 |
Municipal, consumer, and other |
|
| 108,256 |
|
| 267 |
|
| — |
|
| 201 |
|
| 108,724 |
Total loans |
| $ | 2,144,170 |
| $ | 7,076 |
| $ | 791 |
| $ | 18,977 |
| $ | 2,171,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accruing Interest |
|
|
|
|
|
| |||||||
|
|
|
|
| 30 - 89 Days |
| 90+ Days |
|
|
|
| Total | |||
December 31, 2018 |
| Current |
| Past Due |
| Past Due |
| Nonaccrual |
| Loans | |||||
|
| (dollars in thousands) | |||||||||||||
Commercial and industrial |
| $ | 356,481 |
| $ | 122 |
| $ | 1,747 |
| $ | 2,151 |
| $ | 360,501 |
Agricultural and farmland |
|
| 207,791 |
|
| 108 |
|
| — |
|
| 1,976 |
|
| 209,875 |
Commercial real estate - owner occupied |
|
| 249,698 |
|
| 538 |
|
| 184 |
|
| 4,654 |
|
| 255,074 |
Commercial real estate - non-owner occupied |
|
| 532,241 |
|
| 1,058 |
|
| — |
|
| 611 |
|
| 533,910 |
Multi-family |
|
| 134,368 |
|
| 1,361 |
|
| 196 |
|
| — |
|
| 135,925 |
Construction and land development |
|
| 236,798 |
|
| 82 |
|
| — |
|
| 395 |
|
| 237,275 |
One-to-four family residential |
|
| 304,439 |
|
| 2,154 |
|
| 600 |
|
| 5,915 |
|
| 313,108 |
Municipal, consumer, and other |
|
| 97,998 |
|
| 380 |
|
| 37 |
|
| 174 |
|
| 98,589 |
Total loans |
| $ | 2,119,814 |
| $ | 5,803 |
| $ | 2,764 |
| $ | 15,876 |
| $ | 2,144,257 |
The following tables present total loans by category based on their assigned risk ratings determined by management as of September 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
| Pass |
| Watch |
| Substandard |
| Doubtful |
| Total | |||||
|
| (dollars in thousands) | |||||||||||||
Commercial and industrial |
| $ | 306,285 |
| $ | 22,524 |
| $ | 11,841 |
| $ | — |
| $ | 340,650 |
Agricultural and farmland |
|
| 178,777 |
|
| 9,577 |
|
| 16,687 |
|
| — |
|
| 205,041 |
Commercial real estate - owner occupied |
|
| 206,456 |
|
| 21,122 |
|
| 12,227 |
|
| — |
|
| 239,805 |
Commercial real estate - non-owner occupied |
|
| 503,137 |
|
| 46,735 |
|
| 2,390 |
|
| — |
|
| 552,262 |
Multi-family |
|
| 188,392 |
|
| 1,765 |
|
| 1,489 |
|
| — |
|
| 191,646 |
Construction and land development |
|
| 202,554 |
|
| 5,233 |
|
| 3,152 |
|
| — |
|
| 210,939 |
One-to-four family residential |
|
| 294,322 |
|
| 14,072 |
|
| 13,553 |
|
| — |
|
| 321,947 |
Municipal, consumer, and other |
|
| 94,336 |
|
| 417 |
|
| 13,971 |
|
| — |
|
| 108,724 |
Total loans |
| $ | 1,974,259 |
| $ | 121,445 |
| $ | 75,310 |
| $ | — |
| $ | 2,171,014 |
21
Table of Contentsmanagement:
HBT FINANCIAL, INC. AND SUBSIDIARIES
| | | | | | | | | | | | | | | |
September 30, 2022 |
| Pass |
| Pass-Watch |
| Substandard |
| Doubtful |
| Total | |||||
| | (dollars in thousands) | |||||||||||||
Commercial and industrial | | $ | 229,239 | | $ | 8,730 | | $ | 2,702 | | $ | — | | $ | 240,671 |
Agricultural and farmland | | | 230,636 | | | 13,601 | | | 997 | | | — | | | 245,234 |
Commercial real estate - owner occupied | | | 202,250 | | | 13,465 | | | 10,809 | | | — | | | 226,524 |
Commercial real estate - non-owner occupied | | | 673,481 | | | 10,336 | | | 34,272 | | | — | | | 718,089 |
Multi-family | | | 255,665 | | | 4,965 | | | — | | | — | | | 260,630 |
Construction and land development | | | 361,954 | | | 329 | | | 2,007 | | | — | | | 364,290 |
One-to-four family residential | | | 313,608 | | | 6,074 | | | 8,985 | | | — | | | 328,667 |
Municipal, consumer, and other | | | 182,902 | | | 298 | | | 12,623 | | | — | | | 195,823 |
Total | | $ | 2,449,735 | | $ | 57,798 | | $ | 72,395 | | $ | — | | $ | 2,579,928 |
| | | | | | | | | | | | | | | |
December 31, 2021 |
| Pass |
| Pass-Watch |
| Substandard |
| Doubtful |
| Total | |||||
| | (dollars in thousands) | |||||||||||||
Commercial and industrial | | $ | 267,088 | | $ | 5,114 | | $ | 14,744 | | $ | — | | $ | 286,946 |
Agricultural and farmland | | | 221,898 | | | 25,213 | | | 685 | | | — | | | 247,796 |
Commercial real estate - owner occupied | | | 198,862 | | | 24,098 | | | 11,584 | | | — | | | 234,544 |
Commercial real estate - non-owner occupied | | | 619,212 | | | 32,372 | | | 32,439 | | | — | | | 684,023 |
Multi-family | | | 241,362 | | | 22,549 | | | — | | | — | | | 263,911 |
Construction and land development | | | 268,556 | | | 27,474 | | | 2,018 | | | — | | | 298,048 |
One-to-four family residential | | | 308,951 | | | 11,221 | | | 7,665 | | | — | | | 327,837 |
Municipal, consumer, and other | | | 143,299 | | | 244 | | | 13,041 | | | — | | | 156,584 |
Total | | $ | 2,269,228 | | $ | 148,285 | | $ | 82,176 | | $ | — | | $ | 2,499,689 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
| Pass |
| Watch |
| Substandard |
| Doubtful |
| Total | |||||
|
| (dollars in thousands) | |||||||||||||
Commercial and industrial |
| $ | 315,815 |
| $ | 35,176 |
| $ | 9,510 |
| $ | — |
| $ | 360,501 |
Agricultural and farmland |
|
| 185,598 |
|
| 12,116 |
|
| 12,161 |
|
| — |
|
| 209,875 |
Commercial real estate - owner occupied |
|
| 217,017 |
|
| 17,845 |
|
| 20,212 |
|
| — |
|
| 255,074 |
Commercial real estate - non-owner occupied |
|
| 486,859 |
|
| 39,231 |
|
| 7,820 |
|
| — |
|
| 533,910 |
Multi-family |
|
| 131,583 |
|
| 2,468 |
|
| 1,874 |
|
| — |
|
| 135,925 |
Construction and land development |
|
| 227,775 |
|
| 5,663 |
|
| 3,837 |
|
| — |
|
| 237,275 |
One-to-four family residential |
|
| 282,704 |
|
| 14,599 |
|
| 15,805 |
|
| — |
|
| 313,108 |
Municipal, consumer, and other |
|
| 97,668 |
|
| 497 |
|
| 424 |
|
| — |
|
| 98,589 |
Total loans |
| $ | 1,945,019 |
| $ | 127,595 |
| $ | 71,643 |
| $ | — |
| $ | 2,144,257 |
The following tables present the financial effect ofThere were no new troubled debt restructurings for the three months ended September 30, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Charge-offs | |
|
|
|
| Recorded Investment |
| and Specific | |||||
Three Months Ended September 30, 2019 |
| Number |
| Pre-Modification |
| Post-Modification |
| Reserves | |||
|
| (dollars in thousands) | |||||||||
One-to-four family residential |
| 1 |
| $ | 21 |
| $ | 21 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Charge-offs | |
|
|
|
| Recorded Investment |
| and Specific | |||||
Three Months Ended September 30, 2018 |
| Number |
| Pre-Modification |
| Post-Modification |
| Reserves | |||
|
| (dollars in thousands) | |||||||||
Commercial and industrial |
| 1 |
| $ | 120 |
| $ | 120 |
| $ | 35 |
Agricultural and farmland |
| 1 |
|
| 171 |
|
| 171 |
|
| — |
Commercial real estate - owner occupied |
| 2 |
|
| 5,173 |
|
| 5,189 |
|
| 47 |
One-to-four family residential |
| 2 |
|
| 898 |
|
| 897 |
|
| 421 |
Total |
| 6 |
| $ | 6,362 |
| $ | 6,377 |
| $ | 503 |
22
The following tables present the financial effect of troubled debt restructurings for the nine months ended September 30, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Charge-offs | |
|
|
|
| Recorded Investment |
| and Specific | |||||
Nine Months Ended September 30, 2019 |
| Number |
| Pre-Modification |
| Post-Modification |
| Reserves | |||
|
| (dollars in thousands) | |||||||||
Commercial and industrial |
| 3 |
| $ | 516 |
| $ | 516 |
| $ | — |
Agricultural and farmland |
| 2 |
|
| 392 |
|
| 392 |
|
| — |
Commercial real estate - owner occupied |
| 1 |
|
| 170 |
|
| 170 |
|
| — |
One-to-four family residential |
| 1 |
|
| 21 |
|
| 21 |
|
| — |
Total |
| 7 |
| $ | 1,099 |
| $ | 1,099 |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Charge-offs | |
|
|
|
| Recorded Investment |
| and Specific | |||||
Nine Months Ended September 30, 2018 |
| Number |
| Pre-Modification |
| Post-Modification |
| Reserves | |||
|
| (dollars in thousands) | |||||||||
Commercial and industrial |
| 2 |
| $ | 296 |
| $ | 296 |
| $ | 157 |
Agricultural and farmland |
| 1 |
|
| 171 |
|
| 171 |
|
| — |
Commercial real estate - owner occupied |
| 2 |
|
| 5,173 |
|
| 5,189 |
|
| 47 |
One-to-four family residential |
| 4 |
|
| 1,230 |
|
| 1,255 |
|
| 480 |
Total |
| 9 |
| $ | 6,870 |
| $ | 6,911 |
| $ | 684 |
Duringduring the three and nine months ended September 30, 2019 and 2018, all troubled debt restructurings were the result of a payment concession.2022 or 2021.
Of the troubled debt restructurings entered into during the last 12 months, there were none which had subsequent payment defaults during the three and nine months ended September 30, 2019 and 2018, respectively.2022 or 2021. For purposes of this disclosure, the Company considers “default” to mean 90 days or more past due as to interest or principal or were on nonaccrual status subsequent to restructuring.
As of September 30, 20192022 and December 31, 2018,2021, the Company had $9,919,000$3.1 million and $13,362,000$3.5 million of troubled debt restructurings, respectively. Restructured loans are evaluated for impairment quarterly as part of the Company’s determination of the allowance for loan losses. There were no material commitments to lend additional funds to debtors owing receivablesloans whose terms have been modified in troubled debt restructurings.
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), along with a joint statement issued by banking regulatory agencies, provided that short-term loan payment modifications made prior to December 31, 2021 to borrowers experiencing financial hardship due to the COVID-19 pandemic generally do not need to be accounted for as a troubled debt restructuring. As of September 30, 2022, the Company had no loans that were granted a payment modification due to a COVID-19 related financial hardship which had not returned to regular payments. As of December 31, 2021, the Company had $0.2 million of loans that were granted a payment modification due to a COVID-19 related financial hardship and had not returned to regular payments. Substantially all modifications were in the form of a three-month interest-only period or a one-month payment deferral. Some borrowers received more than one loan payment modification.
28
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As of September 30, 2022 and December 31, 2021, the Company pledged loans totaling $824.9 million and $567.0 million, respectively, to the Federal Home Loan Bank of Chicago (“FHLB”) to secure available FHLB advance borrowing capacity.
Changes in the accretable yield for loans acquired with deteriorated credit quality were as follows for the three and nine months ended September 30, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
|
| (dollars in thousands) | ||||||||||
Beginning balance |
| $ | 1,633 |
| $ | 1,474 |
| $ | 2,101 |
| $ | 2,723 |
Reclassification from non-accretable difference |
|
| 129 |
|
| 179 |
|
| 536 |
|
| 608 |
Accretion income |
|
| (231) |
|
| (691) |
|
| (1,106) |
|
| (2,369) |
Ending balance |
| $ | 1,531 |
| $ | 962 |
| $ | 1,531 |
| $ | 962 |
follows:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
| | (dollars in thousands) | ||||||||||
Beginning balance | | $ | 537 | | $ | 1,350 | | $ | 413 | | $ | 1,397 |
Reclassification from non-accretable difference | | | 283 | | | 280 | | | 500 | | | 433 |
Accretion income | | | (58) | | | (86) | | | (151) | | | (286) |
Ending balance | | $ | 762 | | $ | 1,544 | | $ | 762 | | $ | 1,544 |
23
NOTE 5 – LOAN SERVICING
Mortgage loans serviced for others, which are not included in the accompanying consolidated balance sheets, amounted to $1,164,738,000$976.1 million and $1,229,953,000$1.04 billion as of September 30, 20192022 and December 31, 2018,2021, respectively. Activity in mortgage servicing rights is as follows for the three and nine months ended September 30, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
|
| (dollars in thousands) | ||||||||||
Beginning balance |
| $ | 8,796 |
| $ | 10,656 |
| $ | 10,918 |
| $ | 10,289 |
Capitalized servicing rights |
|
| 344 |
|
| 259 |
|
| 720 |
|
| 687 |
Fair value adjustment |
|
| (1,204) |
|
| (352) |
|
| (3,702) |
|
| (413) |
Ending balance |
| $ | 7,936 |
| $ | 10,563 |
| $ | 7,936 |
| $ | 10,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
follows:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
| | (dollars in thousands) | ||||||||||
Beginning balance | | $ | 10,089 | | $ | 7,319 | | $ | 7,994 | | $ | 5,934 |
Capitalized servicing rights | | | 144 | | | 241 | | | 451 | | | 994 |
Fair value adjustment: | | | | | | | | | | | | |
Attributable to payments and principal reductions | | | (362) | | | (451) | | | (1,048) | | | (1,408) |
Attributable to changes in valuation inputs and assumptions | | | 569 | | | 250 | | | 3,043 | | | 1,839 |
Total fair value adjustment | | | 207 | | | (201) | | | 1,995 | | | 431 |
Ending balance | | $ | 10,440 | | $ | 7,359 | | $ | 10,440 | | $ | 7,359 |
29
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 – FORECLOSED ASSETS
Foreclosed assets activity is as follows for the three and nine months ended September 30, 2019 and 2018:follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
|
| (dollars in thousands) | ||||||||||
Beginning balance |
| $ | 9,707 |
| $ | 11,916 |
| $ | 9,559 |
| $ | 16,545 |
Transfers from loans |
|
| 27 |
|
| — |
|
| 1,788 |
|
| 1,889 |
Capitalized improvements |
|
| 41 |
|
| — |
|
| 41 |
|
| — |
Proceeds from sales |
|
| (3,173) |
|
| (1,545) |
|
| (4,142) |
|
| (6,092) |
Sales through loan origination |
|
| — |
|
| — |
|
| (360) |
|
| (1,174) |
Net gain (loss) on sales |
|
| 135 |
|
| 39 |
|
| 240 |
|
| (281) |
Direct write-downs |
|
| (163) |
|
| (234) |
|
| (552) |
|
| (711) |
Ending balance |
| $ | 6,574 |
| $ | 10,176 |
| $ | 6,574 |
| $ | 10,176 |
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
| | (dollars in thousands) | ||||||||||
Beginning balance | | $ | 2,891 | | $ | 7,757 | | $ | 3,278 | | $ | 4,168 |
Transfers from loans | | | — | | | — | | | 27 | | | 4,856 |
Proceeds from sales | | | (29) | | | (354) | | | (476) | | | (1,583) |
Sales through loan origination | | | — | | | (74) | | | — | | | (252) |
Net gain on sales | | | 20 | | | 108 | | | 118 | | | 321 |
Direct write-downs | | | (245) | | | (122) | | | (310) | | | (195) |
Ending balance | | $ | 2,637 | | $ | 7,315 | | $ | 2,637 | | $ | 7,315 |
Gains (losses) on foreclosed assets shown onincludes the consolidated statements of income include net gains (losses) on sales, direct write-downs, gains on foreclosure, and guarantee reimbursements. During the nine months ended September 30, 2019, gains (losses) on foreclosed assets also include a gain on settlement of $375,000. following:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
| | (dollars in thousands) | ||||||||||
Direct write-downs | | $ | (245) | | $ | (122) | | $ | (310) | | $ | (195) |
Net gain on sales | | | 20 | | | 108 | | | 118 | | | 321 |
Gains (losses) on foreclosed assets | | $ | (225) | | $ | (14) | | $ | (192) | | $ | 126 |
There were no gains on settlement recognized in gains (losses) on foreclosed assets during for the three months endedone-to-four family residential real estate properties held as of September 30, 2019 and 2018 or the nine months ended September 30, 2018.
2022. The carrying value of foreclosed one-to-four family residential real estate propertyproperties held as of September 30, 2019 and December 31, 2018,2021 was $2,268,000 and $2,558,000, respectively.$0.2 million. As of September 30, 2019,2022, there were 164 one-to-four family residential real estate loans in the process of foreclosure totaling approximately $725,000.$0.4 million. As of December 31, 2018,2021, there were 144 one-to-four family residential real estate loans in the process of foreclosure totaling approximately $1,097,000.$0.1 million.
2430
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 7 – DEPOSITS
The Company’s interest-bearing deposits are summarized below as of September 30, 2019 and December 31, 2018:below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2019 |
| December 31, 2018 | ||
|
|
|
|
|
|
|
| (dollars in thousands) | ||||
Interest-bearing demand |
|
|
|
|
|
|
| $ | 800,471 |
| $ | 856,919 |
Money market |
|
|
|
|
|
|
|
| 463,444 |
|
| 427,730 |
Savings |
|
|
|
|
|
|
|
| 426,707 |
|
| 421,698 |
Time |
|
|
|
|
|
|
|
| 364,120 |
|
| 424,747 |
Total interest-bearing deposits |
|
|
|
|
|
|
| $ | 2,054,742 |
| $ | 2,131,094 |
| | | | | | |
| | September 30, 2022 |
| December 31, 2021 | ||
| | (dollars in thousands) | ||||
Noninterest-bearing deposits | | $ | 1,017,710 | | $ | 1,087,659 |
Interest-bearing deposits: | | | | | | |
Interest-bearing demand | | | 1,131,284 | | | 1,105,949 |
Money market | | | 584,202 | | | 583,198 |
Savings | | | 641,139 | | | 633,171 |
Time | | | 269,108 | | | 328,208 |
Total interest-bearing deposits | | | 2,625,733 | | | 2,650,526 |
Total deposits | | $ | 3,643,443 | | $ | 3,738,185 |
Money market deposits include $16,315,000$4.2 million of brokered deposits as of December 31, 2021. There were no brokered deposits as of September 30, 2022. Money market deposits also include $5.7 million and $20,512,000$6.9 million of reciprocal transaction deposits as of September 30, 20192022 and December 31, 2018,2021, respectively. Time deposits include $3,534,000$0.7 million and $4,895,000$0.9 million of reciprocal time deposits as of September 30, 20192022, and December 31, 2018,2021, respectively.
The aggregate amounts of time deposits in denominations of $250,000$250 thousand or more amounted to $32,075,000$25.8 million and $36,875,000$59.5 million as of September 30, 20192022 and December 31, 2018,2021, respectively. The aggregate amounts of time deposits in denominations of $100,000$100 thousand or more amounted to $124,850,000$89.9 million and $153,717,000$133.1 million as of September 30, 20192022 and December 31, 2018,2021, respectively.
The components of interest expense on deposits for the three and nine months ended September 30, 2019 and 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
|
| (dollars in thousands) | ||||||||||
Interest-bearing demand |
| $ | 347 |
| $ | 377 |
| $ | 1,175 |
| $ | 964 |
Money market |
|
| 497 |
|
| 165 |
|
| 1,356 |
|
| 491 |
Savings |
|
| 70 |
|
| 70 |
|
| 207 |
|
| 213 |
Time |
|
| 1,086 |
|
| 1,007 |
|
| 3,356 |
|
| 2,547 |
Total interest expense on deposits |
| $ | 2,000 |
| $ | 1,619 |
| $ | 6,094 |
| $ | 4,215 |
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2022 |
| 2021 | | 2022 |
| 2021 | ||||
| | (dollars in thousands) | ||||||||||
Interest-bearing demand | | $ | 144 | | $ | 129 | | $ | 430 | | $ | 373 |
Money market | | | 203 | | | 96 | | | 434 | | | 279 |
Savings | | | 53 | | | 48 | | | 155 | | | 135 |
Time | | | 187 | | | 291 | | | 643 | | | 1,034 |
Total interest expense on deposits | | $ | 587 | | $ | 564 | | $ | 1,662 | | $ | 1,821 |
NOTE 8 – BORROWINGS
There were no Federal Home Loan Bank of Chicago (FHLB) borrowings outstanding as of September 30, 2019 and December 31, 2018. Available borrowings from the FHLB are secured by FHLB stock held by the Company and pledged security in the form of qualifying loans. The total amount of loans pledged as of September 30, 2019 and December 31, 2018 was $528,250,000 and $538,537,000, respectively. As of September 30, 2019 and December 31, 2018, loans pledged also served as collateral for credit exposure of approximately $355,000 associated with the Banks’ participation in the FHLB’s Mortgage Partnership Finance Program.
The Banks also have available a line of credit from the FHLB with available borrowings based on the collateral pledged. There was no outstanding balance under the line of credit as of September 30, 2019 and December 31, 2018. The line, when drawn upon, is due on demand and bears interest at a variable rate.
Lincoln Bank also has available a line of credit from the Federal Reserve Bank of Chicago (FRB) with available borrowings based on the collateral pledged. As of September 30, 2019 and December 31, 2018, the carrying
2531
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
value of securities pledged amounted to $520,000 and $490,000, respectively. There was no outstanding balance under the line of credit as of September 30, 2019 and December 31, 2018. The line, when drawn upon, is due on demand and bears interest at a variable rate.
NOTE 9 – SUBORDINATED DEBENTURES
Five subsidiary business trusts of the Company have issued floating rate capital securities (“capital securities”) which are guaranteed by the Company.
The Company owns all of the outstanding stock of the five subsidiary business trusts. The trusts used the proceeds from the issuance of their capital securities to buy floating rate junior subordinated deferrable interest debentures (“debentures”) issued by the Company. These debentures are the only assets of the trusts and the interest payments from the debentures finance the distributions paid on the capital securities. The debentures are unsecured and rank junior and subordinate in the right of payment to all senior debt of the Company.
The trusts are not consolidated in the Company’s financial statements.
The carrying value of subordinated debentures are summarized as follows:
|
|
|
|
|
|
|
|
| September 30, 2019 |
| December 31, 2018 | ||
|
| (dollars in thousands) | ||||
Heartland Bancorp, Inc. Capital Trust B |
| $ | 10,310 |
| $ | 10,310 |
Heartland Bancorp, Inc. Capital Trust C |
|
| 10,310 |
|
| 10,310 |
Heartland Bancorp, Inc. Capital Trust D |
|
| 5,155 |
|
| 5,155 |
FFBI Capital Trust I |
|
| 7,217 |
|
| 7,217 |
National Bancorp Statutory Trust I |
|
| 4,574 |
|
| 4,525 |
Total |
| $ | 37,566 |
| $ | 37,517 |
The National Bancorp Statutory Trust I debenture was assumed through a business combination and has a contractual obligation of $5,773,000.
The interest rates on the subordinated debentures are variable, reset quarterly, and are equal to the three-month LIBOR, as determined on the LIBOR Determination Date immediately preceding each Distribution Payment Date specific to each subordinated debenture, plus a fixed percentage. The interest rates and maturities of the subordinated debentures are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest Rate at |
|
| ||
|
| Variable |
| September 30, |
| December 31, |
| Maturity | |
|
| Interest Rate |
| 2019 |
| 2018 |
| Date | |
Heartland Bancorp, Inc. Capital Trust B |
| LIBOR plus | 2.75 | % | 5.05 | % | 5.19 | % | April 6, 2034 |
Heartland Bancorp, Inc. Capital Trust C |
| LIBOR plus | 1.53 | % | 3.65 | % | 4.32 | % | June 15, 2037 |
Heartland Bancorp, Inc. Capital Trust D |
| LIBOR plus | 1.35 | % | 3.47 | % | 4.14 | % | September 15, 2037 |
FFBI Capital Trust I |
| LIBOR plus | 2.80 | % | 5.10 | % | 5.24 | % | April 6, 2034 |
National Bancorp Statutory Trust I |
| LIBOR plus | 2.90 | % | 5.02 | % | 5.69 | % | December 31, 2037 |
The distribution rate payable on the debentures is cumulative and payable quarterly in arrears. The Company has the right, subject to events in default, to defer payments of interest on the debentures at any time by
26
extending the interest payment period for a period not exceeding 10 quarterly periods with respect to each deferral period, provided that no extension period may extend beyond the redemption or maturity date of the debentures. The capital securities are subject to mandatory redemption upon payment of the debentures and carry an interest rate identical to that of the related debenture. The debentures maturity dates may be shortened if certain conditions are met, or at any time within 90 days following the occurrence and continuation of certain changes in either tax treatment or the capital treatment of the debentures or the capital securities. If the debentures are redeemed before they mature, the redemption price will be the principal amount plus any accrued but unpaid interest. The Company has the right to terminate each Capital Trust and cause the debentures to be distributed to the holders of the capital securities in liquidation of such trusts.
Under current banking regulations, bank holding companies are allowed to include qualifying trust preferred securities in their Tier 1 Capital for regulatory capital purposes, subject to a 25% limitation to all core (Tier 1) capital elements, net of goodwill and other intangible assets less any associated deferred tax liability. As of September 30, 2019 and December 31, 2018, 100% of the trust preferred securities qualified as Tier 1 capital under the final rule adopted in March 2005.
NOTE 108 – DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are negotiated contracts entered into by two issuing counterparties containing specific agreement terms, including the underlying instrument, amount, exercise price, and maturities.
The Company is exposed to certain risks relating to its ongoing business operations. The primary risk managed by using derivative financial instruments is interest rate risk. Interest rate swaps are entered into to manage interest rate risk associated with the Company’s variable-rate borrowings and variable-rate loans.
The derivatives and hedge accounting guidance requires that the Company recognize all derivative financial instruments as either assets or liabilities at fair value in the consolidated balance sheets. In accordance with this guidance, theThe Company may utilize interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position.
Interest Rate Swaps Designated as Cash Flow Hedges
The Company designated certain interest rate swaps on variable-rate borrowings and variable-rate loansswap agreements as cash flow hedges. Thehedges on variable-rate borrowings. For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on interest rate swaps designated as cash flow hedging instruments, arenet of tax, is reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings.
During 2018 and the three months ended March 31, 2019, the Company had anThe interest rate swap contract with a notional amount of $10,000,000agreements designated as a cash flow hedge on variable-rate loans. Beginning April 1, 2019, this hedging relationship was no longer considered highly effective, and the Company discontinued hedge accounting. In accordance with hedge accounting guidance, the net unrealized gain associated with the discontinued hedging relationship, recorded within accumulated other comprehensive income, will be reclassified into earnings on a level yield basis through April 7, 2020, the period the hedged forecasted transactions affect earnings. On June 25, 2019, the Company cancelled the interest rate swap agreement and received $174,000 to settle the financial instrument. As of September 30, 2019, the remaining unrealized gain recognizedhedges are summarized as a component of accumulated other comprehensive income was $76,000.follows:
| | | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 | ||||||||
| | Notional | | Fair | | Notional | | Fair | ||||
|
| Amount |
| Value |
| Amount |
| Value | ||||
| | (dollars in thousands) | ||||||||||
Fair value recorded in other assets | | $ | 17,000 | | $ | 614 | | $ | — | | $ | — |
Fair value recorded in other liabilities | | | — | | | — | | | 17,000 | | | (680) |
As of September 30, 2019,2022, the Company also had interest rate swap contracts with a total notional amount of $17,000,000agreements designated as a cash flow hedge on variable-rate borrowings. As of September 30, 2019, these interest rate swap contractshedges had contractual maturities between 2024 and 2025. As of September 30, 2019,2022, counterparties had cash pledged and held on deposit by the Company of $0.6 million. As of December 31, 2021, the Company had cash pledged of $960,000, and held on deposit at counterparties.counterparties of $0.8 million.
The Company also entered intoeffect of interest rate swap contracts with several borrowersagreements designated as cash flow hedges on variable-rate loans, on which the Company has offsetting interest rate swap contracts. These interest rate swap contracts with borrowers have a total notional valueconsolidated statements of $117,660,000 and $112,947,000income are summarized as of September 30, 2019 andfollows:
| | | | | | | | | | | | |
Location of gross gain (loss) reclassified | | Amounts of gross gain (loss) | ||||||||||
from accumulated other | | reclassified from accumulated | ||||||||||
comprehensive income (loss) to income | | other comprehensive income | ||||||||||
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
|
| 2022 |
| 2021 | | 2022 |
| 2021 | ||||
Designated as cash flow hedges: | | (dollars in thousands) | ||||||||||
Junior subordinated debentures interest expense | | $ | (14) | | $ | (105) | | $ | (177) | | $ | (306) |
2732
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 31, 2018, respectively, and the offsettingThe Company may offer interest rate swap contracts entered into by theagreements to its commercial borrowers in connection with their risk management needs. The Company have a total notional value of $117,660,000 and $112,947,000 as of September 30, 2019 and December 31, 2018, respectively. As of September 30, 2019,manages the interest rate swaprisk associated with these contracts by entering into an equal and offsetting derivative with borrowers on variable-rate loans had contractual maturities between 2022 and 2042. As of September 30, 2019 and December 31, 2018, the Company had $12,758,000 and $589,000, respectively, of securities pledged and held in safekeeping at the counterparty.a third-party financial institution. While these interest rate swap derivativesagreements generally workedwork together as an economic interest rate hedge, the Company did not designate them for hedge accounting treatment. Consequently, changes in fair value of the corresponding derivative financial asset or liability were recorded as either a charge or credit to current earnings during the period in which the changes occurred.
The interest rate swap agreements not designated as hedging instruments are summarized as follows:
| | | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 | ||||||||
| | Notional | | Fair | | Notional | | Fair | ||||
|
| Amount |
| Value |
| Amount |
| Value | ||||
| | (dollars in thousands) | ||||||||||
Fair value recorded in other assets: | | | | | | | | | | | | |
Interest rate swaps with a commercial borrower counterparty | | $ | — | | $ | — | | $ | 112,041 | | $ | 8,622 |
Interest rate swaps with a financial institution counterparty | | | 109,468 | | | 7,431 | | | 3,880 | | | 75 |
Total fair value recorded in other assets | | $ | 109,468 | | $ | 7,431 | | $ | 115,921 | | $ | 8,697 |
| | | | | | | | | | | | |
Fair value recorded in other liabilities: | | | | | | | | | | | | |
Interest rate swaps with a commercial borrower counterparty | | $ | 109,468 | | $ | (7,431) | | $ | 3,880 | | $ | (75) |
Interest rate swaps with a financial institution counterparty | | | — | | | — | | | 112,041 | | | (8,622) |
Total fair value recorded in other liabilities | | $ | 109,468 | | $ | (7,431) | | $ | 115,921 | | $ | (8,697) |
As of September 30, 2019 and December 31, 2018,2022, the fair values of the Company’s derivative instrument assets and liabilities related to interest rate swap contracts are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2019 |
| December 31, 2018 | ||
Designated as cash flow hedges: |
|
|
|
|
|
|
| (dollars in thousands) | ||||
Fair value recorded in other assets |
|
|
|
|
|
|
| $ | — |
| $ | 151 |
Fair value recorded in other liabilities |
|
|
|
|
|
|
|
| (898) |
|
| — |
Total |
|
|
|
|
|
|
| $ | (898) |
| $ | 151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Fair value recorded in other assets |
|
|
|
|
|
|
| $ | 11,766 |
| $ | 3,074 |
Fair value recorded in other liabilities |
|
|
|
|
|
|
|
| (11,766) |
|
| (3,074) |
Total |
|
|
|
|
|
|
| $ | — |
| $ | — |
For the three and nine months ended September 30, 2019 and 2018, the effect of interest rate contractsagreements not designated as cash flow hedges onhedging instruments had contractual maturities between 2022 and 2042. As of December 31, 2021, the consolidated statementscarrying value of income are summarized as follows:.
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of gross gain (loss) reclassified |
|
|
| |||||||||
from accumulated other |
| Amounts of gross gain (loss) reclassified from | ||||||||||
comprehensive income to income |
| accumulated other comprehensive income | ||||||||||
|
| Three Months Ended |
| Nine Months Ended | ||||||||
|
| September 30, |
| September 30, | ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
Designated as cash flow hedges: |
| (dollars in thousands) | ||||||||||
Taxable loan interest income |
| $ | 33 |
| $ | 39 |
| $ | 83 |
| $ | 137 |
Subordinated debentures interest expense |
|
| (9) |
|
| — |
|
| (7) |
|
| — |
Total |
| $ | 24 |
| $ | 39 |
| $ | 76 |
| $ | 137 |
debt securities pledged and held in safekeeping at a financial institution counterparty was $7.5 million.
For the three and nine months ended September 30, 2019 and 2018, theThe effect of interest rate contracts not designated as hedging instruments recognized in other noninterest income on the consolidated statements of income are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended | ||||||||
|
| September 30, |
| September 30, | ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
Not designated as hedging instruments: |
| (dollars in thousands) | ||||||||||
Gross gains |
| $ | 4,151 |
| $ | 136 |
| $ | 10,196 |
| $ | 1,459 |
Gross losses |
|
| (4,151) |
|
| (136) |
|
| (10,159) |
|
| (1,459) |
Net gains (losses) |
| $ | — |
| $ | — |
| $ | 37 |
| $ | — |
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
|
| 2022 |
| 2021 | | 2022 |
| 2021 | ||||
Not designated as hedging instruments: | | (dollars in thousands) | ||||||||||
Gross gains | | $ | 5,209 | | $ | 1,843 | | $ | 15,303 | | $ | 12,281 |
Gross losses | | | (5,209) | | | (1,843) | | | (15,303) | | | (12,281) |
Net gains (losses) | | $ | — | | $ | — | | $ | — | | $ | — |
2833
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 119 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table presents the activity and accumulated balances for components of other comprehensive income (loss) for the three and nine months ended September 30, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized Gains (Losses) |
|
|
|
|
|
| ||||
|
| on Securities |
|
|
|
|
|
| ||||
|
| Available-for-Sale |
| Held-to-Maturity |
| Derivatives |
| Total | ||||
|
| (dollars in thousands) | ||||||||||
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019 |
| $ | 8,063 |
| $ | (37) |
| $ | (590) |
| $ | 7,436 |
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
before reclassifications |
|
| 1,289 |
|
| — |
|
| (208) |
|
| 1,081 |
Reclassifications |
|
| — |
|
| (62) |
|
| (24) |
|
| (86) |
Other comprehensive income (loss) |
|
| 1,289 |
|
| (62) |
|
| (232) |
|
| 995 |
Balance, September 30, 2019 |
| $ | 9,352 |
| $ | (99) |
| $ | (822) |
| $ | 8,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2018 |
| $ | (10,672) |
| $ | 316 |
| $ | 206 |
| $ | (10,150) |
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
before reclassifications |
|
| (3,196) |
|
| — |
|
| (13) |
|
| (3,209) |
Reclassifications |
|
| (262) |
|
| (99) |
|
| (39) |
|
| (400) |
Other comprehensive loss |
|
| (3,458) |
|
| (99) |
|
| (52) |
|
| (3,609) |
Balance, September 30, 2018 |
| $ | (14,130) |
| $ | 217 |
| $ | 154 |
| $ | (13,759) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018 |
| $ | (4,561) |
| $ | 122 |
| $ | 151 |
| $ | (4,288) |
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
before reclassifications |
|
| 13,913 |
|
| — |
|
| (897) |
|
| 13,016 |
Reclassifications |
|
| — |
|
| (221) |
|
| (76) |
|
| (297) |
Other comprehensive income (loss) |
|
| 13,913 |
|
| (221) |
|
| (973) |
|
| 12,719 |
Balance, September 30, 2019 |
| $ | 9,352 |
| $ | (99) |
| $ | (822) |
| $ | 8,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017 |
| $ | (1,288) |
| $ | 504 |
| $ | 409 |
| $ | (375) |
Adoption of ASU 2016-01 |
|
| (122) |
|
| — |
|
| — |
|
| (122) |
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
before reclassifications |
|
| (12,458) |
|
| — |
|
| (118) |
|
| (12,576) |
Reclassifications |
|
| (262) |
|
| (287) |
|
| (137) |
|
| (686) |
Other comprehensive loss |
|
| (12,720) |
|
| (287) |
|
| (255) |
|
| (13,262) |
Balance, September 30, 2018 |
| $ | (14,130) |
| $ | 217 |
| $ | 154 |
| $ | (13,759) |
:
The amounts reclassified
| | | | | | | | | | | | |
| | Unrealized Gains (Losses) | | | | | | | ||||
| | on Debt Securities | | | | | | | ||||
|
| Available-for-Sale |
| Held-to-Maturity |
| Derivatives |
| Total | ||||
| | (dollars in thousands) | ||||||||||
Three Months Ended September 30, 2022 | | | | | | | | | | | | |
Balance, June 30, 2022 | | $ | (42,061) | | $ | (10,656) | | $ | (103) | | $ | (52,820) |
Other comprehensive income (loss) before reclassifications | | | (35,358) | | | — | | | 374 | | | (34,984) |
Reclassifications | | | — | | | 504 | | | 14 | | | 518 |
Other comprehensive income (loss), before tax | | | (35,358) | | | 504 | | | 388 | | | (34,466) |
Income tax expense (benefit) | | | (10,079) | | | 144 | | | 111 | | | (9,824) |
Other comprehensive income (loss), after tax | | | (25,279) | | | 360 | | | 277 | | | (24,642) |
Balance, September 30, 2022 | | $ | (67,340) | | $ | (10,296) | | $ | 174 | | $ | (77,462) |
| | | | | | | | | | | | |
Three Months Ended September 30, 2021 | | | | | | | | | | | | |
Balance, June 30, 2021 | | $ | 13,260 | | $ | (3,840) | | $ | (1,034) | | $ | 8,386 |
Other comprehensive loss before reclassifications | | | (5,676) | | | — | | | (8) | | | (5,684) |
Reclassifications | | | — | | | 195 | | | 105 | | | 300 |
Other comprehensive income (loss), before tax | | | (5,676) | | | 195 | | | 97 | | | (5,384) |
Income tax expense | | | (1,618) | | | 56 | | | 27 | | | (1,535) |
Other comprehensive income (loss), after tax | | | (4,058) | | | 139 | | | 70 | | | (3,849) |
Balance, September 30, 2021 | | $ | 9,202 | | $ | (3,701) | | $ | (964) | | $ | 4,537 |
34
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| | | | | | | | | | | | |
| | Unrealized Gains (Losses) | | | | | | | ||||
| | on Debt Securities | | | | | | | ||||
|
| Available-for-Sale |
| Held-to-Maturity |
| Derivatives |
| Total | ||||
| | (dollars in thousands) | ||||||||||
Nine Months Ended September 30, 2022 | | | | | | | | | | | | |
Balance, December 31, 2021 | | $ | 5,736 | | $ | (3,514) | | $ | (751) | | $ | 1,471 |
Transfer from available-for-sale to held-to-maturity | | | 7,664 | | | (7,664) | | | — | | | — |
Other comprehensive income (loss) before reclassifications | | | (112,931) | | | — | | | 1,117 | | | (111,814) |
Reclassifications | | | — | | | 1,234 | | | 177 | | | 1,411 |
Other comprehensive income (loss), before tax | | | (112,931) | | | 1,234 | | | 1,294 | | | (110,403) |
Income tax expense (benefit) | | | (32,191) | | | 352 | | | 369 | | | (31,470) |
Other comprehensive income (loss), after tax | | | (80,740) | | | 882 | | | 925 | | | (78,933) |
Balance, September 30, 2022 | | $ | (67,340) | | $ | (10,296) | | $ | 174 | | $ | (77,462) |
| | | | | | | | | | | | |
Nine Months Ended September 30, 2021 | | | | | | | | | | | | |
Balance, December 31, 2020 | | $ | 19,578 | | $ | (118) | | $ | (1,307) | | $ | 18,153 |
Transfer from available-for-sale to held-to-maturity | | | 3,887 | | | (3,887) | | | — | | | — |
Other comprehensive income (loss) before reclassifications | | | (19,950) | | | — | | | 173 | | | (19,777) |
Reclassifications | | | — | | | 426 | | | 306 | | | 732 |
Other comprehensive income (loss), before tax | | | (19,950) | | | 426 | | | 479 | | | (19,045) |
Income tax expense (benefit) | | | (5,687) | | | 122 | | | 136 | | | (5,429) |
Other comprehensive income (loss), after tax | | | (14,263) | | | 304 | | | 343 | | | (13,616) |
Balance, September 30, 2021 | | $ | 9,202 | | $ | (3,701) | | $ | (964) | | $ | 4,537 |
Reclassifications from accumulated other comprehensive income (loss) for unrealized gains (losses) on debt securities available-for-sale are included in gain (loss)gains (losses) on sales of securities in the accompanying consolidated statements of income.
The amounts reclassifiedReclassifications from accumulated other comprehensive income (loss) for unrealized gains on debt securities held-to-maturity are included in securities interest income in the accompanying consolidated statements of income.
29
The amounts reclassifiedReclassifications from accumulated other comprehensive income (loss) for the fair value of derivative financial instruments represent net interest payments received or made on derivatives designated as cash flow hedges. See Note 108 for additional information.
35
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1210 – DEFERRED COMPENSATIONEARNINGS PER SHARE
The Company maintained a supplemental executive retirement plan (the SERP)has granted certain restricted stock units that contain non-forfeitable rights to dividend equivalents. Such restricted stock units are considered participating securities. As such, we have included these restricted stock units in the calculation of basic earnings per share and calculate basic earnings per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for certain key executive officers. each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings.
Diluted earnings per share is computed using the treasury stock method and reflects the potential dilution from the Company’s outstanding restricted stock units and performance restricted stock units.
The SERP benefit payments were scheduled to be paid in equal monthly installments over 30 years. In June 2019,following table sets forth the Company approved terminationcomputation of the SERP agreements,basic and each participant will receive a lump sum payment equal to the present valuediluted earnings per share:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
| | (dollars in thousands) | ||||||||||
Numerator: | | | | | | | | | | | | |
Net income | | $ | 15,627 | | $ | 13,715 | | $ | 43,316 | | $ | 42,677 |
Earnings allocated to participating securities | | | (17) | | | (25) | | | (51) | | | (81) |
Numerator for earnings per share - basic and diluted | | $ | 15,610 | | $ | 13,690 | | $ | 43,265 | | $ | 42,596 |
| | | | | | | | | | | | |
Denominator: | | | | | | | | | | | | |
Weighted average common shares outstanding | | | 28,787,662 | | | 27,340,926 | | | 28,887,757 | | | 27,377,809 |
Dilutive effect of outstanding restricted stock units | | | 72,643 | | | 13,921 | | | 56,761 | | | 11,412 |
Weighted average common shares outstanding, including all dilutive potential shares | | | 28,860,305 | | | 27,354,847 | | | 28,944,518 | | | 27,389,221 |
| | | | | | | | | | | | |
Earnings per share - Basic | | $ | 0.54 | | $ | 0.50 | | $ | 1.50 | | $ | 1.56 |
Earnings per share - Diluted | | $ | 0.54 | | $ | 0.50 | | $ | 1.49 | | $ | 1.56 |
36
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1311 – STOCK-BASED COMPENSATION PLANS
The Company sponsored a Stock Appreciation Rights Plan (the SAR Plan) which, as of September 30, 2019 authorized the issuance of performance shares (units) to certain key employees and directors as approved by the Board of Directors. Upon issuance, each unit was assigned a value equal to the price per share of the Company’s stock as determined by an independent appraisal subject to approval by the Board of Directors. The units were revalued each year thereafter based on an independent appraisal. As of December 31, 2018, all outstanding units were fully vested and were subsequently exercised during 2019.
In June 2019, the Companyhas adopted subject to stockholder approval, the HBT Financial, Inc. Omnibus Incentive Plan (the “Omnibus Incentive Plan”). The stockholders approved the Omnibus Incentive Plan on October 9, 2019. The Omnibus Incentive Plan provides for grants of (i) stock options, (ii) stock appreciation rights, (iii) restricted shares, (iv) restricted stock units, (v) performance awards, (v)(vi) other share-based awards and (vi) other cash-based awards to eligible employees, non-employee directors and consultants of the Company. The maximum number of shares of common stock available for issuance under the Omnibus Incentive Plan is 1,820,000 shares.
On September 1, 2019,The following is a summary of stock-based compensation expense (benefit):
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
| | (dollars in thousands) | ||||||||||
Restricted stock units | | $ | 230 | | $ | 153 | | $ | 1,072 | | $ | 415 |
Performance restricted stock units | | | 119 | | | 75 | | | 530 | | | 123 |
Total awards classified as equity | | | 349 | | | 228 | | | 1,602 | | | 538 |
Stock appreciation rights | | | 51 | | | (87) | | | 35 | | | 43 |
Total stock-based compensation expense | | $ | 400 | | $ | 141 | | $ | 1,637 | | $ | 581 |
In February 2022, all outstanding restricted stock unit and performance restricted stock unit agreements were modified to address treatment upon retirement. In the Company granted 110,160event of retirement, and if the retirement eligibility requirements are met, then 100% of unvested restricted stock units and performance restricted stock units will continue to certain key employees, atvest in accordance with the originally established vesting schedule. The retirement modification resulted in the acceleration of $0.6 million of expense, although total compensation costs related to the modified agreements remained the same.
37
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Restricted Stock Units
A restricted stock unit grants a grant date assigned valueparticipant the right to receive one share of $25.75 per unit. Of the Company’s common stock, following the completion of the requisite service period. Restricted stock units grantedare classified as equity. Compensation cost is based on September 1, 2019, 79,560 units were fully vestedthe Company’s stock price on the grant date and 30,600is recognized on a straight-line basis over the service period for the entire award. Dividend equivalents on restricted stock units, vest ratably over a 4-year period.
Unitswhich are either accrued until vested or paid at the same time as dividends on common stock, are classified as liabilities. As of September 30, 2019 there was no liability recorded for the outstanding units. As of December 31, 2018, the liability recorded for the outstanding units was $1,884,000. During the three months ended September 30, 2019 and 2018, the Company recognized $64,000 and $482,000 as compensation expense, respectively. dividends charged to retained earnings.
During the nine months ended September 30, 20192022 and 2018,2021, the Company recognized $(51,000)total grant date fair value of the restricted stock units granted was $0.9 million and $540,000 as compensation expense,$0.8 million, respectively, based on the grant date closing prices. The total intrinsic value of restricted stock that vested during the nine months ended September 30, 2022 and 2021 was $0.7 million and $0.3 million, respectively.
The following is a summary of restricted stock unit activity:
| | | | | | | | | | |
| | Three Months Ended September 30, | ||||||||
| | 2022 | | 2021 | ||||||
| | | | Weighted | | | | Weighted | ||
| | | | Average | | | | Average | ||
| | Restricted | | Grant Date | | Restricted | | Grant Date | ||
|
| Stock Units |
| Fair Value |
| Stock Units |
| Fair Value | ||
Beginning balance | | 120,631 | | $ | 17.98 | | 99,597 | | $ | 17.37 |
Granted | | — | | | — | | — | | | — |
Vested | | — | | | — | | — | | | — |
Forfeited | | (1,328) | | | 18.35 | | — | | | — |
Ending balance | | 119,303 | | $ | 17.98 | | 99,597 | | $ | 17.37 |
| | | | | | | | | | |
| | Nine Months Ended September 30, | ||||||||
| | 2022 | | 2021 | ||||||
| | | | Weighted | | | | Weighted | ||
| | | | Average | | | | Average | ||
| | Restricted | | Grant Date | | Restricted | | Grant Date | ||
|
| Stock Units |
| Fair Value |
| Stock Units |
| Fair Value | ||
Beginning balance | | 109,244 | | $ | 17.27 | | 71,000 | | $ | 18.98 |
Granted | | 46,312 | | | 19.11 | | 50,347 | | | 15.72 |
Vested | | (34,925) | | | 17.26 | | (20,225) | | | 18.86 |
Forfeited | | (1,328) | | | 18.35 | | (1,525) | | | 18.11 |
Ending balance | | 119,303 | | $ | 17.98 | | 99,597 | | $ | 17.37 |
As of September 30, 20192022, unrecognized compensation cost related to the non-vested restricted stock units was $1.1 million. This cost is expected to be recognized over the weighted average remaining service period of 1.7 years.
38
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Performance Restricted Stock Units
A performance restricted stock unit is similar to a restricted stock unit, except that the number of shares of the Company’s common stock awarded is based on a performance condition and December 31, 2018, therethe completion of the requisite service period. The number of shares of the Company’s common stock that may be earned ranges from 0% to 150% of the number of performance restricted stock units granted. Performance restricted stock units are classified as equity. Compensation cost is based on the Company’s stock price on the grant date and an assessment of the probable outcome of the performance condition. Compensation cost is recognized on a straight-line basis over the service period of the entire award. Changes in the performance condition probability assessment result in cumulative catch-up adjustments to the compensation cost recognized. Dividend equivalents on performance restricted stock units, which are accrued until vested, are classified as dividends charged to retained earnings.
During the nine months ended September 30, 2022 and 2021, the total fair value of the performance restricted stock units granted was no$0.5 million and $0.4 million, respectively, based on the grant date closing prices and an assessment of the probable outcome of the performance condition on the grant date.
The following is a summary of performance restricted stock unit activity:
| | | | | | | | | | |
| | Three Months Ended September 30, | ||||||||
| | 2022 | | 2021 | ||||||
| | | | Weighted | | | | Weighted | ||
| | Performance | | Average | | Performance | | Average | ||
| | Restricted | | Grant Date | | Restricted | | Grant Date | ||
|
| Stock Units |
| Fair Value |
| Stock Units |
| Fair Value | ||
Beginning balance | | 62,067 | | $ | 17.02 | | 28,697 | | $ | 15.53 |
Granted | | — | | | — | | — | | | — |
Vested | | — | | | — | | — | | | — |
Forfeited | | — | | | — | | — | | | — |
Ending balance | | 62,067 | | $ | 17.02 | | 28,697 | | $ | 15.53 |
| | | | | | | | | | |
| | Nine months ended September 30, | ||||||||
| | 2022 | | 2021 | ||||||
| | | | Weighted | | | | Weighted | ||
| | Performance | | Average | | Performance | | Average | ||
| | Restricted | | Grant Date | | Restricted | | Grant Date | ||
|
| Stock Units |
| Fair Value |
| Stock Units |
| Fair Value | ||
Beginning balance | | 38,344 | | $ | 15.72 | | — | | $ | — |
Granted | | 23,723 | | | 19.14 | | 28,697 | | | 15.53 |
Vested | | — | | | — | | — | | | — |
Forfeited | | — | | | — | | — | | | — |
Ending balance | | 62,067 | | $ | 17.02 | | 28,697 | | $ | 15.53 |
As of September 30, 2022, unrecognized compensation cost related to non-vested stock-based compensation agreements.performance restricted stock units was $0.5 million, based on the current assessment of the probable outcome of the performance conditions. This cost is expected to be recognized over the weighted average remaining service period of 1.7 years.
39
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Stock Appreciation Rights
A stock appreciation right grants a participant the right to receive an amount of cash, the value of which equals the appreciation in the Company’s stock price between the grant date and the exercise date. Stock appreciation rights are classified as liabilities. The liability is based on an option-pricing model used to estimate the fair value of the stock appreciation rights. Compensation cost for non-vested stock appreciation rights is recognized on a straight line basis over the service period of the entire award. The non-vested stock appreciation rights vest in four equal annual installments beginning on the first anniversary of the grant date.
The following is a summary of stock appreciation rights activity:
| | | | | | | | | | |
| | Three Months Ended September 30, | ||||||||
| | 2022 | | 2021 | ||||||
|
| Stock |
| Weighted |
| Stock |
| Weighted | ||
Beginning balance | | 91,800 | | $ | 16.32 | | 97,920 | | $ | 16.32 |
Granted | | — | | | — | | — | | | — |
Exercised | | — | | | — | | — | | | — |
Expired | | — | | | — | | — | | | — |
Forfeited | | — | | | — | | — | | | — |
Ending balance | | 91,800 | | $ | 16.32 | | 97,920 | | $ | 16.32 |
| | | | | | | | | | |
| | Nine Months Ended September 30, | ||||||||
| | 2022 | | 2021 | ||||||
|
| Stock |
| Weighted |
| Stock |
| Weighted | ||
Beginning balance | | 97,920 | | $ | 16.32 | | 105,570 | | $ | 16.32 |
Granted | | — | | | — | | — | | | — |
Exercised | | (6,120) | | | 16.32 | | (6,120) | | | 16.32 |
Expired | | — | | | — | | (1,530) | | | 16.32 |
Forfeited | | — | | | — | | — | | | — |
Ending balance | | 91,800 | | $ | 16.32 | | 97,920 | | $ | 16.32 |
A further summary of stock appreciation rights as of September 30, 2022, is as follows:
| | | | | | | |
| | | | | | Weighted Average | |
| | Stock Appreciation Rights | | Remaining | |||
Grant Date Assigned Values |
| Outstanding |
| Exercisable |
| Contractual Term | |
$ 16.32 | | 91,800 | | 85,680 | | 6.5 | years |
As of September 30, 2019,2022, unrecognized compensation cost related to non-vested stock appreciation rights was $33 thousand.
40
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As of September 30, 2022 and December 31, 2021, the liability recorded for outstanding stock appreciation rights was $0.5 million and $0.5 million, respectively. The Company used an option pricing model to value the stock appreciation rights, using the assumptions in the following table. Expected volatility is derived from the historical volatility of the Company’s stock price and a selected peer group of industry-related companies.
| | | | | | | |
|
| September 30, 2022 |
| December 31, 2021 | | ||
Risk-free interest rate | | | 3.97 | % | | 1.40 | % |
Expected volatility | | | 36.17 | % | | 35.52 | % |
Expected life (in years) | | | 6.9 | | | 7.7 | |
Expected dividend yield | | | 3.53 | % | | 3.20 | % |
As of September 30, 2022, the liability recorded for previously exercised unitsstock appreciation rights was $1,674,000,$0.5 million, which will be paid in five equaltwo remaining annual installments beginning in 2019 or 2020.2023 and 2024. As of December 31, 2018,2021, the liability recorded for previously exercised unitsstock appreciation rights was $176,000 and was paid in 2019.$0.8 million.
Subsequent to September 30, 2019, in conjunction with the initial public offering, the grant date assigned value of all outstanding units with a grant date assigned value of $25.75 was adjusted to $16.32, reflecting a decrease
30
per unit equal to the $9.43 per share special dividend paid to shareholders of record prior to the initial public offering.
A summary of the status of awards as of September 30, 2019 and December 31, 2018, and changes during the three and nine months ended September 30, 2019 and 2018, is as follows:
|
|
|
|
|
|
Three Months Ended September 30, 2019 |
| Units |
| Weighted Average | |
Outstanding, June 30, 2019 |
| 42,840 |
| $ | 7.46 |
Granted |
| 110,160 |
|
| 25.75 |
Exercised |
| (42,840) |
|
| 7.46 |
Forfeited |
| — |
|
| — |
Outstanding, September 30, 2019 |
| 110,160 |
| $ | 25.75 |
|
|
|
|
|
|
Three Months Ended September 30, 2018 |
|
|
|
|
|
Outstanding, June 30, 2018 |
| 91,800 |
| $ | 5.73 |
Granted |
| — |
|
| — |
Exercised |
| — |
|
| — |
Forfeited |
| — |
|
| — |
Outstanding, September 30, 2018 |
| 91,800 |
| $ | 5.73 |
|
|
|
|
|
|
Nine Months Ended September 30, 2019 |
|
|
|
|
|
Outstanding, December 31, 2018 |
| 91,800 |
| $ | 5.73 |
Granted |
| 110,160 |
|
| 25.75 |
Exercised |
| (91,800) |
|
| 5.73 |
Forfeited |
| — |
|
| — |
Outstanding, September 30, 2019 |
| 110,160 |
| $ | 25.75 |
|
|
|
|
|
|
Nine Months Ended September 30, 2018 |
|
|
|
|
|
Outstanding, December 31, 2017 |
| 116,280 |
| $ | 5.66 |
Granted |
| — |
|
| — |
Exercised |
| (24,480) |
|
| 5.43 |
Forfeited |
| — |
|
| — |
Outstanding, September 30, 2018 |
| 91,800 |
| $ | 5.73 |
|
|
|
|
|
|
Exercisable, September 30, 2019 |
| 79,560 |
| $ | 25.75 |
Exercisable, December 31, 2018 |
| 91,800 |
| $ | 5.73 |
A further summary of awards outstanding as of September 30, 2019, is as follows:
|
|
|
|
|
|
|
| Units |
| Units | |
Range of Grant Date Assigned Values |
| Outstanding |
| Exercisable | |
$ 25.75 |
| 110,160 |
|
| 79,560 |
NOTE 1412 – REGULATORY MATTERS
The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) became effective for the Company on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019. As allowed
31
under the new regulations, the Banks and Company elected to exclude accumulated other comprehensive income, including unrealized gains and losses on securities, in the computation of regulatory capital.
The ability of the Company to pay dividends to its stockholders is dependent upon the ability of the Banks to pay dividends to the Company. The Banks are subject to certain statutory and regulatory restrictions on the amount it may pay in dividends. Under the Basel III regulations, a capital conservation buffer calculation will phase in over five years which limits allowable bank dividends if regulatory capital ratios fall below specific thresholds. As of September 30, 2019 and December 31, 2018, the capital conservation buffer was 2.5% and 1.875%, respectively.
HBT Financial, Inc. (on a consolidated basis) and the BanksBank are each subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by the regulators that, if undertaken, could have a direct material effect on the consolidated financial statements of HBT Financial, Inc.the Company and the Banks. Bank. Additionally, the ability of the Company to pay dividends to its stockholders is dependent upon the ability of the Bank to pay dividends to the Company.
Under capital adequacy guidelines and the regulatory framework for prompt corrective action, HBT Financial, Inc.the Company and the BanksBank must meet specific capital guidelines that involve quantitative measures of the assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. As allowed under the regulations, the Company and the Bank elected to exclude accumulated other comprehensive income, including unrealized gains and losses on debt securities, in the computation of regulatory capital. Prompt corrective action provisions are not applicable to bank holding companies.
Management believes, asAdditionally, the Company and the Bank must maintain a “capital conservation buffer” to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. As of September 30, 20192022 and December 31, 2018, that HBT Financial, Inc.2021, the capital conservation buffer was 2.5% of risk-weighted assets.
As of September 30, 2022, the Company and the BanksBank each met all capital adequacy requirements to which they arewere subject.
3241
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The actual and required capital amounts and ratios of HBT Financial, Inc. (consolidated)the Company (on a consolidated basis) and the BanksBank are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Actual |
| For Capital |
| To Be Well |
| |||||||||
September 30, 2019 |
| Amount |
| Ratio |
| Amount |
| Ratio |
| Amount |
| Ratio |
| |||
|
|
| (dollars in thousands) |
| ||||||||||||
Total Capital (to Risk Weighted Assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated HBT Financial, Inc. |
| $ | 371,681 |
| 14.88 | % | $ | 199,798 |
| 8.00 | % |
| N/A |
| N/A |
|
Heartland Bank |
| $ | 329,689 |
| 14.30 | % | $ | 184,457 |
| 8.00 | % | $ | 230,572 |
| 10.00 | % |
Lincoln Bank |
| $ | 37,349 |
| 19.88 | % | $ | 15,031 |
| 8.00 | % | $ | 18,789 |
| 10.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to Risk Weighted Assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated HBT Financial, Inc. |
| $ | 348,920 |
| 13.97 | % | $ | 149,848 |
| 6.00 | % |
| N/A |
| N/A |
|
Heartland Bank |
| $ | 309,145 |
| 13.41 | % | $ | 138,343 |
| 6.00 | % | $ | 184,457 |
| 8.00 | % |
Lincoln Bank |
| $ | 35,132 |
| 18.70 | % | $ | 11,274 |
| 6.00 | % | $ | 15,031 |
| 8.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Equity Tier 1 Capital (to Risk Weighted Assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated HBT Financial, Inc. |
| $ | 312,519 |
| 12.51 | % | $ | 112,386 |
| 4.50 | % |
| N/A |
| N/A |
|
Heartland Bank |
| $ | 309,145 |
| 13.41 | % | $ | 103,757 |
| 4.50 | % | $ | 149,871 |
| 6.50 | % |
Lincoln Bank |
| $ | 35,132 |
| 18.70 | % | $ | 8,455 |
| 4.50 | % | $ | 12,213 |
| 6.50 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to Average Assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated HBT Financial, Inc. |
| $ | 348,920 |
| 11.02 | % | $ | 126,601 |
| 4.00 | % |
| N/A |
| N/A |
|
Heartland Bank |
| $ | 309,145 |
| 11.00 | % | $ | 112,366 |
| 4.00 | % | $ | 140,458 |
| 5.00 | % |
Lincoln Bank |
| $ | 35,132 |
| 9.96 | % | $ | 14,104 |
| 4.00 | % | $ | 17,631 |
| 5.00 | % |
| | | | | | | | | | | | | | | | |
| | Actual | | For Capital | | To Be Well | | |||||||||
September 30, 2022 |
| Amount |
| Ratio |
| Amount |
| Ratio |
| Amount |
| Ratio |
| |||
| | | (dollars in thousands) | | ||||||||||||
Total Capital (to Risk Weighted Assets) | | | | | | | | | | | | | | | | |
Consolidated HBT Financial, Inc. | | $ | 507,277 | | 16.34 | % | $ | 248,395 | | 8.00 | % | | N/A | | N/A | |
Heartland Bank and Trust Company | | | 484,065 | | 15.60 | | | 248,216 | | 8.00 | | $ | 310,271 | | 10.00 | % |
| | | | | | | | | | | | | | | | |
Tier 1 Capital (to Risk Weighted Assets) | | | | | | | | | | | | | | | | |
Consolidated HBT Financial, Inc. | | $ | 442,841 | | 14.26 | % | $ | 186,296 | | 6.00 | % | | N/A | | N/A | |
Heartland Bank and Trust Company | | | 459,005 | | 14.79 | | | 186,162 | | 6.00 | | $ | 248,216 | | 8.00 | % |
| | | | | | | | | | | | | | | | |
Common Equity Tier 1 Capital (to Risk Weighted Assets) | | | | | | | | | | | | | | | | |
Consolidated HBT Financial, Inc. | | $ | 406,243 | | 13.08 | % | $ | 139,722 | | 4.50 | % | | N/A | | N/A | |
Heartland Bank and Trust Company | | | 459,005 | | 14.79 | | | 139,622 | | 4.50 | | $ | 201,676 | | 6.50 | % |
| | | | | | | | | | | | | | | | |
Tier 1 Capital (to Average Assets) | | | | | | | | | | | | | | | | |
Consolidated HBT Financial, Inc. | | $ | 442,841 | | 10.44 | % | $ | 169,611 | | 4.00 | % | | N/A | | N/A | |
Heartland Bank and Trust Company | | | 459,005 | | 10.83 | | | 169,515 | | 4.00 | | $ | 211,894 | | 5.00 | % |
| | | | | | | | | | | | | | | | |
| | Actual | | For Capital | | To Be Well | | |||||||||
December 31, 2021 |
| Amount |
| Ratio |
| Amount |
| Ratio |
| Amount |
| Ratio |
| |||
| | | (dollars in thousands) | | ||||||||||||
Total Capital (to Risk Weighted Assets) | | | | | | | | | | | | | | | | |
Consolidated HBT Financial, Inc. | | $ | 479,320 | | 16.88 | % | $ | 227,115 | | 8.00 | % | | N/A | | N/A | |
Heartland Bank and Trust Company | | | 452,162 | | 15.94 | | | 226,950 | | 8.00 | | $ | 283,688 | | 10.00 | % |
| | | | | | | | | | | | | | | | |
Tier 1 Capital (to Risk Weighted Assets) | | | | | | | | | | | | | | | | |
Consolidated HBT Financial, Inc. | | $ | 416,068 | | 14.66 | % | $ | 170,336 | | 6.00 | % | | N/A | | N/A | |
Heartland Bank and Trust Company | | | 428,226 | | 15.09 | | | 170,213 | | 6.00 | | $ | 226,950 | | 8.00 | % |
| | | | | | | | | | | | | | | | |
Common Equity Tier 1 Capital (to Risk Weighted Assets) | | | | | | | | | | | | | | | | |
Consolidated HBT Financial, Inc. | | $ | 379,519 | | 13.37 | % | $ | 127,752 | | 4.50 | % | | N/A | | N/A | |
Heartland Bank and Trust Company | | | 428,226 | | 15.09 | | | 127,659 | | 4.50 | | $ | 184,397 | | 6.50 | % |
| | | | | | | | | | | | | | | | |
Tier 1 Capital (to Average Assets) | | | | | | | | | | | | | | | | |
Consolidated HBT Financial, Inc. | | $ | 416,068 | | 9.84 | % | $ | 169,171 | | 4.00 | % | | N/A | | N/A | |
Heartland Bank and Trust Company | | | 428,226 | | 10.13 | | | 169,070 | | 4.00 | | $ | 211,337 | | 5.00 | % |
3342
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Actual |
| For Capital |
| To Be Well |
| |||||||||
December 31, 2018 |
| Amount |
| Ratio |
| Amount |
| Ratio |
| Amount |
| Ratio |
| |||
|
|
| (dollars in thousands) |
| ||||||||||||
Total Capital (to Risk Weighted Assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated HBT Financial, Inc. |
| $ | 372,472 |
| 14.99 | % | $ | 198,730 |
| 8.00 | % |
| N/A |
| N/A |
|
Heartland Bank |
| $ | 332,391 |
| 14.44 | % | $ | 184,127 |
| 8.00 | % | $ | 230,159 |
| 10.00 | % |
Lincoln Bank |
| $ | 38,059 |
| 21.02 | % | $ | 14,488 |
| 8.00 | % | $ | 18,110 |
| 10.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to Risk Weighted Assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated HBT Financial, Inc. |
| $ | 351,963 |
| 14.17 | % | $ | 149,047 |
| 6.00 | % |
| N/A |
| N/A |
|
Heartland Bank |
| $ | 313,406 |
| 13.62 | % | $ | 138,095 |
| 6.00 | % | $ | 184,127 |
| 8.00 | % |
Lincoln Bank |
| $ | 36,535 |
| 20.17 | % | $ | 10,866 |
| 6.00 | % | $ | 14,488 |
| 8.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Equity Tier 1 Capital (to Risk Weighted Assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated HBT Financial, Inc. |
| $ | 315,611 |
| 12.71 | % | $ | 111,785 |
| 4.50 | % |
| N/A |
| N/A |
|
Heartland Bank |
| $ | 313,406 |
| 13.62 | % | $ | 103,572 |
| 4.50 | % | $ | 149,603 |
| 6.50 | % |
Lincoln Bank |
| $ | 36,535 |
| 20.17 | % | $ | 8,150 |
| 4.50 | % | $ | 11,772 |
| 6.50 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to Average Assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated HBT Financial, Inc. |
| $ | 351,963 |
| 10.80 | % | $ | 130,393 |
| 4.00 | % |
| N/A |
| N/A |
|
Heartland Bank |
| $ | 313,406 |
| 11.03 | % | $ | 113,668 |
| 4.00 | % | $ | 142,085 |
| 5.00 | % |
Lincoln Bank |
| $ | 36,535 |
| 10.21 | % | $ | 14,319 |
| 4.00 | % | $ | 17,899 |
| 5.00 | % |
NOTE 1513 – FAIR VALUE OF FINANCIAL INSTRUMENTS
Recurring Basis
The Company uses fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Additional information on fair value measurements areis summarized in Note 1 to the Company’s annual consolidated financial statements included in the prospectusAnnual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on OctoberMarch 11, 2019.2022. There were no transfers between levels during the three and nine months ended September 30, 20192022 and 2018.2021. The Company’s policy for determining transfers between levels occurs at the end of the reporting period when circumstances in the underlying valuation criteria change and result in transfer between levels.
34
The following tables present the balances of the assets measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018:basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
|
|
| (dollars in thousands) | |||||||||
Securities available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency |
| $ | — |
| $ | 39,574 |
| $ | — |
| $ | 39,574 |
Municipal |
|
| — |
|
| 152,499 |
|
| — |
|
| 152,499 |
Mortgage-backed: |
|
|
|
|
|
|
|
|
|
|
|
|
Agency residential |
|
| — |
|
| 218,246 |
|
| — |
|
| 218,246 |
Agency commercial |
|
| — |
|
| 129,449 |
|
| — |
|
| 129,449 |
Private-label |
|
| — |
|
| 22 |
|
| — |
|
| 22 |
Corporate |
|
| — |
|
| 78,330 |
|
| — |
|
| 78,330 |
Equity securities with readily determinable fair values |
|
| 3,251 |
|
| — |
|
| — |
|
| 3,251 |
Mortgage servicing rights |
|
| — |
|
| — |
|
| 7,936 |
|
| 7,936 |
Derivative financial assets |
|
| — |
|
| 11,766 |
|
| — |
|
| 11,766 |
Derivative financial liabilities |
|
| — |
|
| 12,664 |
|
| — |
|
| 12,664 |
| | | | | | | | | | | | | ||||||||||||
September 30, 2022 |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
December 31, 2018 |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||||||||||||||
|
|
| (dollars in thousands) | |||||||||||||||||||||
Securities available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
| | | (dollars in thousands) | |||||||||||||||||||||
Debt securities available-for-sale: | | | | | | | | | | | | | ||||||||||||
U.S. Treasury | | $ | 153,572 | | $ | — | | $ | — | | $ | 153,572 | ||||||||||||
U.S. government agency |
| $ | — |
| $ | 46,866 |
| $ | — |
| $ | 46,866 | | | — | | | 57,023 | | | — | | | 57,023 |
Municipal |
|
| — |
|
| 161,450 |
|
| — |
|
| 161,450 | | | — | | | 241,911 | | | — | | | 241,911 |
Mortgage-backed: |
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | |
Agency residential |
|
| — |
|
| 234,303 |
|
| — |
|
| 234,303 | | | — | | | 204,907 | | | — | | | 204,907 |
Agency commercial |
|
| — |
|
| 150,081 |
|
| — |
|
| 150,081 | | | — | | | 137,376 | | | — | | | 137,376 |
Private-label |
|
| — |
|
| 256 |
|
| — |
|
| 256 | ||||||||||||
Corporate |
|
| — |
|
| 86,570 |
|
| — |
|
| 86,570 | | | — | | | 58,951 | | | — | | | 58,951 |
Equity securities with readily determinable fair values |
|
| 3,081 |
|
| — |
|
| — |
|
| 3,081 | | | 2,996 | | | — | | | — | | | 2,996 |
Mortgage servicing rights |
|
| — |
|
| — |
|
| 10,918 |
|
| 10,918 | | | — | | | — | | | 10,440 | | | 10,440 |
Derivative financial assets |
|
| — |
|
| 3,225 |
|
| — |
|
| 3,225 | | | — | | | 8,045 | | | — | | | 8,045 |
Derivative financial liabilities |
|
| — |
|
| 3,074 |
|
| — |
|
| 3,074 | | | — | | | 7,431 | | | — | | | 7,431 |
| | | | | | | | | | | | |
December 31, 2021 |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
| | | (dollars in thousands) | |||||||||
Debt securities available-for-sale: | | | | | | | | | | | | |
U.S. Treasury | | $ | 108,976 | | $ | — | | $ | — | | $ | 108,976 |
U.S. government agency | | | — | | | 128,105 | | | — | | | 128,105 |
Municipal | | | — | | | 297,077 | | | — | | | 297,077 |
Mortgage-backed: | | | | | | | | | | | | |
Agency residential | | | — | | | 179,466 | | | — | | | 179,466 |
Agency commercial | | | — | | | 164,061 | | | — | | | 164,061 |
Corporate | | | — | | | 64,483 | | | — | | | 64,483 |
Equity securities with readily determinable fair values | | | 3,443 | | | — | | | — | | | 3,443 |
Mortgage servicing rights | | | — | | | — | | | 7,994 | | | 7,994 |
Derivative financial assets | | | — | | | 8,697 | | | — | | | 8,697 |
Derivative financial liabilities | | | — | | | 9,377 | | | — | | | 9,377 |
The following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy. There were no changes to the valuation techniques from December 31, 20182021 to September 30, 2019.2022.
43
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Investment Securities
When available, the Company uses quoted market prices to determine the fair value of securities; such items are classified in Level 1 of the fair value hierarchy. For the Company’s securities where quoted prices are not available for identical securities in an active market, the Company determines fair value utilizing vendors who apply matrix pricing for similar bonds where no price is observable or may compile prices from various sources. These models are primarily industry-standard models that consider various assumptions, including time value, yield curve, volatility factors, prepayment speeds, default rates, loss severity, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace. Fair values from these models are verified, where possible, against quoted market prices for recent trading activity of assets with similar characteristics to the security being valued. Such methods are generally classified as Level 2. However,2; however, when prices from
35
independent sources vary, cannot be obtained or cannot be corroborated, a security is generally classified as Level 3. The change in fair value of debt securities available-for-sale is recorded through an adjustment to the consolidated statement of comprehensive income.income (loss). The change in fair value of equity securities with readily determinable fair values is recorded through an adjustment to the consolidated statement of income.
Derivative Financial Instruments
Interest rate swap agreements are carried at fair value as determined by dealer valuation models. Based on the inputs used, the derivative financial instruments subjected to recurring fair value adjustments are classified as Level 2. For derivative financial instruments designated as a hedging instruments, the change in fair value is recorded through an adjustment to the consolidated statement of comprehensive income.income (loss). For derivative financial instruments not designated as a hedging instruments, the change in fair value is recorded through an adjustment to the consolidated statement of income.
Mortgage Servicing Rights
The Company has elected to record its mortgage servicing rights at fair value. Mortgage servicing rights do not trade in an active market with readily observable prices. Accordingly, the Company determines the fair value of mortgage servicing rights by estimating the fair value of the future cash flows associated with the mortgage loans being serviced as calculated by an independent third party. Key economic assumptions used in measuring the fair value of mortgage servicing rights include, but are not limited to, prepayment speeds and discount rates. Due to the nature of the valuation inputs, mortgage servicing rights are classified inas Level 3 of the fair value hierarchy.3. The change in fair value is recorded through an adjustment to the consolidated statement of income.
44
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present additional information about the unobservable inputs used in the fair value measurement of the mortgage servicing rights (dollars in thousands):
|
|
|
|
|
|
|
|
|
| |||||||||
September 30, 2019 |
| Fair Value |
| Valuation Technique |
| Unobservable Inputs |
| Range | ||||||||||
| | | | | | | | | | |||||||||
September 30, 2022 |
| Fair Value |
| Valuation Technique |
| Unobservable Inputs |
| Range | ||||||||||
Mortgage servicing rights |
| $ | 7,936 |
| Discounted cash flows |
| Constant pre-payment rates (CPR) |
| 7.1% to 68.5% (14.1%) | | $ | 10,440 | | Discounted cash flows | | Constant pre-payment rates (CPR) | | 5.5% to 59.7% (8.2%) |
|
|
|
|
|
|
| Discount rate |
| 9.0% to 11.0% (9.0%) | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||
December 31, 2018 |
| Fair Value |
| Valuation Technique |
| Unobservable Inputs |
| Range | ||||||||||
| | | | | | | Discount rate | | 9.0% to 11.5% (9.3%) | |||||||||
| | | | | | | | | | |||||||||
December 31, 2021 | | Fair Value | | Valuation Technique | | Unobservable Inputs | | Range | ||||||||||
Mortgage servicing rights |
| $ | 10,918 |
| Discounted cash flows |
| Constant pre-payment rates (CPR) |
| 7.5% to 87.6% (8.9%) | | $ | 7,994 | | Discounted cash flows | | Constant pre-payment rates (CPR) | | 7.0% to 88.9% (11.7%) |
|
|
|
|
|
|
| Discount rate |
| 9.0% to 11.0% (9.0%) | |||||||||
| | | | | | | Discount rate | | 9.0% to 11.0% (9.0%) | |||||||||
Nonrecurring Basis
Certain assets are measured at fair value on a nonrecurring basis. These assets are not measured at fair value on an ongoing basis; however, they are subject to fair value adjustments in certain circumstances, such as there is evidence of impairment or a change in the amount of previously recognized impairment.
36
The following tables present the balances of the assets measured at fair value on a nonrecurring basis as of September 30, 2019 and December 31, 2018:basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
|
|
| (dollars in thousands) | |||||||||
Loans held for sale |
| $ | — |
| $ | 7,608 |
| $ | — |
| $ | 7,608 |
Collateral-dependent impaired loans |
|
| — |
|
| — |
|
| 13,124 |
|
| 13,124 |
Bank premises held for sale |
|
| — |
|
| — |
|
| 121 |
|
| 121 |
Foreclosed assets |
|
| — |
|
| — |
|
| 6,574 |
|
| 6,574 |
| | | | | | | | | | | | | ||||||||||||
September 30, 2022 |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
December 31, 2018 |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||||||||||||||
|
|
| (dollars in thousands) | |||||||||||||||||||||
| | | (dollars in thousands) | |||||||||||||||||||||
Loans held for sale |
| $ | — |
| $ | 2,800 |
| $ | — |
| $ | 2,800 | | $ | — | | $ | 2,297 | | $ | — | | $ | 2,297 |
Collateral-dependent impaired loans |
|
| — |
|
| — |
|
| 7,355 |
|
| 7,355 | | | — | | | — | | | 17,517 | | | 17,517 |
Bank premises held for sale |
|
| — |
|
| — |
|
| 749 |
|
| 749 | | | — | | | — | | | 281 | | | 281 |
Foreclosed assets |
|
| — |
|
| — |
|
| 9,559 |
|
| 9,559 | | | — | | | — | | | 2,637 | | | 2,637 |
| | | | | | | | | | | | |
December 31, 2021 |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
| | | (dollars in thousands) | |||||||||
Loans held for sale | | $ | — | | $ | 4,942 | | $ | — | | $ | 4,942 |
Collateral-dependent impaired loans | | | — | | | — | | | 22,423 | | | 22,423 |
Bank premises held for sale | | | — | | | — | | | 1,452 | | | 1,452 |
Foreclosed assets | | | — | | | — | | | 3,278 | | | 3,278 |
Loans Held for Sale
Mortgage loans originated and held for sale are carried at the lower of cost or estimated fair value. The Company obtains quotes or bids on these loans directly from purchasing financial institutions. Typically, these quotes include a premium on the sale and thus these quotes indicate fair value of the held for sale loans is greater than cost.
Collateral-dependent45
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Collateral-Dependent Impaired Loans
In accordance with the provisions of the loan impairment guidance, impairment was measured for loans with respect to which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement. The fair value of collateral-dependent impaired loans is estimated based on the fair value of the underlying collateral supporting the loan. Collateral-dependent impaired loans require classification in the fair value hierarchy. Impaired loans include loans acquired with deteriorated credit quality. Collateral values are estimated using Level 3 inputs based on customized discounting criteria.
Bank Premises Held for Sale
Bank premises held for sale are recorded at the lower of cost or fair value, less estimated selling costs, at the date classified as held for sale. Values are estimated using Level 3 inputs based on appraisals and customized discounting criteria. The carrying value of bank premises held for sale is not re-measured to fair value on a recurring basis but is subject to fair value adjustments when the carrying value exceeds the fair value, less estimated selling costs.
Foreclosed Assets
Foreclosed assets are recorded at fair value based on property appraisals, less estimated selling costs, at the date of the transfer. Subsequent to the transfer, foreclosed assets are carried at the lower of cost or fair value, less estimated selling costs. Values are estimated using Level 3 inputs based on appraisals and customized discounting criteria. The carrying value of foreclosed assets is not re-measured to fair value on a recurring basis but is subject to fair value adjustments when the carrying value exceeds the fair value, less estimated selling costs.
37
Collateral-Dependent Impaired Loans, Bank Premises Held for Sale, and Foreclosed Assets
The estimated fair value of collateral-dependent impaired loans, bank premises held for sale, and foreclosed assets is based on the appraised fair value of the collateral, less estimated costs to sell. Collateral-dependent impaired loans, bank premises held for sale, and foreclosed assets are classified within Level 3 of the fair value hierarchy.
The Company considers the appraisal or a similar evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals or a similar evaluation of the collateral underlying collateral-dependent loans and foreclosed assets are obtained at the time a loan is first considered impaired or a loan is transferred to foreclosed assets. Appraisals or a similar evaluation of bank premises held for sale are obtained when first classified as held for sale. Appraisals or similar evaluations are obtained subsequently as deemed necessary by management but at least annually on foreclosed assets and bank premises held for sale. Appraisals are reviewed for accuracy and consistency by management. Appraisals are performed by individuals selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated costs to sell. These discounts and estimates are developed by management by comparison to historical results.
46
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present quantitative information about unobservable inputs used in nonrecurring Level 3 fair value measurements (dollars in thousands).:
|
|
|
|
|
|
|
|
|
| |||||||||
September 30, 2019 |
| Fair |
| Valuation |
| Unobservable Inputs |
| Range | ||||||||||
| | | | | | | | | | |||||||||
September 30, 2022 |
| Fair |
| Valuation |
| Unobservable Inputs |
| Range | ||||||||||
Collateral-dependent impaired loans |
| $ | 13,124 |
| Appraisal of collateral |
| Appraisal adjustments |
| 20% to 40% (25%) | | $ | 17,517 | | Appraisal of collateral | | Appraisal adjustments | | Not meaningful |
Bank premises held for sale |
|
| 121 |
| Appraisal |
| Appraisal adjustments |
| 7% (7%) | | | 281 | | Appraisal | | Appraisal adjustments | | 7% (7%) |
Foreclosed assets |
|
| 6,574 |
| Appraisal |
| Appraisal adjustments |
| 7% (7%) | | | 2,637 | | Appraisal | | Appraisal adjustments | | 7% (7%) |
|
|
|
|
|
|
|
|
|
| |||||||||
December 31, 2018 |
| Fair |
| Valuation |
| Unobservable Inputs |
| Range | ||||||||||
| | | | | | | | | | |||||||||
December 31, 2021 | | Fair | | Valuation | | Unobservable Inputs | | Range | ||||||||||
Collateral-dependent impaired loans |
| $ | 7,355 |
| Appraisal of collateral |
| Appraisal adjustments |
| 20% to 40% (25%) | | $ | 22,423 | | Appraisal of collateral | | Appraisal adjustments | | Not meaningful |
Bank premises held for sale |
|
| 749 |
| Appraisal |
| Appraisal adjustments |
| 7% (7%) | | | 1,452 | | Appraisal | | Appraisal adjustments | | 7% (7%) |
Foreclosed assets |
|
| 9,559 |
| Appraisal |
| Appraisal adjustments |
| 7% (7%) | | | 3,278 | | Appraisal | | Appraisal adjustments | | 7% (7%) |
Other Fair Value Methods
The following methods and assumptions were used by the Company in estimating fair value disclosures of its other financial instruments. There were no changes in the methods and significant assumptions used to estimate the fair value of these financial instruments.
Cash and Cash Equivalents
The carrying amounts of these financial instruments approximate their fair values.
Interest-bearing Time Deposits with Banks
The carrying values of interest-bearing time deposits with banks approximate their fair values.
38
Restricted Stock
The carrying amount of FHLB stock approximates fair value based on the redemption provisions of the FHLB.
Loans
The fair value estimation process for the loan portfolio uses an exit price concept and reflects discounts the Company believes are consistent with discounts in the market place.marketplace. Fair values are estimated for portfolios of loans with similar characteristics. Loans are segregated by type such as commercial and industrial, agricultural and farmland, commercial real estate - owner occupied, commercial real estate - non-owner occupied, multi-family, construction and land development, one-to-four family residential, and municipal, consumer, and other. The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for similar maturities. The fair value analysis also includes other assumptions to estimate fair value, intended to approximate those a market participant would use in an orderly transaction, with adjustments for discount rates, interest rates, liquidity, and credit spreads, as appropriate.
Investments in Unconsolidated Subsidiaries
The fair values of the Company’s investments in unconsolidated subsidiaries are presumed to approximate carrying amounts.
47
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Time Deposits
Fair values of certificates of deposit with stated maturities have been estimated using the present value of estimated future cash flows discounted at rates currently offered for similar instruments. Time deposits also include public funds time deposits.
Securities Sold Under Agreements to Repurchase
The fair values of repurchase agreements with variable interest rates are presumed to approximate their recorded carrying amounts.
Subordinated Notes
The fair values of subordinated notes are estimated using discounted cash flow analyses based on rates observed on recent debt issuances by other financial institutions.
Junior Subordinated Debentures
The fair values of subordinated debentures are estimated using discounted cash flow analyses based on rates observed on recent debt issuances by other financial institutions.
Accrued Interest
The carrying amounts of accrued interest approximate fair value.
Limitations
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
39
Fair values have been estimated using data which management considered the best available and estimation methodologies deemed suitable for the pertinent category of financial instrument.
48
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table provides summary information on the carrying amounts and estimated fair values of the Company’s financial instruments as of September 30, 2019 and December 31, 2018:instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair Value |
| September 30, 2019 |
| December 31, 2018 | ||||||||
|
| Hierarchy |
| Carrying |
| Estimated |
| Carrying |
| Estimated | ||||
|
| Level |
| Amount |
| Fair Value |
| Amount |
| Fair Value | ||||
|
|
|
|
| (dollars in thousands) | |||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| Level 1 |
| $ | 154,941 |
| $ | 154,941 |
| $ | 186,879 |
| $ | 186,879 |
Interest-bearing time deposits with banks |
| Level 1 |
|
| 248 |
|
| 248 |
|
| 248 |
|
| 248 |
Securities held-to-maturity |
| Level 2 |
|
| 99,861 |
|
| 102,378 |
|
| 121,715 |
|
| 121,506 |
Restricted stock |
| Level 3 |
|
| 2,425 |
|
| 2,425 |
|
| 2,719 |
|
| 2,719 |
Loans, net |
| Level 3 |
|
| 2,148,253 |
|
| 2,185,888 |
|
| 2,123,748 |
|
| 2,125,698 |
Investments in unconsolidated subsidiaries |
| Level 3 |
|
| 1,165 |
|
| 1,165 |
|
| 1,165 |
|
| 1,165 |
Accrued interest receivable |
| Level 2 |
|
| 14,816 |
|
| 14,816 |
|
| 15,300 |
|
| 15,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits |
| Level 3 |
|
| 364,120 |
|
| 362,593 |
|
| 424,747 |
|
| 419,333 |
Securities sold under agreements to repurchase |
| Level 2 |
|
| 32,267 |
|
| 32,267 |
|
| 46,195 |
|
| 46,195 |
Subordinated debentures |
| Level 3 |
|
| 37,566 |
|
| 31,754 |
|
| 37,517 |
|
| 32,149 |
Accrued interest payable |
| Level 2 |
|
| 1,172 |
|
| 1,172 |
|
| 1,207 |
|
| 1,207 |
| | | | | | | | | | | | | | |
| | Fair Value | | September 30, 2022 | | December 31, 2021 | ||||||||
| | Hierarchy | | Carrying | | Estimated | | Carrying | | Estimated | ||||
|
| Level |
| Amount |
| Fair Value |
| Amount |
| Fair Value | ||||
| | | | | (dollars in thousands) | |||||||||
Financial assets: | | | | | | | | | | | | | | |
Cash and cash equivalents | | Level 1 | | $ | 78,215 | | $ | 78,215 | | $ | 409,268 | | $ | 409,268 |
Debt securities held-to-maturity | | Level 2 | | | 546,694 | | | 481,692 | | | 336,185 | | | 336,027 |
Restricted stock | | Level 3 | | | 4,050 | | | 4,050 | | | 2,739 | | | 2,739 |
Loans, net | | Level 3 | | | 2,554,868 | | | 2,548,050 | | | 2,475,753 | | | 2,494,686 |
Investments in unconsolidated subsidiaries | | Level 3 | | | 1,165 | | | 1,165 | | | 1,165 | | | 1,165 |
Accrued interest receivable | | Level 2 | | | 16,881 | | | 16,881 | | | 14,901 | | | 14,901 |
| | | | | | | | | | | | | | |
Financial liabilities: | | | | | | | | | | | | | | |
Time deposits | | Level 3 | | | 269,108 | | | 260,220 | | | 328,208 | | | 327,779 |
Securities sold under agreements to repurchase | | Level 2 | | | 48,130 | | | 48,130 | | | 61,256 | | | 61,256 |
Subordinated notes | | Level 3 | | | 39,376 | | | 37,667 | | | 39,316 | | | 41,602 |
Junior subordinated debentures | | Level 3 | | | 37,763 | | | 36,210 | | | 37,714 | | | 33,640 |
Accrued interest payable | | Level 2 | | | 607 | | | 607 | | | 1,043 | | | 1,043 |
The Company estimated the fair value of lending related commitments as described in Note 1614 to be immaterial based on limited interest rate exposure due to their variable nature, short-term commitment periods and termination clauses provided in the agreements.
49
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1614 – COMMITMENTS AND CONTINGENCIES
Financial Instruments
The Banks areBank is party to credit-related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.
The Banks’Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Banks useBank uses the same credit policies in making commitments and conditional obligations as they doit does for on-balance sheet instruments.
40
Such commitments and conditional obligations were as follows as of September 30, 2019 and December 31, 2018:follows:
|
|
|
|
|
|
|
|
| Contractual Amount | ||||
|
| September 30, |
| December 31, | ||
|
| 2019 |
| 2018 | ||
|
|
| (dollars in thousands) | |||
Commitments to extend credit |
| $ | 542,620 |
| $ | 524,112 |
Standby letters of credit |
|
| 8,666 |
|
| 10,358 |
| | | | | | |
| | Contractual Amount | ||||
|
| September 30, 2022 |
| December 31, 2021 | ||
| | | (dollars in thousands) | |||
Commitments to extend credit | | $ | 667,788 | | $ | 609,947 |
Standby letters of credit | | | 16,918 | | | 12,960 |
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Banks evaluateBank evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, by the BanksBank upon extension of credit is based on management’s credit evaluation of the customer. Collateral held varies, but may include real estate, accounts receivable, inventory, property, plant, and equipment, and income-producing properties.
Standby letters of credit are conditional commitments issued by the BanksBank to guarantee the performance of a customer to a third party. Those standby letters of credit are primarily issued to support extensions of credit. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to customers. The Banks secureBank secures the standby letters of credit with the same collateral used to secure the related loan.
50
HBT FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Legal Contingencies
Various legal claims arise from time to time inIn the normal course of business, which,the Company, or its subsidiaries, are involved in various legal proceedings. In the opinion of management, willany liability resulting from pending proceedings would not be expected to have noa material adverse effect on the Company’sCompany's consolidated financial statements.
DeBaere, et al v. Heartland Bank and Trust Company
The Bank is a defendant in a purported class action lawsuit filed in June 2020, in the Circuit Court of Cook County, Illinois, DeBaere, et al v. Heartland Bank and Trust Company. The plaintiff, a customer of the Bank, alleges that the Bank breached its contract with the plaintiff by (1) charging multiple insufficient funds fees or overdraft fees on a single customer-initiated transaction, and (2) charging overdraft fees for transactions that were authorized on a positive account balance, but when settled, settled into a negative balance.
The Bank intends to vigorously defend the lawsuit. The Company does not believe a loss is probable at this time, as that term is used in assessing loss contingencies. Accordingly, consistent with the authoritative guidance in the evaluation of contingencies, an accrual related to this matter has not been recorded. However, an unfavorable outcome is reasonably possible, and the Company would not characterize the chance of any loss as “remote.” Given the early stage of this case, the Company cannot yet offer an opinion on the estimated range of any possible loss, in the event of an unfavorable opinion.
Miller, et al v. State Bank of Lincoln and Heartland Bank and Trust Company
The Bank is a defendant in a purported class action lawsuit filed in May 2020, in the Circuit Court of Logan County, Illinois, Miller, et al v. State Bank of Lincoln and the Bank. The plaintiff, a customer of State Bank of Lincoln, which previously merged with the Bank, alleges that the Bank breached its contract with the plaintiff by charging multiple insufficient funds fees or overdraft fees on a single customer-initiated transaction.
The Bank intends to vigorously defend the lawsuit. The Company does not believe a loss is probable at this time, as that term is used in assessing loss contingencies. Accordingly, consistent with the authoritative guidance in the evaluation of contingencies, an accrual related to this matter has not been recorded. However, an unfavorable outcome is reasonably possible, and the Company would not characterize the chance of any loss as “remote.” Given the early stage of this case, the Company cannot yet offer an opinion on the estimated range of any possible loss, in the event of an unfavorable opinion.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless the context requires otherwise, references in this report to the “Company,” “we,” “us” and “our” refer to HBT Financial, Inc. and its consolidated subsidiaries.
The following is management’s discussion and analysis of the financial condition as of September 30, 20192022 (unaudited), as compared with December 31, 2018,2021, and the results of operations for the three months and nine months ended September 30, 20192022 and 20182021 (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,10-Q, as well as the Company’s audited consolidated financial statements included in the Company’s prospectusAnnual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (SEC)SEC on OctoberMarch 11, 2019.2022. Results of operations for the three and nine months ended September 30, 20192022 and 2021 are not necessarily indicative of results to be attained for the year ended December 31, 2022 or for any other period.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this quarterly report are forward-looking statements. Forward-looking statements may include statements relating to our future plans, strategies and expectations, as well as our future revenues, expenses, earnings, losses, financial performance, financial condition, asset quality metrics and future prospects. Forward looking statements are generally identifiable by use of the words "believe," "may," "will," "should," "could," "expect," "estimate," "intend," "anticipate," "project," "plan" or similar expressions. Forward looking statements are frequently based on assumptions that may or may not materialize and are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements.
Factors that could cause actual results to differ materially from the results anticipated or projected and which could materially and adversely affect our operating results, financial condition or prospects include, but are not limited to: our asset quality and any loan charge-offs; the composition of our loan portfolio; time and effort necessary to resolve nonperforming assets; environmental liability associated with our lending activities; the effects of the current low interest rate environment or changes in interest rates on our net interest income, net interest margin, our investments, and our loan originations, and our modeling estimates relating to interest rate changes; our access to sources of liquidity and capital to address our liquidity needs; our inability to receive dividends from our Banks, pay dividends to our common stockholders or satisfy obligations as they become due; the effects of problems encountered by other financial institutions; our ability to achieve organic loan and deposit growth and the composition of such growth; our ability to attract and retain skilled employees or changes in our management personnel; any failure or interruption of our information and communications systems; our ability to identify and address cybersecurity risks; the effects of the failure of any component of our business infrastructure provided by a third party; our ability to keep pace with technological changes; our ability to successfully develop and commercialize new or enhanced products and services; current and future business, economic and market conditions in the United States generally or in Illinois in particular; the geographic concentration of our operations in the State of Illinois; our ability to effectively compete with other financial services companies and the effects of competition in the financial services industry on our business; our ability to attract and retain customer deposits; our ability to maintain our Banks' reputations; possible impairment of our goodwill and other intangible assets; the impact of, and changes in applicable laws, regulations and accounting standards and policies; our prior status as an S Corp; possible changes in trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar organizations; the effectiveness of our risk management and internal disclosure controls and procedures; market perceptions associated with certain aspects of our business; the one-time and incremental costs of operating as a standalone public company; our ability to meet our obligations as a public company, including our obligations under Section 404 of Sarbanes-Oxley; and damage to our reputation from any of the factors described above, in "Management's Discussion and Analysis of Financial Condition and Results of Operations" or elsewhere in this Quarterly Report on Form 10-Q.
42
These risks and uncertainties, as well as the factors discussed under "Risk Factors," should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Forward-looking statements speak only as of the date they are made. We do not undertake any obligation to update any forward-looking statement in the future, or to reflect circumstances and events that occur after the date on which the forward-looking statement was made.
OVERVIEW
HBT Financial, Inc. is a bank holding company, headquartered in Bloomington, Illinois. As of September 30, 2019,Illinois, is the Company had total assets of $3.17 billion, total loans heldholding company for investment of $2.17 billion, total deposits of $2.70 billion and stockholders’ equity of $348.9 million. Through the Company’s two bank subsidiaries, Heartland Bank and Lincoln Bank, theTrust Company, providesand has banking roots that can be traced back to 1920. We 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. Illinois and Eastern Iowa. As of September 30, 2022, the Company had total assets of $4.2 billion, loans held for investment of $2.6 billion, and total deposits of $3.6 billion.
Market Area
We currently operate 6158 full-service and three limited-service branch locations, and havebranches. We hold a leading deposit share in many of our Central Illinois markets, which we define as a top three deposit share rank, inproviding the majorityfoundation for our strong deposit base. The stability provided by this low-cost funding is a key driver of our core marketsstrong track record of financial performance. Below is a summary of our loan and deposit balances by geographic region.
| | | | | | |
|
| September 30, 2022 |
| December 31, 2021 | ||
Total loans | | (dollars in thousands) | ||||
Illinois by metropolitan and micropolitan statistical areas | | | | | | |
Bloomington-Normal | | $ | 495,896 | | $ | 527,161 |
Champaign-Urbana | | | 217,792 | | | 191,646 |
Chicago | | | 1,272,588 | | | 1,196,605 |
Lincoln | | | 79,564 | | | 87,153 |
Ottawa-Peru | | | 90,418 | | | 101,117 |
Peoria | | | 124,094 | | | 123,143 |
Total Illinois | | | 2,280,352 | | | 2,226,825 |
Iowa | | | 299,576 | | | 272,864 |
Total loans | | $ | 2,579,928 | | $ | 2,499,689 |
| | | | | | |
Total deposits | | | | | | |
Illinois by metropolitan and micropolitan statistical areas | | | | | | |
Bloomington-Normal | | $ | 851,612 | | $ | 887,587 |
Champaign-Urbana | | | 218,068 | | | 203,899 |
Chicago | | | 1,257,235 | | | 1,237,486 |
Lincoln | | | 187,056 | | | 203,098 |
Ottawa-Peru | | | 383,932 | | | 407,156 |
Peoria | | | 606,430 | | | 610,155 |
Total Illinois | | | 3,504,333 | | | 3,549,381 |
Iowa | | | 139,110 | | | 188,804 |
Total deposits | | $ | 3,643,443 | | $ | 3,738,185 |
52
Pending Town and Country Acquisition
On August 23, 2022, HBT Financial and Town and Country Financial Corporation (“Town and Country”), the holding company for Town and Country Bank, jointly announced the signing of a merger agreement pursuant to which HBT Financial will acquire Town and Country and Town and Country Bank. The acquisition will further enhance HBT Financial’s footprint in Central Illinois that we attributeand expand HBT Financial’s footprint into metro-east St. Louis. The acquisition is expected to our long track recordclose in the first quarter of providing relationship-based2023, subject to Town and personalized service to our customersCountry shareholder approval, regulatory approvals, and communities.
Transaction with Lincoln S.B. Corp
In December 2018,other customary closing conditions. During the Company entered into an agreement to exchange 100% of the outstanding stock of Lincoln S.B. Corp, an Illinois corporation headquarteredthree months ended September 30, 2022, HBT Financial incurred $0.5 million in Lincoln, Illinois for shares of our Series A common stock (the Lincoln Acquisition). Lincoln Bank was a wholly-owned subsidiary of Lincoln S.B. Corp priorpre-tax acquisition expenses related to the consummationplanned acquisition of the Lincoln Acquisition. The Company's voting ownershipTown and the voting ownershipCountry, comprised of Lincoln S.B. Corp were considered under common control on the effective date of the Lincoln Acquisitionlegal and for all periods presentedprofessional fees included in other noninterest expense in the consolidated financial statements.statements of income.
NXT Bancorporation, Inc. Acquisition
On October 1, 2021, HBT Financial completed its acquisition of NXT Bancorporation, Inc. (“NXT”), the holding company for NXT Bank. The acquisition expanded HBT Financial’s 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 $234.1 million, total loans of $194.6 million, and total deposits of $181.6 million.
Cash consideration of $10.6 million and stock consideration of approximately 1.8 million shares of HBT Financial common stock resulted in aggregate consideration of $39.9 million. Goodwill of $5.7 million was recorded in the acquisition.
The Lincoln Acquisition was accounted for as a change in reporting entityacquisition of NXT provides an opportunity to utilize HBT Financial’s existing excess liquidity to replace NXT’s higher cost funding. Additionally, our broader range of products and accordingly, asservices and greater ability to meet larger borrowing needs provides an opportunity to expand NXT customer relationships.
We did not incur expenses related to the receiving entity,acquisition of NXT during the three and nine months ended September 30, 2022. We incurred the following pre-tax acquisition expenses related to the acquisition of NXT during the three and nine months ended September 30, 2021:
| | | | | | |
|
| Three Months Ended September 30, 2021 | | Nine Months Ended September 30, 2021 | ||
| | (dollars in thousands) | ||||
Furniture and equipment | | $ | 1 | | $ | 1 |
Data processing | | | 150 | | | 157 |
Marketing and customer relations | | | 4 | | | 4 |
Legal fees and other noninterest expense | | | 225 | | | 375 |
Total NXT acquisition-related expenses | | $ | 380 | | $ | 537 |
53
Branch Rationalization Plan
In April 2021, the Company recognizedmade plans to close or consolidate six branches. One branch was consolidated during the transfersecond quarter of 2021, and the assets and liabilities in connection withremaining five branches were closed during the Lincoln Acquisition at their carrying amounts in the accountsthird quarter of Lincoln S.B. Corp, the transferring entity, on the effective date2021. The Company estimated annual pre-tax cost savings, net of the Lincoln Acquisition. The results of operations are reported as though the exchange of equity interests had occurred at the beginning of the periods presented. For similar assets and liabilities accounted for using different accounting methods, the carrying amounts have been retrospectively adjustedassociated revenue impacts, related to the basisbranch rationalization plan to be approximately $1.1 million.
The Company incurred the following pre-tax branch closure expenses during the three and nine months ended September 30, 2021:
| | | | | | |
|
| Three Months Ended September 30, 2021 | | Nine Months Ended September 30, 2021 | ||
| | (dollars in thousands) | ||||
NONINTEREST INCOME | | | | | | |
Gains (losses) on other assets | | $ | (648) | | $ | (682) |
| | | | | | |
NONINTEREST EXPENSE | | | | | | |
Salaries | | | (5) | | | 53 |
Marketing and customer relations | | | 1 | | | 6 |
Legal fees and other noninterest expense | | | — | | | 7 |
Total noninterest expense | | | (4) | | | 66 |
Total branch closure costs | | $ | 644 | | $ | 748 |
Paycheck Protection Program Loans
During 2021 and 2020, we funded a total of accounting that used by$290.1 million of Paycheck Protection Program (“PPP”) loans. The vast majority of those loans have received full forgiveness, and outstanding PPP loans totaled $0.1 million as of September 30, 2022.
Income recognition for the Company. Significant intra-entity transactionsfees collected at origination, net of associated origination costs, is deferred and accounts have been eliminated in consolidation.recognized over the loan term on a level yield basis. Recognition of net deferred origination fees is accelerated upon loan forgiveness or repayment prior to contractual maturity. Net deferred origination fees on PPP loans recognized as taxable loan interest income totaled $0.1 million and $3.0 million during the three months ended September 30, 2022 and 2021, respectively, and $1.5 million and $7.6 million during the nine months ended September 30, 2022 and 2021, respectively.
54
FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Economic Conditions
The Company's business and financial performance are affected by economic conditions generally in the United StatesU.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.
COVID-19 Pandemic
Although the Company has had continuous business operations since the beginning of the COVID-19 pandemic, the pandemic has caused significant economic disruption throughout the U.S. and the communities that we serve. While the economic outlook has generally improved relative to 2020 and 2021, there remains uncertainty surrounding the longer lasting impact on specific industries and potential surges in COVID-19 infections with new virus variants. As a result, the businesses we serve may be adversely impacted, and the ability of our customers to fulfill their contractual obligations to us may deteriorate.
Interest Rates
Net interest income is our primary source of revenue. Net interest income equalsis 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 and mix of interest-earning assets and interest-bearinginterest-bearing liabilities both impact net interest income. These factors areNet 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.
43
The cost of our deposits and short-term wholesale borrowings is largely based on short-term interest rates, which are primarily driven by the Federal Reserve Board’sFRB’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 Federal Reserve Board’sFRB’s actions. The level ofOur net interest income is therefore influenced by movements in such interest rates and the pace at which such movements occur. During 2019, overallGenerally, we expect increases in market interest rates started to decline. The Federal Open Markets 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 downwards pressure onwill increase our net interest margin. In general, we believe that rate increases will lead to improvedincome and net interest marginsmargin in future periods, while rate decreases will result in lowermarket interest rates may decrease our net interest margins.income and net interest margin in future periods.
Credit Trends
We focus on originating loans with appropriate risk / risk/reward profiles. We have a detailed Loan Policyloan 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 process and credit review process is a strengthprocesses are strengths that allowsallow 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.
55
Competition
Our profitability and growth are affected by the highly competitive nature of the financial services industry. We compete with community banks in all of 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 seek to meet our competitioncompete 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. Recently, we have seenWe continue to see increased competitive pressures on loan rates and terms and increased competition for deposits. Continued loan and deposit pricing pressurewhich may affect our financial results in the future.
Digital Banking
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 has accelerated this transition, and in-person branch traffic is not expected to return to pre-pandemic levels. 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.
Regulatory Environment /and Trends
We are subject to extensivefederal 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 also has heightened supervisory expectationsincludes extensive regulation and supervision in areas such as consumer compliance, the BSABank Secrecy Act and anti-money laundering compliance, risk management and internal audit. We anticipate that this environment of heightened scrutinyextensive regulation and supervision will continue for the industry. As a result, of these heightened expectations, we expect to incurchanges 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.
FACTORS AFFECTING COMPARABILITY OF FINANCIAL RESULTS
S Corp StatusJOBS Act Accounting Election
PriorWe 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 withhas $1.07 billion or more in annual revenues, (3) the consent of its stockholders,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 be taxed under sections of federaluse the extended transition period until we are no longer an emerging growth company or until we choose to affirmatively and state income tax law as an "S Corporation" which provides that, in lieu of Company income taxes, except for state replacement and franchise taxes, the stockholders separately account for their pro rata sharesirrevocably opt out of the Company’s items of income, deductions, losses and credits.extended transition period. As a result, of this election, no income taxes, other than state replacement and franchise taxes, have been recognized in the accompanying consolidatedour financial statements. No provision has been made for any amounts whichstatements may not be advancedcomparable to companies that comply with new or paid as dividendsrevised accounting pronouncements applicable to the stockholders to assist them in paying their personal taxes on the income from the Company.
public companies.
4456
Effective October 11, 2019, in connection with the initial public offering, the Company revoked its S Corporation status and became a taxable entity (C Corporation). As such, any periods prior to October 11, 2019 will only reflect an effective state income tax rate. In connection with the conversion of tax status, the Company recognized a deferred tax asset of approximately $0.5 million, income tax benefit of approximately $3.3 million, and a reduction in accumulated other comprehensive income of approximately $2.7 million.
The following table illustrates the impact of being taxed as a C Corporation for the three and nine months ended September 30, 2019 and 2018:
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|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
|
| September 30, |
| September 30, |
| ||||||||
|
| 2019 |
|
| 2018 |
| 2019 |
| 2018 |
| |||
|
| (dollars in thousands, except per share amounts) |
| ||||||||||
As Reported (S Corporation) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
| $ | 17,736 |
| $ | 17,833 |
| $ | 51,597 |
| $ | 52,509 |
|
Income tax expense |
|
| 299 |
|
| 241 |
|
| 819 |
|
| 630 |
|
Net Income |
| $ | 17,437 |
| $ | 17,592 |
| $ | 50,778 |
| $ | 51,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - Basic |
| $ | 0.97 |
| $ | 0.98 |
| $ | 2.82 |
| $ | 2.87 |
|
Earnings per share - Diluted |
| $ | 0.97 |
| $ | 0.98 |
| $ | 2.82 |
| $ | 2.87 |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
| 1.7 | % |
| 1.4 | % |
| 1.6 | % |
| 1.2 | % |
|
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|
|
|
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|
|
Pro Forma C Corp Equivalent |
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|
|
Historical income before income tax expense |
| $ | 17,736 |
| $ | 17,833 |
| $ | 51,597 |
| $ | 52,509 |
|
C Corp equivalent income tax expense |
|
| 4,614 |
|
| 4,605 |
|
| 13,313 |
|
| 13,406 |
|
C Corp equivalent net income |
| $ | 13,122 |
| $ | 13,228 |
| $ | 38,284 |
| $ | 39,103 |
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|
|
|
C Corp equivalent earnings per share - Basic |
| $ | 0.73 |
| $ | 0.73 |
| $ | 2.12 |
| $ | 2.17 |
|
C Corp equivalent earnings per share - Diluted |
| $ | 0.73 |
| $ | 0.73 |
| $ | 2.12 |
| $ | 2.17 |
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|
Effective tax rate |
|
| 26.0 | % |
| 25.8 | % |
| 25.8 | % |
| 25.5 | % |
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|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares of Common Stock Outstanding |
|
| 18,027,512 |
|
| 18,027,512 |
|
| 18,027,512 |
|
| 18,054,011 |
|
The C Corp equivalent effective rates reflect a U.S. federal income tax rate of 21% for the three and nine months ended September 30, 2019 and 2018 on corporate federal taxable income. The C Corp equivalent rates also reflect Illinois Corporate Income and Corporate Replacement tax rates of 7.00% and 2.50%, respectively, for the three and nine months ended September 30, 2019 and 2018.
Public Company Costs
Following the completion of the initial public offering, the Company expects to incur additional costs associated with operating as a public company, hiring additional personnel, enhancing technology and expanding capabilities. The Company expects that these costs will include legal, regulatory, accounting, investor relations and other expenses that were not incurred as a private company. Sarbanes-Oxley and rules adopted by the SEC, the FDIC and national securities exchanges require public companies to implement specified corporate governance practices that were inapplicable as a private company.
45
RESULTS OF OPERATIONS
Overview of Recent Financial Results
The following table presents selected financial results and measures as of and for the three and nine months ended September 30, 2019 and 2018.measures:
| | | | | | | | | | | | | |
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | | ||||
|
| (dollars in thousands, except per share amounts) | | ||||||||||
Consolidated Statement of Income Information | | | | | | | | | | | | | |
Total interest and dividend income | | $ | 39,014 | | $ | 32,115 | | $ | 108,106 | | $ | 93,868 | |
Total interest expense | | | 1,624 | | | 1,400 | | | 4,415 | | | 4,324 | |
Net interest income | | | 37,390 | | | 30,715 | | | 103,691 | | | 89,544 | |
Provision for loan losses | | | 386 | | | (1,667) | | | (53) | | | (7,234) | |
Net interest income after provision for loan losses | | | 37,004 | | | 32,382 | | | 103,744 | | | 96,778 | |
Total noninterest income | | | 8,234 | | | 8,392 | | | 26,828 | | | 27,974 | |
Total noninterest expense | | | 23,998 | | | 22,167 | | | 71,997 | | | 66,865 | |
Income before income tax expense | | | 21,240 | | | 18,607 | | | 58,575 | | | 57,887 | |
Income tax expense | | | 5,613 | | | 4,892 | | | 15,259 | | | 15,210 | |
Net income | | $ | 15,627 | | $ | 13,715 | | $ | 43,316 | | $ | 42,677 | |
| | | | | | | | | | | | | |
Adjusted net income (1) | | $ | 15,856 | |
| 14,479 | | $ | 41,919 | | $ | 42,680 | |
| | | | | | | | | | | | | |
Net interest income (tax-equivalent basis) (1) (2) | | $ | 38,064 | | $ | 31,223 | | $ | 105,492 | | $ | 91,058 | |
| | | | | | | | | | | | | |
Share and Per Share Information | |
|
| |
|
| |
|
| |
|
| |
Earnings per share - Diluted | | $ | 0.54 | | $ | 0.50 | | $ | 1.49 | | $ | 1.56 | |
Adjusted earnings per share - Diluted (1) | |
| 0.55 | |
| 0.53 | |
| 1.45 | |
| 1.56 | |
| | | | | | | | | | | | | |
Weighted average shares of common stock outstanding | |
| 28,787,662 | |
| 27,340,926 | |
| 28,887,757 | |
| 27,377,809 | |
| | | | | | | | | | | | | |
Summary Ratios | |
| | |
|
| |
|
| |
|
| |
Net interest margin * | |
| 3.65 | % |
| 3.18 | % |
| 3.36 | % |
| 3.19 | % |
Net interest margin (tax-equivalent basis) * (1) (2) | |
| 3.72 | |
| 3.23 | |
| 3.41 | |
| 3.24 | |
Yield on loans * | | | 4.91 | | | 4.86 | | | 4.66 | | | 4.69 | |
Yield on interest-earning assets * | | | 3.81 | | | 3.33 | | | 3.50 | | | 3.34 | |
Cost of interest-bearing liabilities * | | | 0.23 | | | 0.22 | | | 0.21 | | | 0.23 | |
Cost of total deposits * | |
| 0.06 | | | 0.07 | |
| 0.06 | |
| 0.07 | |
| | | | | | | | | | | | | |
Efficiency ratio | |
| 52.07 | % |
| 56.04 | % |
| 54.60 | % |
| 56.22 | % |
Efficiency ratio (tax-equivalent basis) (1) (2) | |
| 51.31 | |
| 55.32 | |
| 53.86 | |
| 55.50 | |
| | | | | | | | | | | | | |
Return on average assets * | |
| 1.47 | % |
| 1.37 | % |
| 1.35 | % |
| 1.47 | % |
Return on average stockholders' equity * | |
| 16.27 | |
| 14.29 | |
| 14.91 | |
| 15.42 | |
Return on average tangible common equity * (1) | |
| 17.70 | |
| 15.32 | |
| 16.20 | |
| 16.59 | |
| | | | | | | | | | | | | |
Adjusted return on average assets * (1) | |
| 1.49 | % |
| 1.45 | % |
| 1.31 | % |
| 1.47 | % |
Adjusted return on average stockholders' equity * (1) | |
| 16.51 | |
| 15.08 | |
| 14.43 | |
| 15.43 | |
Adjusted return on average tangible common equity * (1) | |
| 17.96 | |
| 16.18 | |
| 15.67 | |
| 16.59 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
|
| September 30, |
| September 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
|
| (dollars in thousands, except per share amounts) |
| ||||||||||
Net income |
| $ | 17,437 |
| $ | 17,592 |
| $ | 50,778 |
| $ | 51,879 |
|
C Corp equivalent net income |
|
| 13,122 |
|
| 13,228 |
|
| 38,284 |
|
| 39,103 |
|
Adjusted C Corp equivalent net income(2) |
|
| 14,343 |
|
| 13,132 |
|
| 43,010 |
|
| 39,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share and Per Share Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - Basic and diluted |
| $ | 0.97 |
| $ | 0.98 |
| $ | 2.82 |
| $ | 2.87 |
|
C Corp equivalent earnings per share - Basic and diluted (1) |
|
| 0.73 |
|
| 0.73 |
|
| 2.12 |
|
| 2.17 |
|
Adjusted C Corp equivalent earnings per share - Basic and diluted (2) |
|
| 0.80 |
|
| 0.73 |
|
| 2.39 |
|
| 2.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending number shares of common stock outstanding |
|
| 18,027,512 |
|
| 18,027,512 |
|
| 18,027,512 |
|
| 18,027,512 |
|
Weighted average number shares of common stock outstanding |
|
| 18,027,512 |
|
| 18,027,512 |
|
| 18,027,512 |
|
| 18,054,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin * |
|
| 4.31 | % |
| 4.22 | % |
| 4.37 | % |
| 4.12 | % |
Net interest margin (tax-equivalent basis) * (2) |
|
| 4.38 | % |
| 4.31 | % |
| 4.45 | % |
| 4.21 | % |
Cost of total deposits * |
|
| 0.29 | % |
| 0.23 | % |
| 0.29 | % |
| 0.20 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency ratio |
|
| 53.94 | % |
| 52.55 | % |
| 54.86 | % |
| 54.22 | % |
Efficiency ratio (tax-equivalent basis) (2) |
|
| 53.21 | % |
| 51.69 | % |
| 54.08 | % |
| 53.34 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets * |
|
| 2.18 | % |
| 2.18 | % |
| 2.10 | % |
| 2.12 | % |
Return on average stockholders' equity * |
|
| 20.00 | % |
| 21.19 | % |
| 19.63 | % |
| 21.09 | % |
Return on average tangible common equity * (2) |
|
| 21.76 | % |
| 23.27 | % |
| 21.40 | % |
| 23.22 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C Corp equivalent return on average assets * (1) |
|
| 1.64 | % |
| 1.64 | % |
| 1.58 | % |
| 1.60 | % |
C Corp equivalent return on average stockholders' equity * (1) |
|
| 15.05 | % |
| 15.93 | % |
| 14.80 | % |
| 15.90 | % |
C Corp equivalent return on average tangible common equity* (1) (2) |
|
| 16.37 | % |
| 17.49 | % |
| 16.14 | % |
| 17.50 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted C Corp equivalent return on average assets * (2) |
|
| 1.79 | % |
| 1.63 | % |
| 1.78 | % |
| 1.61 | % |
Adjusted C Corp equivalent return on average stockholders' equity * (2) |
|
| 16.45 | % |
| 15.81 | % |
| 16.63 | % |
| 15.99 | % |
Adjusted C Corp equivalent return on average tangible common equity * (2) |
|
| 17.90 | % |
| 17.37 | % |
| 18.13 | % |
| 17.60 | % |
* Annualized measure.
| (1) |
|
|
| See "Non-GAAP Financial Information" |
| (2) | On a tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%. |
4657
Comparison of the Three Months Ended September 30, 20192022 to the Three Months Ended September 30, 20182021
For the three months ended September 30, 2019,2022, net income was $17.4$15.6 million, decreasingincreasing by $0.2$1.9 million, or 0.9%13.9%, from the three months ended September 30, 2018. Netwhen compared to net income declined primarily due to a $0.8 million decline in the mortgage servicing rights fair value adjustment and a charge of $0.8 million associated with the termination of the supplemental executive retirement plan (SERP) included in the employee benefits expense, offset by increases in net interest income as a result of increases in asset yields. Provision expense for the three months ended September 30, 2019 was $0.6 million lower than2021. Notable changes include the provision for the three months ended September 30, 2018.following:
| ● | A $6.7 million increase in net interest income, primarily attributable to higher average balances of interest-earning assets following the NXT acquisition in the fourth quarter of 2021, a more favorable asset mix, and higher yields on interest-earning assets which more than offset a $2.9 million decrease in PPP loan fees recognized as loan interest income; |
| ● | A provision for loan losses of $0.4 million was recognized during the three months ended September 30, 2022, compared to a negative provision for loan losses of $1.7 million during the three months ended September 30, 2021; |
| ● | A $1.8 million increase in noninterest expense, primarily reflecting a higher base level of noninterest expense following the NXT acquisition; and |
| ● | A $0.9 million decrease in gains on sale of mortgage loans, primarily attributable to a lower level of mortgage refinancing activity due to increases in interest rates. |
Comparison of the Nine Months Ended September 30, 20192022 to the Nine Months Ended September 30, 20182021
For the nine months ended September 30, 2019,2022, net income was $50.8$43.3 million, decreasingincreasing by $1.1$0.6 million, or 2.1%1.5%, from the nine months ended September 30, 2018. Netwhen compared to net income declined primarily due to a decline in the mortgage servicing rights fair value adjustment of $3.3 million and a charge of $4.2 million associated with the termination of the SERP included in the employee benefits expense, offset by increases in net interest income as a result of increases in asset yields. Provision expense for the nine months ended September 30, 2019 was $1.5 million higher than2021. Notable changes include the provision for the nine months ended September 30, 2018.following:
| ● | A $14.1 million increase in net interest income, primarily attributable to higher average balances of interest-earning assets following the NXT acquisition in the fourth quarter of 2021, a more favorable asset mix, and higher yields on interest-earning assets which more than offset a $6.1 million decrease in PPP loan fees recognized as loan interest income; |
| ● | A negative provision for loan losses of $0.1 million was recognized during the nine months ended September 30, 2022, compared to a negative provision for loan losses of $7.2 million during the nine months ended September 30, 2021; |
| ● | A $3.7 million decrease in gains on sale of mortgage loans, primarily attributable to a lower level of mortgage refinancing activity due to increases in interest rates; and |
| ● | A $5.1 million increase in noninterest expense, primarily reflecting a higher base level of noninterest expense following the NXT acquisition. |
Net Interest Income
Net interest income equals the excess of interest income on interest earning assets (including discount accretion on acquired loans)loans plus fees earned on interest earning assetscertain 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.
58
The following tables setsset forth average balances, average yields and costs, and certain other information for the three and nine months ended September 30, 20192022 and 2018.2021. 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,
47
discounts and premiums, as well as purchase accounting adjustments that are accreted or amortized to interest income or expense.
| | | | | | | | | | | | | | | | | |
| | Three Months Ended |
| ||||||||||||||
|
| September 30, 2022 |
| September 30, 2021 | | ||||||||||||
|
| Average |
| | |
| |
| Average |
| | |
| | | ||
|
| Balance | | Interest |
| Yield/Cost * |
| Balance | | Interest |
| Yield/Cost * | | ||||
|
| (dollars in thousands) | | ||||||||||||||
ASSETS | | | | | | | | | | | | | | | | | |
Loans | | $ | 2,481,920 | | $ | 30,697 |
| 4.91 | % | $ | 2,135,476 | | $ | 26,176 |
| 4.86 | % |
Securities | |
| 1,470,092 | |
| 7,842 |
| 2.12 | |
| 1,180,513 | |
| 5,735 |
| 1.93 | |
Deposits with banks | |
| 105,030 | |
| 458 |
| 1.73 | |
| 513,158 | |
| 190 |
| 0.15 | |
Other | |
| 2,936 | |
| 17 |
| 2.25 | |
| 2,739 | |
| 14 |
| 2.00 | |
Total interest-earning assets | |
| 4,059,978 | | $ | 39,014 |
| 3.81 | % |
| 3,831,886 | | $ | 32,115 |
| 3.33 | % |
Allowance for loan losses | |
| (24,717) | | | | | | |
| (26,470) | | | | | | |
Noninterest-earning assets | |
| 173,461 | | | | | | |
| 159,635 | | | | | | |
Total assets | | $ | 4,208,722 | | | | | | | $ | 3,965,051 | | | | | | |
| | | | | | | | | | | | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | | |
Interest-bearing deposits: | | | | | | | | | | | | | | | | | |
Interest-bearing demand | | $ | 1,137,072 | | $ | 144 |
| 0.05 | % | $ | 1,020,216 | | $ | 129 |
| 0.05 | % |
Money market | |
| 577,388 | |
| 203 |
| 0.14 | |
| 510,183 | |
| 96 |
| 0.07 | |
Savings | |
| 649,752 | |
| 53 |
| 0.03 | |
| 608,436 | |
| 48 |
| 0.03 | |
Time | |
| 271,870 | |
| 187 |
| 0.27 | |
| 275,224 | |
| 291 |
| 0.42 | |
Total interest-bearing deposits | |
| 2,636,082 | |
| 587 |
| 0.09 | |
| 2,414,059 | |
| 564 |
| 0.09 | |
Securities sold under agreements to repurchase | |
| 50,427 | |
| 9 |
| 0.07 | |
| 49,923 | |
| 8 |
| 0.06 | |
Borrowings | |
| 11,967 | |
| 85 |
| 2.80 | |
| 326 | |
| 1 |
| 0.46 | |
Subordinated notes | | | 39,365 | | | 470 | | 4.73 | | | 39,285 | | | 470 | | 4.74 | |
Junior subordinated debentures issued to capital trusts | |
| 37,755 | |
| 473 |
| 4.97 | |
| 37,688 | |
| 357 |
| 3.76 | |
Total interest-bearing liabilities | |
| 2,775,596 | | $ | 1,624 |
| 0.23 | % |
| 2,541,281 | | $ | 1,400 |
| 0.22 | % |
Noninterest-bearing deposits | |
| 1,031,407 | | | |
|
| |
| 1,016,384 | |
|
|
|
| |
Noninterest-bearing liabilities | |
| 20,736 | | | |
|
| |
| 26,523 | |
|
|
|
| |
Total liabilities | |
| 3,827,739 | | | |
|
| |
| 3,584,188 | |
|
|
|
| |
Stockholders' Equity | |
| 380,983 | | | |
|
| |
| 380,863 | |
|
|
|
| |
Total liabilities and stockholders’ equity | | $ | 4,208,722 | | | |
|
| | $ | 3,965,051 | |
|
|
|
| |
| | | | | | | | | | | | | | | | | |
Net interest income/Net interest margin (1) | | | | | $ | 37,390 | | 3.65 | % | | | | $ | 30,715 |
| 3.18 | % |
Tax-equivalent adjustment (2) | | | | |
| 674 | | 0.07 | | | | |
| 508 |
| 0.05 | |
Net interest income (tax-equivalent basis)/ Net interest margin (tax-equivalent basis) (2) (3) | | | | | $ | 38,064 | | 3.72 | % |
| | | $ | 31,223 |
| 3.23 | % |
Net interest rate spread (4) | |
| | |
| | | 3.58 | % |
|
| |
|
|
| 3.11 | % |
Net interest-earning assets (5) | | $ | 1,284,382 | | | | |
| | $ | 1,290,605 | |
|
|
|
| |
Ratio of interest-earning assets to interest-bearing liabilities | |
| 1.46 | |
| | |
| |
| 1.51 | |
|
|
|
| |
Cost of total deposits | |
| | |
| | | 0.06 | % |
|
| |
|
|
| 0.07 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| |||||||||||||||
|
| September 30, 2019 |
| September 30, 2018 |
| |||||||||||||
|
| Average |
|
|
|
| * |
| Average |
|
|
|
| * |
| |||
|
| Balance |
| Interest |
| Yield/Cost |
| Balance |
| Interest |
| Yield/Cost |
| |||||
|
| (dollars in thousand) |
| |||||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
| $ | 2,191,230 |
| $ | 29,992 |
|
| 5.47 | % | $ | 2,143,577 |
| $ | 28,975 |
| 5.41 | % |
Securities |
|
| 745,532 |
|
| 4,967 |
|
| 2.67 | % |
| 851,324 |
|
| 5,377 |
| 2.53 | % |
Deposits with banks |
|
| 136,635 |
|
| 662 |
|
| 1.94 | % |
| 91,474 |
|
| 362 |
| 1.58 | % |
Other |
|
| 2,425 |
|
| 15 |
|
| 2.37 | % |
| 2,719 |
|
| 18 |
| 2.56 | % |
Total interest-earning assets |
|
| 3,075,822 |
| $ | 35,636 |
|
| 4.63 | % |
| 3,089,094 |
| $ | 34,732 |
| 4.50 | % |
Allowance for loan losses |
|
| (22,326) |
|
|
|
|
|
|
|
| (20,263) |
|
|
|
|
|
|
Noninterest-earning assets |
|
| 149,146 |
|
|
|
|
|
|
|
| 151,753 |
|
|
|
|
|
|
Total assets |
| $ | 3,202,642 |
|
|
|
|
|
|
| $ | 3,220,584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing demand |
| $ | 812,526 |
| $ | 347 |
|
| 0.17 | % | $ | 820,619 |
| $ | 377 |
| 0.18 | % |
Money market |
|
| 468,139 |
|
| 497 |
|
| 0.42 | % |
| 438,784 |
|
| 165 |
| 0.15 | % |
Savings |
|
| 428,447 |
|
| 70 |
|
| 0.07 | % |
| 428,725 |
|
| 70 |
| 0.07 | % |
Time |
|
| 383,070 |
|
| 1,086 |
|
| 1.13 | % |
| 453,543 |
|
| 1,007 |
| 0.89 | % |
Total interest-bearing deposits |
|
| 2,092,182 |
|
| 2,000 |
|
| 0.38 | % |
| 2,141,671 |
|
| 1,619 |
| 0.30 | % |
Securities sold under agreements to repurchase |
|
| 35,757 |
|
| 17 |
|
| 0.19 | % |
| 42,034 |
|
| 13 |
| 0.12 | % |
Borrowings |
|
| 33 |
|
| - |
|
| 2.42 | % |
| 5,880 |
|
| 29 |
| 1.97 | % |
Subordinated debentures |
|
| 37,561 |
|
| 478 |
|
| 5.09 | % |
| 37,495 |
|
| 470 |
| 5.01 | % |
Total interest-bearing liabilities |
|
| 2,165,533 |
| $ | 2,495 |
|
| 0.46 | % |
| 2,227,080 |
| $ | 2,131 |
| 0.38 | % |
Noninterest-bearing deposits |
|
| 651,085 |
|
|
|
|
|
|
|
| 634,960 |
|
|
|
|
|
|
Noninterest-bearing liabilities |
|
| 37,274 |
|
|
|
|
|
|
|
| 26,393 |
|
|
|
|
|
|
Total liabilities |
|
| 2,853,892 |
|
|
|
|
|
|
|
| 2,888,433 |
|
|
|
|
|
|
Stockholders' Equity |
|
| 348,750 |
|
|
|
|
|
|
|
| 332,151 |
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
| $ | 3,202,642 |
|
|
|
|
|
|
| $ | 3,220,584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/Net interest margin (3) |
|
|
|
| $ | 33,141 |
|
| 4.31 | % |
|
|
| $ | 32,601 |
| 4.22 | % |
Tax-equivalent adjustment (2) |
|
|
|
|
| 559 |
|
| 0.07 | % |
|
|
|
| 677 |
| 0.09 | % |
Net interest income (tax-equivalent basis)/ Net interest margin (tax-equivalent basis) (1) (2) |
|
|
|
| $ | 33,700 |
|
| 4.38 | % |
|
|
| $ | 33,278 |
| 4.31 | % |
Net interest rate spread (4) |
|
|
|
|
|
|
|
| 4.17 | % |
|
|
|
|
|
| 4.12 | % |
Net interest-earning assets (5) |
| $ | 910,289 |
|
|
|
|
|
|
| $ | 862,014 |
|
|
|
|
|
|
Ratio of interest-earning assets to interest-bearing liabilities |
|
| 1.42 |
|
|
|
|
|
|
|
| 1.39 |
|
|
|
|
|
|
Cost of total deposits |
|
|
|
|
|
|
|
| 0.29 | % |
|
|
|
|
|
| 0.23 | % |
* Annualized measure.
| (1) |
|
|
| (2) |
| On a |
| (3) |
|
|
| (4) |
| Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. |
| (5) |
| Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities. |
4859
| | | | | | | | | | | | | | | | | |
| | Nine Months Ended | | ||||||||||||||
|
| September 30, 2022 |
| September 30, 2021 | | ||||||||||||
|
| Average |
| |
| |
| Average |
| |
| | | ||||
|
| Balance | | Interest |
| Yield/Cost * |
| Balance | | Interest |
| Yield/Cost * | | ||||
|
| (dollars in thousands) | |||||||||||||||
ASSETS | | | | | | | | | | | | | | | | | |
Loans | | $ | 2,485,501 | | $ | 86,687 |
| 4.66 | % | $ | 2,217,463 | | $ | 77,738 |
| 4.69 | % |
Securities | |
| 1,405,245 | |
| 20,332 |
| 1.93 | |
| 1,102,808 | | | 15,706 |
| 1.90 | |
Deposits with banks | |
| 237,646 | |
| 1,037 |
| 0.58 | |
| 432,971 | | | 385 |
| 0.12 | |
Other | |
| 2,829 | |
| 50 |
| 2.36 | |
| 2,655 | | | 39 |
| 1.95 | |
Total interest-earning assets | |
| 4,131,221 | | $ | 108,106 |
| 3.50 | % |
| 3,755,897 | | $ | 93,868 |
| 3.34 | % |
Allowance for loan losses | |
| (24,467) | | | |
|
| |
| (29,069) | |
|
|
|
| |
Noninterest-earning assets | |
| 172,243 | | | |
|
| |
| 157,287 | |
|
|
|
| |
Total assets | | $ | 4,278,997 | | | |
|
| | $ | 3,884,115 | |
|
|
|
| |
| | | | | | | | | | | | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
|
| |
|
|
|
| |
|
| |
|
|
|
| |
Liabilities | |
|
| |
|
|
|
| |
|
| |
|
|
|
| |
Interest-bearing deposits: | |
|
| |
|
|
|
| |
|
| |
|
|
|
| |
Interest-bearing demand | | $ | 1,146,635 | | $ | 430 |
| 0.05 | % | $ | 1,012,557 | | $ | 373 |
| 0.05 | % |
Money market | |
| 585,815 | | | 434 |
| 0.10 | |
| 498,441 | | | 279 |
| 0.07 | |
Savings | |
| 653,659 | | | 155 |
| 0.03 | |
| 584,226 | | | 135 |
| 0.03 | |
Time | |
| 289,000 | | | 643 |
| 0.30 | |
| 286,685 | | | 1,034 |
| 0.48 | |
Total interest-bearing deposits | |
| 2,675,109 | |
| 1,662 |
| 0.08 | |
| 2,381,909 | |
| 1,821 |
| 0.10 | |
Securities sold under agreements to repurchase | |
| 51,503 | | | 26 |
| 0.07 | |
| 47,827 | | | 23 |
| 0.06 | |
Borrowings | |
| 4,344 | | | 87 |
| 2.67 | |
| 421 | | | 2 |
| 0.43 | |
Subordinated notes | | | 39,345 | | | 1,409 | | 4.79 | | | 39,265 | | | 1,409 | | 4.80 | |
Junior subordinated debentures issued to capital trusts | |
| 37,738 | | | 1,231 |
| 4.36 | |
| 37,671 | | | 1,069 |
| 3.79 | |
Total interest-bearing liabilities | |
| 2,808,039 | | $ | 4,415 |
| 0.21 | % |
| 2,507,093 | | $ | 4,324 |
| 0.23 | % |
Noninterest-bearing deposits | |
| 1,060,566 | |
| |
|
| |
| 976,884 | |
|
|
|
| |
Noninterest-bearing liabilities | |
| 21,883 | |
| |
|
| |
| 30,205 | |
|
|
|
| |
Total liabilities | |
| 3,890,488 | |
| |
|
| |
| 3,514,182 | |
|
|
|
| |
Stockholders' Equity | |
| 388,509 | |
| |
|
| |
| 369,933 | |
|
|
|
| |
Total liabilities and stockholders’ equity | | $ | 4,278,997 | | | |
|
| |
| 3,884,115 | |
|
|
|
| |
| | | | | | | | | | | | | | | | | |
Net interest income/Net interest margin (1) | | | | | $ | 103,691 | | 3.36 | % |
| | | $ | 89,544 |
| 3.19 | % |
Tax-equivalent adjustment (2) | | | | |
| 1,801 | | 0.05 | |
| | |
| 1,514 |
| 0.05 | |
Net interest income (tax-equivalent basis)/ Net interest margin (tax-equivalent basis) (2) (3) | | | | | $ | 105,492 | | 3.41 | % |
| | | $ | 91,058 |
| 3.24 | % |
Net interest rate spread (4) | |
| | |
| | | 3.29 | % |
|
| |
|
|
| 3.11 | % |
Net interest-earning assets (5) | | $ | 1,323,182 | | | | |
| | $ | 1,248,804 | |
|
|
|
| |
Ratio of interest-earning assets to interest-bearing liabilities | |
| 1.47 | |
| | |
| |
| 1.50 | |
|
|
|
| |
Cost of total deposits | |
| | |
| | | 0.06 | % |
|
| |
|
|
| 0.07 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended |
| |||||||||||||||
|
| September 30, 2019 |
| September 30, 2018 |
| |||||||||||||
|
| Average |
|
|
| * |
| Average |
|
|
| * |
| |||||
|
| Balance |
| Interest |
| Yield/Cost |
| Balance |
| Interest |
| Yield/Cost |
| |||||
|
| (dollars in thousand) |
| |||||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
| $ | 2,184,263 |
| $ | 91,387 |
|
| 5.58 | % | $ | 2,129,043 |
| $ | 84,705 |
| 5.30 | % |
Securities |
|
| 779,375 |
|
| 15,754 |
|
| 2.70 | % |
| 877,086 |
|
| 16,288 |
| 2.48 | % |
Deposits with banks |
|
| 131,209 |
|
| 1,948 |
|
| 1.98 | % |
| 107,997 |
|
| 1,137 |
| 1.40 | % |
Other |
|
| 2,527 |
|
| 46 |
|
| 2.41 | % |
| 2,789 |
|
| 54 |
| 2.56 | % |
Total interest-earning assets |
|
| 3,097,374 |
| $ | 109,135 |
|
| 4.70 | % |
| 3,116,915 |
| $ | 102,184 |
| 4.37 | % |
Allowance for loan losses |
|
| (21,346) |
|
|
|
|
|
|
|
| (19,771) |
|
|
|
|
|
|
Noninterest-earning assets |
|
| 147,972 |
|
|
|
|
|
|
|
| 160,676 |
|
|
|
|
|
|
Total assets |
| $ | 3,224,000 |
|
|
|
|
|
|
| $ | 3,257,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing demand |
| $ | 821,848 |
| $ | 1,175 |
|
| 0.19 | % | $ | 826,311 |
| $ | 964 |
| 0.16 | % |
Money market |
|
| 455,469 |
|
| 1,356 |
|
| 0.40 | % |
| 448,266 |
|
| 491 |
| 0.15 | % |
Savings |
|
| 428,865 |
|
| 207 |
|
| 0.06 | % |
| 436,913 |
|
| 213 |
| 0.07 | % |
Time |
|
| 408,972 |
|
| 3,356 |
|
| 1.09 | % |
| 445,826 |
|
| 2,547 |
| 0.76 | % |
Total interest-bearing deposits |
|
| 2,115,154 |
|
| 6,094 |
|
| 0.38 | % |
| 2,157,316 |
|
| 4,215 |
| 0.26 | % |
Securities sold under agreements to repurchase |
|
| 39,542 |
|
| 48 |
|
| 0.16 | % |
| 37,631 |
|
| 32 |
| 0.11 | % |
Borrowings |
|
| 378 |
|
| 7 |
|
| 2.60 | % |
| 19,535 |
|
| 252 |
| 1.72 | % |
Subordinated debentures |
|
| 37,544 |
|
| 1,462 |
|
| 5.19 | % |
| 37,479 |
|
| 1,319 |
| 4.69 | % |
Total interest-bearing liabilities |
|
| 2,192,618 |
| $ | 7,611 |
|
| 0.46 | % |
| 2,251,961 |
| $ | 5,818 |
| 0.34 | % |
Noninterest-bearing deposits |
|
| 654,818 |
|
|
|
|
|
|
|
| 652,149 |
|
|
|
|
|
|
Noninterest-bearing liabilities |
|
| 31,720 |
|
|
|
|
|
|
|
| 25,712 |
|
|
|
|
|
|
Total liabilities |
|
| 2,879,156 |
|
|
|
|
|
|
|
| 2,929,822 |
|
|
|
|
|
|
Stockholders' Equity |
|
| 344,844 |
|
|
|
|
|
|
|
| 327,998 |
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
| $ | 3,224,000 |
|
|
|
|
|
|
|
| 3,257,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/Net interest margin (3) |
|
|
|
| $ | 101,524 |
|
| 4.37 | % |
|
|
| $ | 96,366 |
| 4.12 | % |
Tax-equivalent adjustment (2) |
|
|
|
|
| 1,775 |
|
| 0.08 | % |
|
|
|
| 2,020 |
| 0.09 | % |
Net interest income (tax-equivalent basis)/ Net interest margin (tax-equivalent basis) (1) (2) |
|
|
|
| $ | 103,299 |
|
| 4.45 | % |
|
|
| $ | 98,386 |
| 4.21 | % |
Net interest rate spread (4) |
|
|
|
|
|
|
|
| 4.24 | % |
|
|
|
|
|
| 4.03 | % |
Net interest-earning assets (5) |
| $ | 904,756 |
|
|
|
|
|
|
| $ | 864,954 |
|
|
|
|
|
|
Ratio of interest-earning assets to interest-bearing liabilities |
|
| 1.41 |
|
|
|
|
|
|
|
| 1.38 |
|
|
|
|
|
|
Cost of total deposits |
|
|
|
|
|
|
|
| 0.29 | % |
|
|
|
|
|
| 0.20 | % |
* Annualized measure.
| (1) |
|
|
| (2) |
| On a |
| (3) |
|
|
| (4) |
| Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. |
| (5) |
| Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities. |
60
The following tables settable sets forth the components of loan interest income. Loan interest income, which includes contractual interest on loans, loan fees, and accretion of acquired loan discounts and earnings on net cash flow hedges.discounts.
| | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | ||||||||||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | | ||||||||||||
|
| | |
| Yield |
| | |
| Yield |
| | |
| Yield |
| | |
| Yield | |
| | Interest |
| Contribution * | | Interest |
| Contribution * | | Interest |
| Contribution * | | Interest |
| Contribution * | | ||||
|
| (dollars in thousands) | | ||||||||||||||||||
Contractual interest | | $ | 29,308 |
| 4.69 | % | $ | 22,324 |
| 4.14 | % | $ | 81,195 |
| 4.36 | % | $ | 67,096 |
| 4.04 | % |
Loan fees (excluding PPP loans) | |
| 1,030 |
| 0.16 | |
| 631 |
| 0.12 | |
| 3,309 |
| 0.18 | |
| 2,609 |
| 0.16 | |
PPP loan fees | | | 106 | | 0.02 | | | 3,017 | | 0.56 | | | 1,487 | | 0.08 | | | 7,604 | | 0.46 | |
Accretion of acquired loan discounts | |
| 253 |
| 0.04 | |
| 204 |
| 0.04 | |
| 696 |
| 0.04 | |
| 429 |
| 0.03 | |
Total loan interest income | | $ | 30,697 |
| 4.91 | % | $ | 26,176 |
| 4.86 | % | $ | 86,687 |
| 4.66 | % | $ | 77,738 |
| 4.69 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| ||||||||||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||||||
|
|
|
|
| Yield |
|
|
|
| Yield |
|
|
|
| Yield |
|
|
|
| Yield |
|
|
| Interest |
| Contribution * |
| Interest |
| Contribution * |
| Interest |
| Contribution * |
| Interest |
| Contribution * |
| ||||
|
| (dollars in thousands) |
| ||||||||||||||||||
Contractual interest |
| $ | 28,648 |
| 5.23 | % | $ | 27,185 |
| 5.07 | % | $ | 86,620 |
| 5.29 | % | $ | 78,763 |
| 4.93 | % |
Loan fees |
|
| 1,007 |
| 0.18 | % |
| 911 |
| 0.17 | % |
| 2,584 |
| 0.16 | % |
| 2,499 |
| 0.15 | % |
Accretion of acquired loan discounts |
|
| 304 |
| 0.05 | % |
| 840 |
| 0.16 | % |
| 2,100 |
| 0.13 | % |
| 3,306 |
| 0.21 | % |
Net cash flow hedge earnings |
|
| 33 |
| 0.01 | % |
| 39 |
| 0.01 | % |
| 83 |
| — | % |
| 137 |
| 0.01 | % |
Total loan interest income |
| $ | 29,992 |
| 5.47 | % | $ | 28,975 |
| 5.41 | % | $ | 91,387 |
| 5.58 | % | $ | 84,705 |
| 5.30 | % |
* Annualized measure.
49
The following tables settable sets forth the components of net interest income. Total interest income consists of contractual interest on loans, contractual interest on securities, contractual interest on interest-bearing deposits in banks, loan fees, accretion of acquired loan discounts, net securities amortization, net and other interest and dividend income. Total interest expense consists of contractual interest on deposits, contractual interest on other interest-bearing liabilities and other.other interest expense.
| | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | ||||||||||||||||
|
| 2022 |
| 2021 |
| 2022 | | 2021 | | ||||||||||||
|
| | |
| Net Interest |
| | |
| Net Interest |
| | |
| Net Interest |
| | |
| Net Interest | |
| | | |
| Margin | | | |
| Margin | | | | | Margin | | | | | Margin | |
| | Interest |
| Contribution * | | Interest |
| Contribution * | | Interest | | Contribution * | | Interest | | Contribution * | | ||||
|
| (dollars in thousands) | | ||||||||||||||||||
Interest income: | | | | | | | | | | | | | | | | | | | | | |
Contractual interest on loans | | $ | 29,308 |
| 2.86 | % | $ | 22,324 |
| 2.31 | % | $ | 81,195 | | 2.63 | % | $ | 67,096 | | 2.39 | % |
Contractual interest on securities | |
| 9,570 |
| 0.94 | |
| 7,387 |
| 0.77 | | | 25,669 | | 0.83 | | | 20,911 | | 0.75 | |
Contractual interest on deposits with banks | |
| 458 |
| 0.05 | |
| 190 |
| 0.02 | | | 1,037 | | 0.03 | | | 385 | | 0.01 | |
Loan fees (excluding PPP loans) | |
| 1,030 |
| 0.10 | |
| 631 |
| 0.07 | | | 3,309 | | 0.11 | | | 2,609 | | 0.09 | |
PPP loan fees | | | 106 | | 0.01 | | | 3,017 | | 0.31 | | | 1,487 | | 0.05 | | | 7,604 | | 0.27 | |
Accretion of acquired loan discounts | |
| 253 |
| 0.02 | |
| 204 |
| 0.02 | | | 696 | | 0.02 | | | 429 | | 0.02 | |
Securities amortization, net | |
| (1,728) |
| (0.17) | |
| (1,652) |
| (0.17) | | | (5,337) | | (0.17) | | | (5,205) | | (0.19) | |
Other | |
| 17 |
| — | |
| 14 |
| — | | | 50 | | — | | | 39 | | — | |
Total interest income | |
| 39,014 |
| 3.81 | |
| 32,115 |
| 3.33 | | | 108,106 |
| 3.50 | |
| 93,868 |
| 3.34 | |
| | | | | | | | | | | | | | | | | | | | | |
Interest expense: | |
|
|
|
| |
|
|
|
| | | | | | | | | | | |
Contractual interest on deposits | |
| 624 |
| 0.06 | |
| 561 |
| 0.06 | | | 1,817 | | 0.06 | | | 1,812 | | 0.06 | |
Contractual interest on other interest-bearing liabilities | |
| 985 |
| 0.10 | |
| 694 |
| 0.08 | | | 2,467 | | 0.08 | | | 2,088 | | 0.07 | |
Other | |
| 15 |
| — | |
| 145 |
| 0.01 | | | 131 | | — | | | 424 | | 0.02 | |
Total interest expense | |
| 1,624 |
| 0.16 | |
| 1,400 |
| 0.15 | | | 4,415 |
| 0.14 | |
| 4,324 |
| 0.15 | |
Net interest income | |
| 37,390 |
| 3.65 | |
| 30,715 |
| 3.18 | | | 103,691 |
| 3.36 | |
| 89,544 |
| 3.19 | |
Tax equivalent adjustment (1) | |
| 674 |
| 0.07 | |
| 508 |
| 0.05 | | | 1,801 | | 0.05 | | | 1,514 | | 0.05 | |
Net interest income (tax equivalent) (1) (2) | | $ | 38,064 |
| 3.72 | % | $ | 31,223 |
| 3.23 | % | $ | 105,492 |
| 3.41 | % | $ | 91,058 |
| 3.24 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| ||||||||||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||||||
|
|
|
|
| Net Interest |
|
|
|
| Net Interest |
|
|
|
| Net Interest |
|
|
|
| Net Interest |
|
|
|
|
|
| Margin |
|
|
|
| Margin |
|
|
|
| Margin |
|
|
|
| Margin |
|
|
| Interest |
| Contribution * |
| Interest |
| Contribution * |
| Interest |
| Contribution * |
| Interest |
| Contribution * |
| ||||
|
| (dollars in thousands) |
| ||||||||||||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual interest on loans |
| $ | 28,648 |
| 3.73 | % | $ | 27,185 |
| 3.52 | % | $ | 86,620 |
| 3.73 | % | $ | 78,763 |
| 3.37 | % |
Contractual interest on securities |
|
| 5,858 |
| 0.76 | % |
| 6,602 |
| 0.85 | % |
| 18,513 |
| 0.80 | % |
| 20,230 |
| 0.86 | % |
Contractual interest on deposits with banks |
|
| 662 |
| 0.08 | % |
| 362 |
| 0.05 | % |
| 1,948 |
| 0.08 | % |
| 1,137 |
| 0.05 | % |
Loan fees |
|
| 1,007 |
| 0.13 | % |
| 911 |
| 0.12 | % |
| 2,584 |
| 0.11 | % |
| 2,499 |
| 0.11 | % |
Accretion of loan discounts |
|
| 304 |
| 0.04 | % |
| 840 |
| 0.11 | % |
| 2,100 |
| 0.09 | % |
| 3,306 |
| 0.14 | % |
Securities amortization, net |
|
| (891) |
| (0.12) | % |
| (1,225) |
| (0.16) | % |
| (2,759) |
| (0.12) | % |
| (3,942) |
| (0.17) | % |
Other |
|
| 48 |
| 0.01 | % |
| 57 |
| 0.01 | % |
| 129 |
| 0.01 | % |
| 191 |
| 0.01 | % |
Total interest income |
|
| 35,636 |
| 4.63 | % |
| 34,732 |
| 4.50 | % |
| 109,135 |
| 4.70 | % |
| 102,184 |
| 4.37 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual interest on deposits |
|
| 1,994 |
| 0.26 | % |
| 1,636 |
| 0.21 | % |
| 6,103 |
| 0.26 | % |
| 4,235 |
| 0.18 | % |
Contractual interest on other interest-bearing liabilities |
|
| 469 |
| 0.06 | % |
| 495 |
| 0.07 | % |
| 1,461 |
| 0.07 | % |
| 1,554 |
| 0.07 | % |
Other |
|
| 32 |
| — | % |
| — |
| — | % |
| 47 |
| — | % |
| 29 |
| — | % |
Total interest expense |
|
| 2,495 |
| 0.32 | % |
| 2,131 |
| 0.28 | % |
| 7,611 |
| 0.33 | % |
| 5,818 |
| 0.25 | % |
Net interest income |
|
| 33,141 |
| 4.31 | % |
| 32,601 |
| 4.22 | % |
| 101,524 |
| 4.37 | % |
| 96,366 |
| 4.12 | % |
Tax equivalent adjustment |
|
| 559 |
| 0.07 | % |
| 677 |
| 0.09 | % |
| 1,775 |
| 0.08 | % |
| 2,020 |
| 0.09 | % |
Net interest income (tax equivalent) (1) |
| $ | 33,700 |
| 4.38 | % | $ | 33,278 |
| 4.31 | % | $ | 103,329 |
| 4.45 | % | $ | 98,386 |
| 4.21 | % |
* Annualized measure.
| (1) |
|
| (2) | See "Non-GAAP Financial Information" |
61
Rate/Volume Analysis
The following table sets forth the dollar amount of changes in interest income and interest expense for the major categories of our interest-earning assets and interest-bearing liabilities. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to changes attributable to changes in volume (i.e., changes in average balances multiplied by the prior-period average rate), and changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of
50
this table, changes attributable to both volume and rate that cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.
| | | | | | | | | | | | | | | | | | | ||||||||||||||||||
| | Three Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||||||||||
|
| vs. |
| vs. | ||||||||||||||||||||||||||||||||
|
| Three Months Ended September 30, 2021 |
| Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||||||||
|
| Increase (Decrease) Due to | | | |
| Increase (Decrease) Due to | | | | ||||||||||||||||||||||||||
|
| Volume |
| Rate |
| Total |
| Volume |
| Rate |
| Total | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
|
| Three Months Ended September 30, 2019 |
| Nine Months Ended September 30, 2019 | ||||||||||||||||||||||||||||||||
|
| vs. |
| vs. | ||||||||||||||||||||||||||||||||
|
| Three Months Ended September 30, 2018 |
| Nine Months Ended September 30, 2018 | ||||||||||||||||||||||||||||||||
|
| Increase (Decrease) Due to |
|
|
|
| Increase (Decrease) Due to |
|
|
| ||||||||||||||||||||||||||
|
| Volume |
| Rate |
| Total |
| Volume |
| Rate |
| Total | ||||||||||||||||||||||||
|
| (dollars in thousand) | ||||||||||||||||||||||||||||||||||
|
| (dollars in thousands) | ||||||||||||||||||||||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | |
Loans |
| $ | 649 |
| $ | 368 |
| $ | 1,017 |
| $ | 2,254 |
| $ | 4,428 |
| $ | 6,682 | | $ | 4,283 | | $ | 238 | | $ | 4,521 | | $ | 9,350 | | $ | (401) | | $ | 8,949 |
Securities |
|
| (686) |
|
| 276 |
|
| (410) |
|
| (1,895) |
|
| 1,361 |
|
| (534) | |
| 1,506 | |
| 601 | |
| 2,107 | |
| 4,372 | |
| 254 | |
| 4,626 |
Deposits with banks |
|
| 199 |
|
| 101 |
|
| 300 |
|
| 294 |
|
| 517 |
|
| 811 | |
| (262) | |
| 530 | |
| 268 | |
| (244) | |
| 896 | |
| 652 |
Other |
|
| (2) |
|
| (1) |
|
| (3) |
|
| (5) |
|
| (3) |
|
| (8) | |
| 1 | |
| 2 | |
| 3 | |
| 3 | |
| 8 | |
| 11 |
Total interest-earning assets |
|
| 160 |
|
| 744 |
|
| 904 |
|
| 648 |
|
| 6,303 |
|
| 6,951 | |
| 5,528 | |
| 1,371 | |
| 6,899 | |
| 13,481 | |
| 757 | |
| 14,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Interest-earning liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | ||||||||||||||||||
Interest-bearing liabilities: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| ||||||||||||||||||
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Interest-bearing demand |
|
| (4) |
|
| (26) |
|
| (30) |
|
| (6) |
|
| 217 |
|
| 211 | |
| 15 | |
| — | |
| 15 | |
| 50 | |
| 7 | |
| 57 |
Money market | �� |
| 21 |
|
| 311 |
|
| 332 |
|
| 14 |
|
| 851 |
|
| 865 | |
| 14 | |
| 93 | |
| 107 | |
| 55 | |
| 100 | |
| 155 |
Savings |
|
| — |
|
| — |
|
| — |
|
| (4) |
|
| (2) |
|
| (6) | |
| 3 | |
| 2 | |
| 5 | |
| 17 | |
| 3 | |
| 20 |
Time |
|
| (178) |
|
| 257 |
|
| 79 |
|
| (256) |
|
| 1,065 |
|
| 809 | |
| (4) | |
| (100) | |
| (104) | |
| 8 | |
| (399) | |
| (391) |
Total interest-bearing deposits |
|
| (161) |
|
| 542 |
|
| 381 |
|
| (252) |
|
| 2,131 |
|
| 1,879 | |
| 28 | |
| (5) | |
| 23 | |
| 130 | |
| (289) | |
| (159) |
Securities sold under agreements to repurchase |
|
| (2) |
|
| 6 |
|
| 4 |
|
| 2 |
|
| 14 |
|
| 16 | |
| — | |
| 1 | |
| 1 | |
| 2 | |
| 1 | |
| 3 |
Borrowings |
|
| (33) |
|
| 4 |
|
| (29) |
|
| (311) |
|
| 66 |
|
| (245) | |
| 73 | |
| 11 | |
| 84 | |
| 55 | |
| 30 | |
| 85 |
Subordinated debentures |
|
| — |
|
| 8 |
|
| 8 |
|
| 2 |
|
| 141 |
|
| 143 | ||||||||||||||||||
Subordinated notes | | | 1 | | | (1) | | | — | | | 3 | | | (3) | | | — | ||||||||||||||||||
Junior subordinated debentures issued to capital trusts | |
| 1 | |
| 115 | |
| 116 | |
| 2 | |
| 160 | |
| 162 | ||||||||||||||||||
Total interest-bearing liabilities |
|
| (196) |
|
| 560 |
|
| 364 |
|
| (559) |
|
| 2,352 |
|
| 1,793 | |
| 103 | |
| 121 | |
| 224 | |
| 192 | |
| (101) | |
| 91 |
Change in net interest income |
| $ | 356 |
| $ | 184 |
| $ | 540 |
| $ | 1,207 |
| $ | 3,951 |
| $ | 5,158 | | $ | 5,425 | | $ | 1,250 | | $ | 6,675 | | $ | 13,289 | | $ | 858 | | $ | 14,147 |
Comparison of the Three Months Ended September 30, 20192022 to the Three Months Ended September 30, 20182021
Net interest income for the three months ended September 30, 2019 increased $0.52022, was $37.4 million, increasing $6.7 million, or 1.7%21.7%, from the three months ended September 30, 2021. The increase is primarily attributable to $33.1higher average balances of interest-earnings assets following the NXT acquisition and a more favorable asset mix. These balance changes, as well as higher yields on interest-earning assets driven by recent increases in benchmark interest rates, more than offset a $2.9 million from $32.6 milliondecrease in PPP loan fees recognized as loan interest income.
Net interest margin increased to 3.65% for the three months ended September 30, 2018. The increase is primarily due2022 compared to increases in benchmark interest rates, which drove our loan and securities yields higher, and from organic loan growth, funded primarily through decreases in the securities portfolio, shifting our earning asset mix from the securities portfolio to the higher yielding loan portfolio. Net interest margin increased as well to 4.31%3.18% for the three months ended September 30, 2019 compared2021. The increase was primarily attributable to 4.22% fora more favorable mix of interest-earnings assets as well as higher yields on interest-earning assets. Additionally, the contribution of PPP loan fees to net interest margin decreased to 1 basis point during the three months ended September 30, 2018. The contribution of acquired loan discount accretion to net interest income declined to $0.3 million, or 42022 from 31 basis points of the net interest margin, forduring the three months ended September 30, 2019 from $0.8 million, or 11 basis points2021. This decrease was more than offset by an increase in contractual interest on loans, driven by recent increases in benchmark interest rates.
62
Comparison of the Nine Months Ended September 30, 20192022 to the Nine Months Ended September 30, 20182021
Net interest income for the nine months ended September 30, 2019 increased $5.22022, was $103.7 million, increasing $14.1 million, or 5.4%15.8%, from the nine months ended September 30, 2021. The increase is primarily attributable to $101.5higher average balances of interest-earning assets following the NXT acquisition and a more favorable asset mix. These balances changes more than offset a $6.1 million from $96.4 milliondecrease in PPP loan fees recognized as loan interest income.
Net interest margin increased to 3.36% for the nine months ended September 30, 2018. The increase is primarily due2022 compared to increases in benchmark interest rates, which drove our loan and securities yields higher, and from organic loan growth, funded primarily through decreases in the securities portfolio, shifting our earning asset mix from the securities portfolio to the higher yielding loan portfolio. Net interest margin increased as well to 4.37%3.19% for the nine months ended September 30, 2019 compared2021. The contribution of PPP loans to 4.12% fornet interest margin decreased to 5 basis points during the nine months ended September 30, 2018. The contribution of acquired loan discount accretion to net interest income declined to $2.1 million, or 92022 from 27 basis points of the net interest margin, forduring the nine months ended September 30, 2019 from $3.3 million, or 14 basis points of the net2021. This decrease was more than offset by an increase in contractual interest margin, for the nine months ended September 30, 2018.
51
on loans, driven by recent increases in benchmark interest rates.
The quarterly net interest margins were as follows:
|
|
|
|
|
|
|
| 2019 |
| 2018 |
|
Three months ended |
|
|
|
|
|
March 31, |
| 4.44 | % | 4.01 | % |
June 30, |
| 4.36 | % | 4.14 | % |
September 30, |
| 4.31 | % | 4.22 | % |
December 31, |
| — | % | 4.29 | % |
| | | | | |
|
| 2022 |
| 2021 |
|
Three months ended: | | | | | |
March 31 |
| 3.08 | % | 3.25 | % |
June 30 |
| 3.34 | | 3.14 | |
September 30 |
| 3.65 | | 3.18 | |
December 31 |
| — | | 3.17 | |
AsIn March 2020, the chart above illustrates, net interest margin rose throughout 2018, peaked in the first quarter of 2019, and then declined in the second and third quarters of 2019. During 2019, overall market interest rates started to decline. The Federal Open Markets Committee (“FOMC”), in response to the economic downturn caused by the COVID-19 pandemic, lowered Federal Fundsthe target ratesrange for the first timefederal funds rate to 0% to 0.25% and announced the FRB would substantially increase its Treasury and agency mortgage-backed securities holdings. This resulted in 11 years on July 31, 2019a historically low interest rate environment which lasted through the rest of 2020 and then again in September 2019 and October 2019, for a combined decrease of 75 basis points which we expect to continue to put downwardsinto 2021, putting downward pressure on our net interest margin.
In 2021, the FOMC began to taper the pace of its security purchases, and, in March 2022, the FOMC raised the target range for the federal funds rate. Since March 2022, the FOMC has raised the target range for the federal funds rate several times, setting the target range for the federal funds rate to 3.75% to 4.00% at the November 2022 meeting, and indicated that the FRB will continue reducing its security holdings. Additionally, the FOMC indicated that it will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments in determining the pace of future increases in the target range.
As a result of these developments, market interest rates have risen which has led to improvements in our net interest margin. In general, we believe that increases in market interest rates will lead to improved net interest margins while decreases in market interest rates will result in lower net interest margins. Additionally, these recent increases in market interest rates have increased competition for deposits. As a result, we expect deposit costs to increase during the rest of 2022 and deposits balances may decrease and be replaced by higher cost funding sources, such as FHLB advances, brokered deposits, or other wholesale funding. Although funding costs are expected to increase during the remainder of 2022, such increased funding costs should be more than offset by continued increases in interest-earning asset yields resulting from the higher market interest rates.
63
Provision for Loan Losses
Provisions for loan losses which are charged to operations in order to maintain the allowance for loan losses at a level we consider necessary to absorb probable incurred credit losses in the loan portfolio. In determining the level of the allowance for loan losses, management considers past and current loss experience, evaluations of collateral, current economic conditions, volume and type of lending, adverse situations that may affect a borrower’s ability to repay a loan and the levels of nonperforming and other classified loans. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates as more information becomes available or as events change. We assess the allowance for loan losses on a quarterly basis and make provisions for loan losses in order to maintain the allowance. The provision for loan losses is a function of the allowance for loan loss methodology we use to determine the appropriate level of the allowance for inherent loan losses after accounting for net charge-offs have been deducted.(recoveries).
Credit losses in our loan portfolio are highly dependent on the economic conditions in the communities that we serve. The general deterioration in economic conditions initially caused by the COVID-19 pandemic adversely affected the communities that we serve beginning in 2020. As a result, our allowance for loan losses initially increased at the onset of the COVID-19 pandemic, remained elevated during the remainder of 2020, and then gradually returned to near pre-pandemic levels during 2021 as economic conditions improved in our market areas. Potential deterioration of economic conditions, whether due to the COVID-19 pandemic or other factors, may lead to higher credit losses and adversely impact our financial condition and results of operations.
Comparison of the Three Months Ended September 30, 2022 to the Three Months Ended September 30, 2021
The Company recorded a provision for loan losses was $0.7of $0.4 million and $1.2 million forduring the three months ended September 30, 2019 and 2018, respectively.2022, compared to a negative provision for loan losses of $1.7 million during the three months ended September 30, 2021. The decreaseprovision during the three months ended September 30, 2022 was primarily due to a $128.1 million increase in loans, resulting in a $1.1 million increase in general reserves. Mostly offsetting this increase was a $0.7 million decrease in specific reserves on loans individually evaluated for impairment duringimpairment.
Comparison of the three months endedNine Months Ended September 30, 2019 compared2022 to an increase during the three months endedNine Months Ended September 30, 2018, as net charge-offs were comparable between the periods. 2021
The Company recorded a negative provision for loan losses was $3.3of $0.1 million and $1.8 million forduring the nine months ended September 30, 2019 and 2018, respectively, increasing primarily due2022, compared to slightly highera negative provision for loan losses of $7.2 million during the nine months ended September 30, 2021. During the nine months ended September 30, 2022, net charge-offs andrecoveries of $1.2 million were mostly offset by a larger$1.1 million increase in required reserves, which included a $0.8 million increase in specific reserves on loans individually evaluated for impairment over the respective nine month periods.impairment.
5264
Noninterest Income
The following table outlinessets forth the amountmajor categories of and changes to the various noninterest income line items as offor the dates indicated.periods indicated:
| | | | | | | | | | | | | | | | | | | ||||||||||||||||||
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
|
| 2022 |
| 2021 |
| $ Change |
| 2022 |
| 2021 |
| $ Change | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
|
| Three Months Ended |
| Nine Months Ended | ||||||||||||||||||||||||||||||||
|
| September 30, |
| September 30, | ||||||||||||||||||||||||||||||||
|
| 2019 |
| 2018 |
| $ Change |
| 2019 |
| 2018 |
| $ Change | ||||||||||||||||||||||||
|
| (dollars in thousands) | ||||||||||||||||||||||||||||||||||
|
| (dollars in thousands) | ||||||||||||||||||||||||||||||||||
Card income |
| $ | 1,985 |
| $ | 1,848 |
| $ | 137 |
| $ | 5,813 |
| $ | 5,427 |
| $ | 386 | | $ | 2,569 | | $ | 2,509 | | $ | 60 | | $ | 7,687 | | $ | 7,216 | | $ | 471 |
Wealth management fees | |
| 2,059 | |
| 2,036 | |
| 23 | | | 6,670 | | | 6,013 | | | 657 | ||||||||||||||||||
Service charges on deposit accounts |
|
| 2,111 |
|
| 2,157 |
|
| (46) |
|
| 5,805 |
|
| 6,063 |
|
| (258) | |
| 1,927 | |
| 1,677 | |
| 250 | | | 5,371 | | | 4,364 | | | 1,007 |
Wealth management fees |
|
| 1,676 |
|
| 1,695 |
|
| (19) |
|
| 5,216 |
|
| 5,315 |
|
| (99) | ||||||||||||||||||
Mortgage servicing |
|
| 795 |
|
| 755 |
|
| 40 |
|
| 2,342 |
|
| 2,400 |
|
| (58) | |
| 697 | |
| 699 | |
| (2) | | | 2,016 | | | 2,095 | | | (79) |
Mortgage servicing rights fair value adjustment |
|
| (860) |
|
| (93) |
|
| (767) |
|
| (2,982) |
|
| 274 |
|
| (3,256) | |
| 351 | |
| 40 | |
| 311 | | | 2,446 | | | 1,425 | | | 1,021 |
Gains on sale of mortgage loans |
|
| 992 |
|
| 855 |
|
| 137 |
|
| 2,177 |
|
| 2,206 |
|
| (29) | |
| 354 | |
| 1,257 | |
| (903) | | | 1,267 | | | 4,919 | | | (3,652) |
Gains (losses) on securities |
|
| (73) |
|
| 180 |
|
| (253) |
|
| 42 |
|
| 150 |
|
| (108) | ||||||||||||||||||
Unrealized gains (losses) on equity securities | |
| (107) | |
| 28 | |
| (135) | | | (447) | | | 74 | | | (521) | ||||||||||||||||||
Gains (losses) on foreclosed assets |
|
| (20) |
|
| (251) |
|
| 231 |
|
| 132 |
|
| (858) |
|
| 990 | |
| (225) | |
| (14) | |
| (211) | | | (192) | | | 126 | | | (318) |
Gains (losses) on sales of other assets |
|
| (29) |
|
| (13) |
|
| (16) |
|
| 944 |
|
| 207 |
|
| 737 | ||||||||||||||||||
Title insurance activity |
|
| — |
|
| 335 |
|
| (335) |
|
| 167 |
|
| 931 |
|
| (764) | ||||||||||||||||||
Gains (losses) on other assets | |
| (31) | |
| (672) | |
| 641 | | | 119 | | | (719) | | | 838 | ||||||||||||||||||
Income on bank owned life insurance | | | 41 | | | — | | | 41 | | | 122 | | | — | | | 122 | ||||||||||||||||||
Other noninterest income |
|
| 1,005 |
|
| 939 |
|
| 66 |
|
| 2,759 |
|
| 2,696 |
|
| 63 | |
| 599 | |
| 832 | |
| (233) | | | 1,769 | | | 2,461 | | | (692) |
Total noninterest income |
| $ | 7,582 |
| $ | 8,407 |
| $ | (825) |
| $ | 22,415 |
| $ | 24,811 |
| $ | (2,396) | | $ | 8,234 | | $ | 8,392 | | $ | (158) | | $ | 26,828 | | $ | 27,974 | | $ | (1,146) |
Comparison of the Three Months Ended September 30, 20192022 to the Three Months Ended September 30, 20182021
Total noninterest income for the three months ended September 30, 2019 decreased by $0.82022, was $8.2 million, a decrease of $0.2 million, or 9.8%1.9%, to $7.6 million from $8.4 million for the three months ended September 30, 2018. The decrease is primarily due to a $0.8 million larger decline2021. Notable changes in noninterest income include the mortgage servicing rights fair value adjustment and a $0.3 million decrease in title insurance activity driven by thefollowing:
| ● | A $0.9 million decrease in gains on sale of mortgage loans, primarily attributable to a lower level of mortgage refinancing activity due to recent interest rate increases; |
| ● | A $0.6 million improvement in gains (losses) on other assets, as the 2021 results include impairment losses of $0.6 million related to branches closed during the third quarter of 2021, pursuant to our branch rationalization plan; |
| ● | A $0.3 million increase in the mortgage servicing rights fair value adjustment, primarily resulting from slower mortgage prepayment speed assumptions; and |
| ● | A $0.3 million increase in service charges on deposit accounts. |
65
Comparison of the Nine Months Ended September 30, 20192022 to the Nine Months Ended September 30, 20182021
Total noninterest income for the nine months ended September 30, 2019 decreased by $2.42022, was $26.8 million, a decrease of $1.1 million, or 9.7%4.1%, to $22.4 million from $24.8 million for the nine months ended September 30, 2018. The decrease is primarily due to a $3.3 million larger decline2021. Notable changes in mortgage servicing rights fair value adjustment fornoninterest income include the nine months ended September 30, 2019. This decrease was partially offset by gains on foreclosed assets and a $0.5 million gain on sale of First Community Title Services, Inc. on February 15, 2019.following:
| ● | A $3.7 million decrease in gains on sale of mortgage loans, primarily attributable to a lower level of mortgage refinancing activity, due to recent interest rate increases; |
| ● | A $1.0 million increase in the mortgage servicing rights fair value adjustment, primarily resulting from slower mortgage prepayment speed assumptions; |
| ● | A $1.0 million increase in service charges on deposit accounts; |
| ● | A $0.8 million improvement in gains (losses) on other assets, as the 2021 results include impairment losses of $0.7 million related to branches closed during the third quarter of 2021, pursuant to our branch rationalization plan; |
| ● | A $0.7 million increase in wealth management fees, reflecting a $0.4 million increase in farm management fees, primarily due to a $0.3 million increase in farm real estate brokerage fees; |
| ● | A $0.7 million decrease in other noninterest income, primarily resulting from a $0.4 million decrease in fees collected on loans due to a lower level of mortgage refinancing activity; and |
| ● | A $0.5 million increase in card income primarily due to increased debit and credit card transaction volume. |
5366
Noninterest Expense
The following table outlinessets forth the amountmajor categories of and changes to the various noninterest expense line items as offor the dates indicated.periods indicated:
| | | | | | | | | | | | | | | | | | | ||||||||||||||||||
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
|
| 2022 |
| 2021 |
| $ Change |
| 2022 |
| 2021 |
| $ Change | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
|
| Three Months Ended |
| Nine Months Ended | ||||||||||||||||||||||||||||||||
|
| September 30, |
| September 30, | ||||||||||||||||||||||||||||||||
|
| 2019 |
| 2018 |
| $ Change |
| 2019 |
| 2018 |
| $ Change | ||||||||||||||||||||||||
|
| (dollars in thousands) | ||||||||||||||||||||||||||||||||||
|
| (dollars in thousands) | ||||||||||||||||||||||||||||||||||
Salaries |
| $ | 12,335 |
| $ | 12,264 |
| $ | 71 |
| $ | 36,339 |
| $ | 36,572 |
| $ | (233) |
| $ | 12,752 |
| $ | 11,835 | | $ | 917 |
| $ | 38,489 | | $ | 36,486 | | $ | 2,003 |
Employee benefits |
|
| 2,224 |
|
| 1,492 |
|
| 732 |
|
| 8,314 |
|
| 4,722 |
|
| 3,592 |
| | 1,771 |
| | 1,455 | |
| 316 |
| | 6,199 | | | 4,549 | | | 1,650 |
Occupancy of bank premises |
|
| 1,785 |
|
| 1,822 |
|
| (37) |
|
| 5,260 |
|
| 5,576 |
|
| (316) |
| | 1,979 |
| | 1,610 | |
| 369 |
| | 5,780 | | | 5,011 | | | 769 |
Furniture and equipment |
|
| 545 |
|
| 695 |
|
| (150) |
|
| 2,050 |
|
| 2,307 |
|
| (257) |
| | 668 |
| | 657 | |
| 11 |
| | 1,843 | | | 1,883 | | | (40) |
Data processing |
|
| 1,471 |
|
| 1,265 |
|
| 206 |
|
| 4,023 |
|
| 3,935 |
|
| 88 |
| | 1,631 |
| | 1,767 | |
| (136) |
| | 5,274 | | | 5,176 | | | 98 |
Marketing and customer relations |
|
| 801 |
|
| 974 |
|
| (173) |
|
| 2,837 |
|
| 3,086 |
|
| (249) |
| | 880 |
| | 883 | |
| (3) |
| | 2,936 | | | 2,291 | | | 645 |
Amortization of intangible assets |
|
| 335 |
|
| 389 |
|
| (54) |
|
| 1,087 |
|
| 1,169 |
|
| (82) |
| | 243 |
| | 252 | |
| (9) |
| | 733 | | | 799 | | | (66) |
FDIC insurance |
|
| 8 |
|
| 241 |
|
| (233) |
|
| 435 |
|
| 728 |
|
| (293) |
| | 302 |
| | 279 | |
| 23 |
| | 888 | | | 763 | | | 125 |
Loan collection and servicing |
|
| 547 |
|
| 625 |
|
| (78) |
|
| 1,901 |
|
| 1,990 |
|
| (89) |
| | 336 |
| | 400 | |
| (64) |
| | 771 | | | 1,098 | | | (327) |
Foreclosed assets |
|
| 196 |
|
| 247 |
|
| (51) |
|
| 525 |
|
| 672 |
|
| (147) |
| | 97 |
| | 242 | |
| (145) |
| | 260 | | | 704 | | | (444) |
Other noninterest expense |
|
| 2,056 |
|
| 1,923 |
|
| 133 |
|
| 6,305 |
|
| 6,120 |
|
| 185 |
| | 3,339 |
| | 2,787 | |
| 552 |
| | 8,824 | | | 8,105 | | | 719 |
Total noninterest expense |
| $ | 22,303 |
| $ | 21,937 |
| $ | 366 |
| $ | 69,076 |
| $ | 66,877 |
| $ | 2,199 | | $ | 23,998 | | $ | 22,167 | | $ | 1,831 | | $ | 71,997 | | $ | 66,865 | | $ | 5,132 |
Comparison of the Three Months Ended September 30, 20192022 to the Three Months Ended September 30, 20182021
Total noninterest expense for the three months ended September 30, 2019 increased by $0.42022, was $24.0 million, an increase of $1.8 million, or 1.7%8.3%, to $22.3 million from $21.9 million for the three months ended September 30, 2018. The increase is primarily due to a $0.7 million increase2021. Notable changes in employee benefits driven by a $0.8 million charge duringnoninterest expense include the three months ended September 30, 2019 related to the termination of the SERP. This increase was partially offset by a $0.2 million decrease in both FDIC insurance expense and in marketing and customer relations expense.following:
| ● | Following the NXT acquisition on October 1, 2021, there was a higher base level of noninterest expense, primarily related to personnel costs and branch operations; and |
| ● | A $0.6 million increase in other noninterest expense, in part due to legal and professional fees related to the acquisition of Town and Country. |
Routine salary increases were offset by a reduction in employee count as a result of the sale of First Community Title Services, Inc. and HBT Insurance during the first quarter of 2019. Salaries expense for First Community Title Services, Inc. and HBT Insurance was $0.3 million for the three months ended September 30, 2018. There was no salaries expense for First Community Title Services, Inc. or HBT Insurance during the three months ended September 30, 2019.
Comparison of the Nine Months Ended September 30, 20192022 to the ThreeNine Months Ended September 30, 20182021
Total noninterest expense for the nine months ended September 30, 2019 increased by $2.22022, was $72.0 million, an increase of $5.1 million, or 3.3%7.7%, to $69.1 million from $66.9 million for the nine months ended September 30, 2018. The increase is primarily due to a $3.6 million increase2021. Notable changes in employee benefits driven by a $4.2 million chargenoninterest expense include the following:
| ● | Following the NXT acquisition on October 1, 2021, there was a higher base level of noninterest expense, primarily related to personnel costs and branch operations; |
| ● | The $1.7 million increase in employee benefits expenses also included accelerated recognition of $0.6 million of stock compensation expense during February 2022 as a result of a modification to all outstanding restricted stock unit and performance restricted stock unit agreements to address treatment upon retirement. Total compensation costs related to the modified agreements remains the same, and stock compensation expense in periods subsequent to the modification are reduced as a result. The net impact of the modification was a $0.5 million increase in stock compensation expense during the nine months ended September 30, 2022; |
| ● | A $0.6 million increase in marketing expense, primarily due to variations in timing of marketing campaigns as well as a slightly higher marketing budget relative to 2021; and |
| ● | A $0.4 million decrease in foreclosed asset expense, primarily due to fewer foreclosed properties held in 2022 relative to 2021. |
67
Income Taxes
Comparison of the Three Months Ended September 30, 2022 to the terminationThree Months Ended September 30, 2021
During the three months ended September 30, 2022 and 2021, we recorded income tax expense of $5.6 million and $4.9 million, respectively, with the effective tax rates remaining nearly unchanged at 26.4% and 26.3%, respectively.
Comparison of the SERP. This increase was partially offset byNine Months Ended September 30, 2022 to the Nine Months Ended September 30, 2021
We recorded income tax expense of $15.3 million, or a $0.3 million decrease in occupancy of bank premises expense driven by sales of bank premises held for sale, reducing real estate holding costs. FDIC insurance expense and furniture and equipment expense both also decreased by $0.3 million.
Routine salary increases were offset by a reduction in employee count as a result of the sale of First Community Title Services, Inc. and HBT Insurance26.1% effective tax rate, during the first quarter of 2019. Salaries expense for First Community Title Services, Inc. and HBT Insurance was $0.4 million and $1.0 million for the nine months ended September 30, 2019 and 2018, respectively.
54
Income Taxes
The Company has historically been taxed under sections of federal and state2022, compared to $15.2 million, or a 26.3% effective tax law as an "S corporation" which provides that with the exception of certain state replacement and franchise taxes, current stockholders account separately for their share of the Company’s income, deductions, losses and credits. For additional information, see “Factors Affecting Comparability of Financial Results: S Corp Status”.
For the three months ended September 30, 2019 and 2018, we recorded income tax expense of $0.3 million and $0.2 million, respectively. Forrate, during the nine months ended September 30, 2019 and 2018, we recorded2021. The slight decrease in effective tax rate was primarily due to lower overall state income tax expensetaxes.
68
FINANCIAL CONDITION
| | | | | | | | | | | | |
| | September 30, | | December 31, | | | | | | | ||
|
| 2022 |
| 2021 |
| $ Change |
| % Change | | |||
Consolidated Balance Sheet Information | | (dollars in thousands, except per share data) | | |||||||||
Cash and cash equivalents | | $ | 78,215 | | $ | 409,268 | | $ | (331,053) | | (80.9) | % |
Debt securities available-for-sale, at fair value | |
| 853,740 | |
| 942,168 | |
| (88,428) | | (9.4) | |
Debt securities held-to-maturity | |
| 546,694 | |
| 336,185 | |
| 210,509 | | 62.6 | |
Loans held for sale | | | 2,297 | | | 4,942 | | | (2,645) | | (53.5) | |
| | | | | | | | | | | | |
Loans, before allowance for loan losses | | | 2,579,928 | | | 2,499,689 | | | 80,239 | | 3.2 | |
Less: allowance for loan losses | | | 25,060 | | | 23,936 | | | 1,124 | | 4.7 | |
Loans, net of allowance for loan losses | | | 2,554,868 | | | 2,475,753 | | | 79,115 | | 3.2 | |
| | | | | | | | | | | | |
Goodwill | | | 29,322 | | | 29,322 | | | — | | — | |
Core deposit intangible assets, net | | | 1,210 | | | 1,943 | | | (733) | | (37.7) | |
Other assets | | | 146,978 | | | 114,673 | | | 32,305 | | 28.2 | |
Total assets | | $ | 4,213,324 | | $ | 4,314,254 | | $ | (100,930) | | (2.3) | % |
| | | | | | | | | | | | |
Total deposits | | $ | 3,643,443 | | $ | 3,738,185 | | $ | (94,742) | | (2.5) | % |
Securities sold under agreements to repurchase | | | 48,130 | | | 61,256 | | | (13,126) | | (21.4) | |
Borrowings | | | 60,000 | | | — | | | 60,000 | | NM | |
Subordinated notes | | | 39,376 | | | 39,316 | | | 60 | | 0.2 | |
Junior subordinated debentures | | | 37,763 | | | 37,714 | | | 49 | | 0.1 | |
Other liabilities | | | 25,539 | | | 25,902 | | | (363) | | (1.4) | |
Total liabilities | | | 3,854,251 | | | 3,902,373 | | | (48,122) | | (1.2) | |
Total stockholders' equity | | | 359,073 | | | 411,881 | | | (52,808) | | (12.8) | |
Total liabilities and stockholders' equity | | $ | 4,213,324 | | $ | 4,314,254 | | $ | (100,930) | | (2.3) | % |
| | | | | | | | | | | | |
Tangible assets (1) | | $ | 4,182,792 | | $ | 4,282,989 | | $ | (100,197) | | (2.3) | % |
Tangible common equity (1) | |
| 328,541 | |
| 380,616 | |
| (52,075) | | (13.7) | |
| | | | | | | | | | | | |
Core deposits (1) | | $ | 3,617,614 | | $ | 3,674,435 | | $ | (56,821) | | (1.5) | % |
| | | | | | | | | | | | |
Share and Per Share Information | | | | | | | | | | | | |
Book value per share | | $ | 12.49 | | $ | 14.21 | | | | | | |
Tangible book value per share (1) | | | 11.43 | | | 13.13 | | | | | | |
| | | | | | | | | | | | |
Shares of common stock outstanding | | | 28,752,626 | | | 28,986,061 | | | | | | |
| | | | | | | | | | | | |
Balance Sheet Ratios | |
|
| |
|
| |
|
| |
| |
Loan to deposit ratio | |
| 70.81 | % |
| 66.87 | % |
|
| |
| |
Core deposits to total deposits (1) | |
| 99.29 | |
| 98.29 | |
|
| |
| |
Stockholders' equity to total assets | |
| 8.52 | |
| 9.55 | |
|
| |
| |
Tangible common equity to tangible assets (1) | |
| 7.85 | |
| 8.89 | |
|
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As of |
|
|
|
|
|
|
| ||||
|
| September 30, |
| December 31, |
|
|
|
|
|
|
| ||
|
| 2019 |
| 2018 |
| $ Change |
| % Change |
| ||||
|
| (dollars in thousands) |
| ||||||||||
Balance Sheet Highlights |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, before allowance for loan losses |
| $ | 2,171,014 |
| $ | 2,144,257 |
| $ | 26,757 |
|
| 1.2 | % |
Securities available-for-sale, at fair value |
|
| 618,120 |
|
| 679,526 |
|
| (61,406) |
|
| (9.0) | % |
Securities held-to-maturity |
|
| 99,861 |
|
| 121,715 |
|
| (21,854) |
|
| (18.0) | % |
Total assets |
|
| 3,166,613 |
|
| 3,249,569 |
|
| (82,956) |
|
| (2.6) | % |
Tangible assets (1) |
|
| 3,138,627 |
|
| 3,220,496 |
|
| (81,869) |
|
| (2.5) | % |
Total deposits |
|
| 2,704,058 |
|
| 2,795,970 |
|
| (91,912) |
|
| (3.3) | % |
Core deposits (1) |
|
| 2,671,983 |
|
| 2,759,095 |
|
| (87,112) |
|
| (3.2) | % |
Total stockholders' equity |
|
| 348,936 |
|
| 340,396 |
|
| 8,540 |
|
| 2.5 | % |
Tangible common equity (1) |
|
| 320,950 |
|
| 311,323 |
|
| 9,627 |
|
| 3.1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans to deposit ratio |
|
| 80.29 | % |
| 76.69 | % |
|
|
|
|
|
|
Core deposits to total deposits (1) |
|
| 98.81 | % |
| 98.68 | % |
|
|
|
|
|
|
Stockholders' equity to total assets |
|
| 11.02 | % |
| 10.48 | % |
|
|
|
|
|
|
Tangible common equity to tangible assets (1) |
|
| 10.23 | % |
| 9.67 | % |
|
|
|
|
|
|
| (1) |
| See "Non-GAAP Financial Information" |
NM Not meaningful
69
Total assets were $3.17$4.21 billion at September 30, 2019,2022, a decrease of $83.0$100.9 million, or 2.6%2.3%, from December 31, 2018, primarily due to a decrease2021. Notable changes in our consolidated balance sheet include the securities portfolio. This decrease was partially offset by increases in the loan portfolio from organic loan growth.following:
| ● | Excess liquidity, including excess cash held at December 31, 2021, was reinvested into debt securities, which increased by $122.1 million, and loans held for investment which increased $80.2 million; |
| ● | Loans increased by $80.2 million with growth in most of our geographic markets, which was partially offset by a $29.4 million decrease due to forgiveness of PPP loans; |
| ● | Total deposits decreased by $94.7 million, primarily due to lower balances maintained in retail and business accounts; |
| ● | Increases in market interest rates since December 31, 2021 drove a decrease in fair value of debt securities resulting in $112.9 million of unrealized losses in the available-for-sale portfolio and substantially contributing to a total decrease of $78.9 million in accumulated other comprehensive income (loss); and |
| ● | Borrowings, consisting of short-term FHLB advances, increased $60.0 million and were utilized to fund short-term liquidity needs. |
Total deposits were $2.70 billion at September 30, 2019, a decrease of $91.9 million, or 3.3%, from December 31, 2018. This decrease is primarily due to decreases in higher cost deposit categories such as time deposits and in interest-bearing demand deposits, partially offset by increases in money market accounts. Total equity was $348.9 million at September 30, 2019, an increase of $8.5 million, or 2.5%, from December 31, 2018 due to an increase in accumulated other comprehensive income from increases in fair values of securities available-for-sale.
Loan Portfolio
The Company focuses on originating loans with appropriate risk / reward profiles. The Company has a detailed Loan Policy that guides the overall loan origination philosophy and a well-established loan approval process that requires experienced credit officers to approve larger loan relationships. The Company also has an active Credit Department that underwrites and prepares annual reviews for larger and more complex loan relationships.
55
Management monitors credit quality closely with a series of monthly reports and a quarterly Credit Committee meeting where performance and trends within the loan portfolio are reviewed. Portfolio diversification at the borrower, industry, and product levels is actively managed to mitigate concentration risk. In addition, credit risk management includes an independent loan review process that assesses compliance with loan policy, compliance with loan documentation standards, accuracy of the risk rating and overall credit quality of the loan portfolio.
Loans by Type
The following table sets forth the composition of the loan portfolio, excluding loans held-for-sale, by type of loan as of September 30, 2019 and December 31, 2018.loan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2019 |
| December 31, 2018 |
| |||||||
|
| Balance |
| Percent |
| Balance |
| Percent |
| |||
|
| (dollars in thousands) |
| |||||||||
Commercial and industrial |
| $ | 340,650 |
|
| 15.7 | % | $ | 360,501 |
| 16.8 | % |
Agricultural and farmland |
|
| 205,041 |
|
| 9.5 | % |
| 209,875 |
| 9.8 | % |
Commercial real estate - owner occupied |
|
| 239,805 |
|
| 11.0 | % |
| 255,074 |
| 11.9 | % |
Commercial real estate - non-owner occupied |
|
| 552,262 |
|
| 25.5 | % |
| 533,910 |
| 24.9 | % |
Multi-family |
|
| 191,646 |
|
| 8.8 | % |
| 135,925 |
| 6.3 | % |
Construction and land development |
|
| 210,939 |
|
| 9.7 | % |
| 237,275 |
| 11.1 | % |
One-to-four family residential |
|
| 321,947 |
|
| 14.8 | % |
| 313,108 |
| 14.6 | % |
Municipal, consumer, and other |
|
| 108,724 |
|
| 5.0 | % |
| 98,589 |
| 4.6 | % |
Total loans, before allowance for loan losses |
|
| 2,171,014 |
|
| 100.0 | % |
| 2,144,257 |
| 100.0 | % |
Allowance for loan losses |
|
| (22,761) |
|
|
|
|
| (20,509) |
|
|
|
Loans, net of allowance for loan losses |
| $ | 2,148,253 |
|
|
|
| $ | 2,123,748 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, before allowance for loan losses (originated) (1) |
| $ | 1,987,265 |
|
| 91.5 | % | $ | 1,923,859 |
| 89.7 | % |
Total loans, before allowance for loan losses (acquired) (1) |
|
| 183,749 |
|
| 8.5 | % |
| 220,398 |
| 10.3 | % |
Total loans, before allowance for loan losses |
| $ | 2,171,014 |
|
| 100.0 | % | $ | 2,144,257 |
| 100.0 | % |
|
|
| | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 | | ||||||
|
| Balance |
| Percent | | Balance |
| Percent | | ||
| | (dollars in thousands) | | ||||||||
Commercial and industrial | | $ | 240,671 |
| 9.4 | % | $ | 286,946 |
| 11.5 | % |
Agricultural and farmland | |
| 245,234 |
| 9.5 | |
| 247,796 |
| 9.9 | |
Commercial real estate - owner occupied | |
| 226,524 |
| 8.8 | |
| 234,544 |
| 9.4 | |
Commercial real estate - non-owner occupied | |
| 718,089 |
| 27.8 | |
| 684,023 |
| 27.4 | |
Multi-family | |
| 260,630 |
| 10.1 | |
| 263,911 |
| 10.5 | |
Construction and land development | |
| 364,290 |
| 14.1 | |
| 298,048 |
| 11.9 | |
One-to-four family residential | |
| 328,667 |
| 12.7 | |
| 327,837 |
| 13.1 | |
Municipal, consumer, and other | |
| 195,823 |
| 7.6 | |
| 156,584 |
| 6.3 | |
Loans, before allowance for loan losses | |
| 2,579,928 |
| 100.0 | % |
| 2,499,689 |
| 100.0 | % |
Allowance for loan losses | |
| (25,060) |
| | |
| (23,936) |
|
| |
Loans, net of allowance for loan losses | | $ | 2,554,868 | | | | $ | 2,475,753 |
|
| |
| | | | | | | | | | | |
PPP loans (included above) |
| | | | | | | | | | |
Commercial and industrial | | $ | 65 | | — | % | $ | 28,404 | | 1.1 | % |
Agricultural and farmland | |
| — | | — | |
| 913 | | 0.1 | |
Municipal, consumer, and other | |
| — | | — | |
| 171 | | — | |
Total PPP loans | | $ | 65 | | — | % | $ | 29,488 | | 1.2 | % |
Total loans,
Loans, before allowance for loan losses increased 1.2%were $2.58 billion at September 30, 2022, an increase of $80.2 million, or 3.2%, from December 31, 20182021, with growth in most of our geographic markets that was partially offset by a $29.4 million decrease due to September 30, 2019forgiveness of PPP loans. Additionally, we saw a slower pace of prepayments, beginning in the third quarter of 2022, as a result of organic growth. Growth was concentratedrecent increases in the commercial real estate - non owner occupied and multi-family categories offset by declines in the commercial and industrial, commercial real estate - owner occupied, and construction and land development categories. The $26.3 million decrease in the construction and land development category was primarily the result of a few construction projects that were completed and the properties sold during the three months ended September 30, 2019.interest rates.
5670
Loan Portfolio Maturities
The following table summarizes the scheduled maturities of the loan portfolio as of September 30, 2019 and December 31, 2018.portfolio. Demand loans loans(loans having no stated repayment schedule or maturitymaturity) and overdraft loans are reported as being due in one year or less.
| | | | | | | | | | | | | | | | ||||||||||||
|
| |
| After 1 Year |
| After 5 Years | | |
| | |||||||||||||||||
| | 1 Year | | Through | | Through | | After | | | |||||||||||||||||
September 30, 2022 | | or Less | | 5 Years | | 15 Years | | 15 Years | | Total | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
As of September 30, 2019 | |||||||||||||||||||||||||||
|
|
|
|
| One Year Through |
|
|
|
|
|
| ||||||||||||||||
|
| One Year or Less |
| Five Years |
| After Five Years |
| Total | |||||||||||||||||||
|
| (dollars in thousands) | |||||||||||||||||||||||||
Scheduled Maturities of Loans: |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
|
| (dollars in thousands) | |||||||||||||||||||||||||
Commercial and industrial |
| $ | 213,886 |
| $ | 100,370 |
| $ | 26,394 |
| $ | 340,650 | | $ | 148,942 | | $ | 74,439 | | $ | 17,290 | | $ | — | | $ | 240,671 |
Agricultural and farmland |
|
| 100,246 |
|
| 79,304 |
|
| 25,491 |
|
| 205,041 | |
| 102,255 | |
| 94,534 | |
| 45,160 | | | 3,285 | |
| 245,234 |
Commercial real estate - owner occupied |
|
| 45,219 |
|
| 111,409 |
|
| 83,177 |
|
| 239,805 | |
| 15,409 | |
| 142,469 | |
| 65,635 | | | 3,011 | |
| 226,524 |
Commercial real estate - non-owner occupied |
|
| 109,035 |
|
| 333,316 |
|
| 109,911 |
|
| 552,262 | |
| 80,362 | |
| 433,608 | |
| 203,610 | | | 509 | |
| 718,089 |
Multi-family |
|
| 23,939 |
|
| 136,948 |
|
| 30,759 |
|
| 191,646 | |
| 22,742 | |
| 169,870 | |
| 68,018 | | | — | |
| 260,630 |
Construction and land development |
|
| 140,167 |
|
| 66,649 |
|
| 4,123 |
|
| 210,939 | |
| 179,018 | |
| 169,457 | |
| 15,585 | | | 230 | |
| 364,290 |
One-to-four family residential |
|
| 56,171 |
|
| 125,995 |
|
| 139,781 |
|
| 321,947 | |
| 77,530 | |
| 110,074 | |
| 79,327 | | | 61,736 | |
| 328,667 |
Municipal, consumer, and other |
|
| 17,590 |
|
| 25,829 |
|
| 65,305 |
|
| 108,724 | |
| 85,266 | |
| 18,681 | |
| 70,953 | | | 20,923 | |
| 195,823 |
Total |
| $ | 706,253 |
| $ | 979,820 |
| $ | 484,941 |
| $ | 2,171,014 | | $ | 711,524 | | $ | 1,213,132 | | $ | 565,578 | | $ | 89,694 | | $ | 2,579,928 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Loans Maturing After One Year: |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Floating interest rates: |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Repricing within one year or less |
|
|
|
|
|
|
|
|
|
| $ | 384,556 | |||||||||||||||
Repricing in more than one year |
|
|
|
|
|
|
|
|
|
|
| 121,759 | |||||||||||||||
Total floating interest rates |
|
|
|
|
|
|
|
|
|
|
| 506,315 | |||||||||||||||
Predetermined (Fixed) interest rates |
|
|
|
|
|
|
|
|
|
|
| 958,446 | |||||||||||||||
Total loans maturing after one year |
|
|
|
|
|
|
|
|
|
| $ | 1,464,761 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
As of December 31, 2018 | |||||||||||||||||||||||||||
|
|
|
|
| One Year Through |
|
|
|
|
|
| ||||||||||||||||
|
| One Year or Less |
| Five Years |
| After Five Years |
| Total | |||||||||||||||||||
|
|
| (dollars in thousands) | ||||||||||||||||||||||||
Scheduled Maturities of Loans: |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Commercial and industrial |
| $ | 198,718 |
| $ | 133,196 |
| $ | 28,587 |
| $ | 360,501 | |||||||||||||||
Agricultural and farmland |
|
| 95,950 |
|
| 90,703 |
|
| 23,222 |
|
| 209,875 | |||||||||||||||
Commercial real estate - owner occupied |
|
| 46,706 |
|
| 141,173 |
|
| 67,195 |
|
| 255,074 | |||||||||||||||
Commercial real estate - non-owner occupied |
|
| 86,185 |
|
| 337,379 |
|
| 110,346 |
|
| 533,910 | |||||||||||||||
Multi-family |
|
| 19,137 |
|
| 104,669 |
|
| 12,119 |
|
| 135,925 | |||||||||||||||
Construction and land development |
|
| 114,237 |
|
| 110,640 |
|
| 12,398 |
|
| 237,275 | |||||||||||||||
One-to-four family residential |
|
| 52,301 |
|
| 109,697 |
|
| 151,110 |
|
| 313,108 | |||||||||||||||
Municipal, consumer, and other |
|
| 10,846 |
|
| 25,188 |
|
| 62,555 |
|
| 98,589 | |||||||||||||||
Total |
| $ | 624,080 |
| $ | 1,052,645 |
| $ | 467,532 |
| $ | 2,144,257 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Loans Maturing After One Year: |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Floating interest rates: |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Repricing within one year or less |
|
|
|
|
|
|
|
|
|
| $ | 437,697 | |||||||||||||||
Repricing in more than one year |
|
|
|
|
|
|
|
|
|
|
| 116,633 | |||||||||||||||
Total floating interest rates |
|
|
|
|
|
|
|
|
|
|
| 554,330 | |||||||||||||||
Pre-determined (Fixed) interest rates |
|
|
|
|
|
|
|
|
|
|
| 965,847 | |||||||||||||||
Total loans maturing after one year |
|
|
|
|
|
|
|
|
|
| $ | 1,520,177 | |||||||||||||||
The following table summarizes loans maturing after one year, segregated into variable and fixed interest rates.
| | | | | | | | | | | | | | | |
|
| Variable Interest Rates | | |
| | |||||||||
| | Repricing | | Repricing | | Total | | Predetermined | | | |||||
| | 1 Year | | After | | Variable | | (Fixed) | | | |||||
September 30, 2022 | | or Less | | 1 Year | | Interest Rates | | Interest Rates | | Total | |||||
|
| (dollars in thousands) | |||||||||||||
Commercial and industrial | | $ | 11,999 | | $ | 19 | | $ | 12,018 | | $ | 79,711 | | $ | 91,729 |
Agricultural and farmland | |
| 7,602 | |
| 5,917 | |
| 13,519 | | | 129,460 | |
| 142,979 |
Commercial real estate - owner occupied | |
| 33,033 | |
| 18,964 | |
| 51,997 | | | 159,118 | |
| 211,115 |
Commercial real estate - non-owner occupied | |
| 69,743 | |
| 14,891 | |
| 84,634 | | | 553,093 | |
| 637,727 |
Multi-family | |
| 25,774 | |
| 431 | |
| 26,205 | | | 211,683 | |
| 237,888 |
Construction and land development | |
| 86,059 | |
| 58 | |
| 86,117 | | | 99,155 | |
| 185,272 |
One-to-four family residential | |
| 63,235 | |
| 23,618 | |
| 86,853 | | | 164,284 | |
| 251,137 |
Municipal, consumer, and other | |
| 31,375 | |
| 11,845 | |
| 43,220 | | | 67,337 | |
| 110,557 |
Total | | $ | 328,820 | | $ | 75,743 | | $ | 404,563 | | $ | 1,463,841 | | $ | 1,868,404 |
Nonperforming Assets
Nonperforming loans consist of all loans past due 90 days or more past due or on nonaccrual. Nonperforming assets consist of all nonperforming loans and foreclosed assets. Typically, loans are placed on nonaccrual when they reach 90 days past due, or when, in management’s opinion, there is reasonable doubt regarding the collection of the amounts due through the normal means of the borrower. Interest accrued and unpaid at the time a loan is placed on nonaccrual status is reversed from interest income. Interest payments received on nonaccrual loans are recognized in accordance with our significant accounting policies. Once a loan is placed on nonaccrual status, the borrower must generally demonstrate at least six months of payment performance and we must believe that all remaining principal and interest is fully collectible, before the loan is eligible to return to accrual status. Management believes the Company'sCompany’s lending practices and active approach to managing nonperforming assets has resulted in timely resolution of problem assets.
Loans acquired with deteriorated credit quality are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. However, these loans may be considered performing, even though they may be contractually past due, as any non-payment of contractual principal or interest is considered in the periodic re-estimation of expected cash flows and is included in the resulting recognition of current period loan loss provision or future period yield adjustments. The accrual of interest is discontinued on loans acquired with deteriorated credit quality if management can no longer estimate future cash flows on the loan. Therefore, interest revenue, through accretion of the difference between the carrying value of the loans and the expected cash flows, is being recognized on all loans acquired with deteriorated credit quality, except those on which management can no longer estimate future cash flows.
5771
The following table below sets forth information concerning nonperforming loans and nonperforming assets as of each of the dates indicated.
| | | | | | | |
|
| September 30, 2022 |
| December 31, 2021 |
| ||
|
| (dollars in thousands) | | ||||
NONPERFORMING ASSETS | | | | | | | |
Nonaccrual | | $ | 3,206 | | $ | 2,763 |
|
Past due 90 days or more, still accruing (1) | |
| — | |
| 16 |
|
Total nonperforming loans | |
| 3,206 | |
| 2,779 |
|
Foreclosed assets | |
| 2,637 | |
| 3,278 |
|
Total nonperforming assets | | $ | 5,843 | | $ | 6,057 | |
| | | | | | | |
Allowance for loan losses | | $ | 25,060 | | $ | 23,936 | |
Loans, before allowance for loan losses | | | 2,579,928 | | | 2,499,689 | |
| | | | | | | |
CREDIT QUALITY RATIOS | | | | | | | |
Allowance for loan losses to loans, before allowance for loan losses | |
| 0.97 | % |
| 0.96 | % |
Allowance for loan losses to nonaccrual loans | | | 781.66 | | | 866.30 | |
Allowance for loan losses to nonperforming loans | |
| 781.66 | |
| 861.32 | |
Nonaccrual loans to loans, before allowance for loan losses | | | 0.12 | | | 0.11 | |
Nonperforming loans to loans, before allowance for loan losses | |
| 0.12 | |
| 0.11 | |
Nonperforming assets to total assets | |
| 0.14 | |
| 0.14 | |
Nonperforming assets to loans, before allowance for loan losses, and foreclosed assets | |
| 0.23 | |
| 0.24 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As of |
| |||||||||||||
|
| September 30, 2019 |
| June 30, 2019 |
| March 31, 2019 |
| December 31, 2018 |
| September 30, 2018 |
| |||||
|
| (dollars in thousands) |
| |||||||||||||
NONPERFORMING ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual |
| $ | 18,977 |
| $ | 25,051 |
|
| 13,877 |
|
| 15,876 |
|
| 20,783 |
|
Past due 90 days or more, still accruing (1) |
|
| 95 |
|
| 2 |
|
| 53 |
|
| 37 |
|
| 629 |
|
Total nonperforming loans |
|
| 19,072 |
|
| 25,053 |
|
| 13,930 |
|
| 15,913 |
|
| 21,412 |
|
Foreclosed assets |
|
| 6,574 |
|
| 9,707 |
|
| 10,151 |
|
| 9,559 |
|
| 10,176 |
|
Total nonperforming assets |
| $ | 25,646 |
| $ | 34,760 |
| $ | 24,081 |
| $ | 25,472 |
| $ | 31,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONPERFORMING ASSETS (Originated) (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual |
| $ | 11,268 |
| $ | 15,985 |
|
| 8,619 |
|
| 10,329 |
|
| 13,683 |
|
Past due 90 days or more, still accruing |
|
| 95 |
|
| 2 |
|
| 53 |
|
| 37 |
|
| 629 |
|
Total nonperforming loans |
|
| 11,363 |
|
| 15,987 |
|
| 8,672 |
|
| 10,366 |
|
| 14,312 |
|
Foreclosed assets |
|
| 1,048 |
|
| 1,510 |
|
| 1,439 |
|
| 1,395 |
|
| 1,975 |
|
Total nonperforming (originated) |
| $ | 12,411 |
| $ | 17,497 |
| $ | 10,111 |
| $ | 11,761 |
| $ | 16,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONPERFORMING ASSETS (Acquired) (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual |
| $ | 7,709 |
| $ | 9,066 |
| $ | 5,258 |
| $ | 5,547 |
| $ | 7,100 |
|
Past due 90 days or more, still accruing (1) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Total nonperforming loans |
|
| 7,709 |
|
| 9,066 |
|
| 5,258 |
|
| 5,547 |
|
| 7,100 |
|
Foreclosed assets |
|
| 5,526 |
|
| 8,197 |
|
| 8,712 |
|
| 8,164 |
|
| 8,201 |
|
Total nonperforming assets (acquired) |
| $ | 13,235 |
| $ | 17,263 |
| $ | 13,970 |
| $ | 13,711 |
| $ | 15,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses |
| $ | 22,761 |
| $ | 22,542 |
| $ | 21,013 |
| $ | 20,509 |
| $ | 21,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, before allowance for loan losses |
| $ | 2,171,014 |
| $ | 2,203,096 |
| $ | 2,183,322 |
| $ | 2,144,257 |
| $ | 2,139,139 |
|
Total loans, before allowance for loan losses (originated) (2) |
|
| 1,987,265 |
|
| 2,005,250 |
|
| 1,974,840 |
|
| 1,923,859 |
|
| 1,904,600 |
|
Total loans, before allowance for loan losses (acquired) (2) |
|
| 183,749 |
|
| 197,846 |
|
| 208,482 |
|
| 220,398 |
|
| 234,539 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CREDIT QUALITY RATIOS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses to total loans, before allowance for loan losses |
|
| 1.05 | % |
| 1.02 | % |
| 0.96 | % |
| 0.96 | % |
| 0.99 | % |
Allowance for loan losses to nonperforming loans |
|
| 119.34 | % |
| 89.98 | % |
| 150.85 | % |
| 128.88 | % |
| 98.88 | % |
Nonperforming loans to total loans, before allowance for loan losses |
|
| 0.88 | % |
| 1.14 | % |
| 0.64 | % |
| 0.74 | % |
| 1.00 | % |
Nonperforming assets to total assets |
|
| 0.81 | % |
| 1.08 | % |
| 0.74 | % |
| 0.78 | % |
| 0.99 | % |
Nonperforming assets to total loans, before allowance for loan losses and foreclosed assets |
|
| 1.18 | % |
| 1.57 | % |
| 1.10 | % |
| 1.18 | % |
| 1.47 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CREDIT QUALITY RATIOS (Originated) (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans to total loans, before allowance for loan losses |
|
| 0.57 | % |
| 0.80 | % |
| 0.44 | % |
| 0.54 | % |
| 0.75 | % |
Nonperforming assets to total loans, before allowance for loan losses and foreclosed assets |
|
| 0.62 | % |
| 0.87 | % |
| 0.51 | % |
| 0.61 | % |
| 0.85 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CREDIT QUALITY RATIOS (Acquired) (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans to total loans, before allowance for loan losses |
|
| 4.20 | % |
| 4.58 | % |
| 2.52 | % |
| 2.52 | % |
| 3.03 | % |
Nonperforming assets to total loans, before allowance for loan losses and foreclosed assets |
|
| 6.99 | % |
| 8.38 | % |
| 6.43 | % |
| 6.00 | % |
| 6.30 | % |
| (1) |
| Excludes loans acquired with deteriorated credit quality that are past due 90 or more days totaling |
|
|
Total nonperforming assets were $25.6$5.8 million at September 30, 2019, a decrease from $34.8 million at June 30, 2019, due primarily to payoffs and paydowns2022, decreasing slightly since December 31, 2021. Our level of nonperforming loansassets has remained low in recent years, representing only 0.14% of total assets at both September 30, 2022 and December 31, 2021. We believe our continuous credit monitoring and collection efforts have resulted in lower levels of nonperforming assets, while also recognizing that favorable economic conditions prior to the COVID-19 pandemic and substantial federal economic stimulus during the quarter. However, nonperforming assets at September 30, 2019 were comparablepandemic have also contributed to $25.5 million at December 31, 2018. Asset quality metrics can be generally influenced by economic conditions beyond the control of the Company, and specific measures may fluctuate from quarter to quarter.these lower levels.
Troubled Debt Restructurings
In general, if the Company grants a troubled debt restructuring (TDR)(“TDR”) that involves either the absence of principal amortization or a material extension of an existing loan amortization period in excess of our underwriting standards, the loan will be placed on nonaccrual status. However, if a TDR is well secured by an abundance of collateral and the collectability of both interest and principal is probable, the loan may remain on accrual status. A nonaccrual TDR in full compliance with the payment requirements specified in the loan modification for at least six months may return to accrual status, if the collectability of both principal and interest is probable. All TDRs are individually evaluated for impairment.
58
The following table presents TDRs by loan category.
|
|
|
|
|
|
|
|
| As of | ||||
|
| September 30, 2019 |
| December 31, 2018 | ||
|
| (dollars in thousands) | ||||
Commercial and industrial |
| $ | 893 |
| $ | 467 |
Agricultural and farmland |
|
| 283 |
|
| — |
Commercial real estate - owner occupied |
|
| 5,764 |
|
| 6,244 |
Commercial real estate - non-owner occupied |
|
| 1,445 |
|
| 2,061 |
Multi-family |
|
| — |
|
| — |
Construction and land development |
|
| — |
|
| — |
One-to-four family residential |
|
| 535 |
|
| 556 |
Municipal, consumer, and other |
|
| — |
|
| — |
Total accrual troubled debt restructurings |
|
| 8,920 |
|
| 9,328 |
|
|
|
|
|
|
|
Commercial and industrial |
|
| 144 |
|
| 206 |
Agricultural and farmland |
|
| 166 |
|
| 166 |
Commercial real estate - owner occupied |
|
| 155 |
|
| 3,112 |
Commercial real estate - non-owner occupied |
|
| — |
|
| — |
Multi-family |
|
| — |
|
| — |
Construction and land development |
|
| — |
|
| — |
One-to-four family residential |
|
| 534 |
|
| 550 |
Municipal, consumer, and other |
|
| — |
|
| — |
Total nonaccrual troubled debt restructurings |
|
| 999 |
|
| 4,034 |
Total troubled debt restructurings |
| $ | 9,919 |
| $ | 13,362 |
| | | | | | | | | | | | | | | | | | |
|
| September 30, 2022 | | December 31, 2021 | ||||||||||||||
|
| Accruing |
| Nonaccrual |
| Total |
| Accruing |
| Nonaccrual |
| Total | ||||||
|
| (dollars in thousands) | ||||||||||||||||
Commercial and industrial | | $ | 111 | | $ | — | | $ | 111 | | $ | 203 | | $ | — | | $ | 203 |
Commercial real estate - owner occupied | |
| 1,532 | | | — | | | 1,532 | | | 1,671 | | | — | |
| 1,671 |
Commercial real estate - non-owner occupied | |
| 1,225 | | | — | | | 1,225 | | | 1,278 | | | — | |
| 1,278 |
One-to-four family residential | |
| 191 | | | — | | | 191 | | | 360 | | | — | |
| 360 |
Total troubled debt restructurings | | $ | 3,059 | | $ | — | | $ | 3,059 | | $ | 3,512 | | $ | — | | $ | 3,512 |
The significant reductionTDRs have remained a small portion of our loan portfolio as loan modifications to borrowers with deteriorating financial condition are generally offered only as part of an overall workout strategy to minimize losses to the Company.
72
Risk Classification of Loans
Our policies, consistent with regulatory guidelines, provide for the classification of loans and other assets that are considered to be of lesser quality as pass-watch, substandard, doubtful, or loss.
A pass-watch loan is still considered a "pass" credit and is not a classified or criticized asset, but is a reflection of a borrower who exhibits credit weaknesses or downward trends warranting close attention and increased monitoring. These potential weaknesses may result in TDRsdeterioration of the repayment prospects for the loan. No loss of principal or interest is expected, and the borrower does not pose sufficient risk to warrant classification.
A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized as probable that the borrower will not pay principal and interest in accordance with the contractual terms.
An asset classified as doubtful has all the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets is not warranted; such balances are promptly charged-off as required by applicable federal regulations.
As of September 30, 2022 and December 31, 2021, our risk classifications of loans were as follows:
| | | | | | |
|
| September 30, 2022 |
| December 31, 2021 | ||
|
| (dollars in thousands) | ||||
Pass | | $ | 2,449,735 | | $ | 2,269,228 |
Pass-watch | |
| 57,798 | |
| 148,285 |
Substandard | |
| 72,395 | |
| 82,176 |
Doubtful | |
| — | |
| — |
Total | | $ | 2,579,928 | | $ | 2,499,689 |
Pass-watch loans decreased $90.5 million, or 61.0%, and substandard loans decreased $9.8 million, or 11.9%, from December 31, 20182021 to September 30, 2019 is2022. This overall improvement was primarily duedriven by better economic conditions, relative to the resolution of one large loan relationship during the second quarter of 2019.2021, which resulted in both risk rating upgrades and paydowns.
5973
Net Charge-offs and Recoveries
The following table sets forth activity in thesummarizes net charge-offs (recoveries) to average loans, before allowance for loan losses.losses, by loan category.
| | | | | | | | | | | | | |
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | | ||||
|
| (dollars in thousands) | | ||||||||||
Net charge-offs (recoveries) | | | | | | | | | | | | | |
Commercial and industrial | | $ | 11 | | $ | 21 | | $ | (733) | | $ | 9 | |
Agricultural and farmland | |
| — | |
| — | |
| — | |
| — | |
Commercial real estate - owner occupied | |
| (1) | |
| — | |
| (101) | |
| — | |
Commercial real estate - non-owner occupied | |
| (3) | |
| (6) | |
| (273) | |
| (19) | |
Multi-family | |
| — | |
| — | |
| — | |
| — | |
Construction and land development | |
| (1) | |
| (1) | |
| (1) | |
| (270) | |
One-to-four family residential | |
| (42) | |
| (87) | |
| (256) | |
| (49) | |
Municipal, consumer, and other | |
| 96 | |
| 52 | |
| 187 | |
| 72 | |
Total | | $ | 60 | | $ | (21) | | $ | (1,177) | | $ | (257) | |
| | | | | | | | | | | | | |
Average loans, before allowance for loan losses | |
|
| |
|
| |
|
| |
|
| |
Commercial and industrial | | $ | 233,046 | | $ | 289,372 | | $ | 271,136 | | $ | 363,497 | |
Agricultural and farmland | |
| 235,273 | |
| 236,444 | |
| 232,762 | |
| 226,096 | |
Commercial real estate - owner occupied | |
| 212,997 | |
| 192,419 | |
| 220,463 | |
| 200,857 | |
Commercial real estate - non-owner occupied | |
| 675,086 | |
| 554,279 | |
| 687,024 | |
| 548,752 | |
Multi-family | |
| 265,690 | |
| 212,980 | |
| 254,836 | |
| 221,986 | |
Construction and land development | |
| 348,958 | |
| 214,159 | |
| 329,781 | |
| 213,761 | |
One-to-four family residential | |
| 327,272 | |
| 302,214 | |
| 328,199 | |
| 309,095 | |
Municipal, consumer, and other | |
| 183,598 | |
| 133,609 | |
| 161,300 | |
| 133,419 | |
Total | | $ | 2,481,920 | | $ | 2,135,476 | | $ | 2,485,501 | | $ | 2,217,463 | |
| | | | | | | | | | | | | |
Net charge-offs (recoveries) to average loans, before allowance for loan losses * | | | | | | | | | | | | | |
Commercial and industrial | | | 0.02 | % | | 0.03 | % | | (0.36) | % | | — | % |
Agricultural and farmland | | | — | | | — | | | — | | | — | |
Commercial real estate - owner occupied | | | — | | | — | | | (0.06) | | | — | |
Commercial real estate - non-owner occupied | | | — | | | — | | | (0.05) | | | — | |
Multi-family | | | — | | | — | | | — | | | — | |
Construction and land development | | | — | | | — | | | — | | | (0.17) | |
One-to-four family residential | | | (0.05) | | | (0.11) | | | (0.10) | | | (0.02) | |
Municipal, consumer, and other | | | 0.21 | | | 0.15 | | | 0.16 | | | 0.07 | |
Total | | | 0.01 | % | | — | % | | (0.06) | % | | (0.02) | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
|
| (dollars in thousands) |
| ||||||||||
Balance, beginning of period |
| $ | 22,542 |
| $ | 20,345 |
| $ | 20,509 |
| $ | 19,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
| (32) |
|
| (43) |
|
| (315) |
|
| (178) |
|
Agricultural and farmland |
|
| — |
|
| — |
|
| (30) |
|
| — |
|
Commercial real estate - owner occupied |
|
| (216) |
|
| (44) |
|
| (382) |
|
| (46) |
|
Commercial real estate - non-owner occupied |
|
| (111) |
|
| — |
|
| (111) |
|
| (69) |
|
Multi-family |
|
| (41) |
|
| — |
|
| (41) |
|
| — |
|
Construction and land development |
|
| — |
|
| — |
|
| (9) |
|
| (53) |
|
One-to-four family residential |
|
| (387) |
|
| (439) |
|
| (1,026) |
|
| (727) |
|
Municipal, consumer, and other |
|
| (150) |
|
| (136) |
|
| (522) |
|
| (459) |
|
Total charge-offs |
|
| (937) |
|
| (662) |
|
| (2,436) |
|
| (1,532) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
| 313 |
|
| 30 |
|
| 420 |
|
| 114 |
|
Agricultural and farmland |
|
| — |
|
| — |
|
| — |
|
| — |
|
Commercial real estate - owner occupied |
|
| 26 |
|
| 45 |
|
| 47 |
|
| 51 |
|
Commercial real estate - non-owner occupied |
|
| 5 |
|
| 5 |
|
| 15 |
|
| 136 |
|
Multi-family |
|
| — |
|
| — |
|
| — |
|
| — |
|
Construction and land development |
|
| 1 |
|
| 2 |
|
| 434 |
|
| 256 |
|
One-to-four family residential |
|
| 42 |
|
| 109 |
|
| 235 |
|
| 396 |
|
Municipal, consumer, and other |
|
| 85 |
|
| 59 |
|
| 271 |
|
| 194 |
|
Total recoveries |
|
| 472 |
|
| 250 |
|
| 1,422 |
|
| 1,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
|
| (465) |
|
| (412) |
|
| (1,014) |
|
| (385) |
|
Provision for loan losses |
|
| 684 |
|
| 1,238 |
|
| 3,266 |
|
| 1,791 |
|
Balance, end of period |
| $ | 22,761 |
| $ | 21,171 |
| $ | 22,761 |
| $ | 21,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
| $ | 465 |
| $ | 412 |
| $ | 1,014 |
| $ | 385 |
|
Net charge-offs - (originated) (1) |
|
| 224 |
|
| 239 |
|
| 182 |
|
| 359 |
|
Net charge-offs - (acquired) (1) |
|
| 241 |
|
| 173 |
|
| 832 |
|
| 26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average total loans, before allowance for loan losses |
| $ | 2,191,230 |
| $ | 2,143,577 |
| $ | 2,184,263 |
| $ | 2,129,043 |
|
Average total loans, before allowance for loan losses (originated) (1) |
|
| 2,001,803 |
|
| 1,895,859 |
|
| 1,979,383 |
|
| 1,862,206 |
|
Average total loans, before allowance for loan losses (acquired) (1) |
|
| 189,427 |
|
| 247,718 |
|
| 204,880 |
|
| 266,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs to average total loans, before allowance for loan losses * |
|
| 0.08 | % |
| 0.08 | % |
| 0.06 | % |
| 0.02 | % |
Net charge-offs to average total loans, before allowance for loan losses (originated) * (1) |
|
| 0.04 | % |
| 0.05 | % |
| 0.01 | % |
| 0.03 | % |
Net charge-offs to average total loans, before allowance for loan losses (acquired) * (1) |
|
| 0.51 | % |
| 0.28 | % |
| 0.54 | % |
| 0.01 | % |
* Annualized measure.
|
|
Net
The net charge-offs (recoveries) to average total loans before allowance for loan losses haveratio has remained low during eachfor several years. We believe our continuous credit monitoring and collection efforts have resulted in lower levels of the three and nine months ended September 30, 2019 and 2018 due primarily toloan losses, while also recognizing that favorable economic conditions prior to the COVID-19 pandemic and our continuous monitoring and collection efforts.substantial federal economic stimulus during the pandemic have also contributed to reduced loan losses.
60
Allocation of Allowance for Loan LossesSecurities
The following table sets forth the allocation of allowance for loan losses by major loan categories.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2019 |
| December 31, 2018 | ||||||||
|
|
| Allowance for |
| Loan |
|
| Allowance for |
| Loan | ||
|
| Loan Losses |
| Balances |
|
| Loan Losses |
| Balances | |||
|
| (dollars in thousands) | ||||||||||
Commercial and industrial |
| $ | 4,553 |
| $ | 340,650 |
| $ | 3,748 |
| $ | 360,501 |
Agricultural and farmland |
|
| 2,729 |
|
| 205,041 |
|
| 2,650 |
|
| 209,875 |
Commercial real estate - owner occupied |
|
| 1,815 |
|
| 239,805 |
|
| 2,506 |
|
| 255,074 |
Commercial real estate - non-owner occupied |
|
| 3,136 |
|
| 552,262 |
|
| 2,644 |
|
| 533,910 |
Multi-family |
|
| 930 |
|
| 191,646 |
|
| 912 |
|
| 135,925 |
Construction and land development |
|
| 3,123 |
|
| 210,939 |
|
| 4,176 |
|
| 237,275 |
One-to-four family residential |
|
| 2,532 |
|
| 321,947 |
|
| 2,782 |
|
| 313,108 |
Municipal, consumer, and other |
|
| 3,943 |
|
| 108,724 |
|
| 1,091 |
|
| 98,589 |
Total |
| $ | 22,761 |
| $ | 2,171,014 |
| $ | 20,509 |
| $ | 2,144,257 |
Securities
The Company'sCompany’s investment policy is established by management and approved by the board of directors. The policy emphasizes safety of the investment,principal, liquidity requirements, potentialneeds, expected returns, cash flow targets and consistency with our interest rate risk management strategy.
The following table sets forth the composition, amortized cost and fair values of debt securities available-for-sale and held-to-maturity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2019 |
| December 31, 2018 | ||||||||
|
| Amortized |
|
|
|
| Amortized |
|
| |||
|
| Cost |
| Fair Value |
| Cost |
| Fair Value | ||||
|
| (dollars in thousands) | ||||||||||
Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency |
| $ | 38,633 |
| $ | 39,574 |
| $ | 46,977 |
| $ | 46,866 |
Municipal |
|
| 150,058 |
|
| 152,499 |
|
| 161,957 |
|
| 161,450 |
Mortgage-backed: |
|
|
|
|
|
|
|
|
|
|
|
|
Agency residential |
|
| 215,303 |
|
| 218,246 |
|
| 235,903 |
|
| 234,303 |
Agency commercial |
|
| 127,550 |
|
| 129,449 |
|
| 151,878 |
|
| 150,081 |
Private-label |
|
| 22 |
|
| 22 |
|
| 254 |
|
| 256 |
Corporate |
|
| 77,202 |
|
| 78,330 |
|
| 87,118 |
|
| 86,570 |
Total available-for-sale |
|
| 608,768 |
|
| 618,120 |
|
| 684,087 |
|
| 679,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying |
|
|
|
| Carrying |
|
|
| ||
|
| Value |
| Fair Value |
| Value |
| Fair Value | ||||
Held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
Municipal |
|
| 55,182 |
|
| 56,606 |
|
| 73,176 |
|
| 74,283 |
Mortgage-backed: |
|
|
|
|
|
|
|
|
|
|
|
|
Agency residential |
|
| 20,336 |
|
| 20,354 |
|
| 23,192 |
|
| 22,194 |
Agency commercial |
|
| 24,343 |
|
| 25,418 |
|
| 25,347 |
|
| 25,029 |
Total held to maturity securities |
|
| 99,861 |
|
| 102,378 |
|
| 121,715 |
|
| 121,506 |
Total debt securities |
| $ | 708,629 |
| $ | 720,498 |
| $ | 805,802 |
| $ | 801,032 |
We evaluate securities with significant declines in fair value on a quarterly basis to determine whether they should be considered other-than-temporarily impaired under current accounting guidance, which generally provides that if a security is in an unrealized loss position, whether due to general market conditions or industry
61
or issuer-specific factors, the holder of the securities must assess whether the impairment is other-than-temporary. There were no other-than-temporary impairments during the nine months ended September 30, 2019 or the year ended December 31, 2018.
Portfolio Maturities and Yields
The composition and maturities of the debt securities portfolio as of September 30, 2019 and December 31, 20182022, are summarized in the following tables.table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. Security yields have not been adjusted to a tax-equivalent basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2019 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
| More Than One Year |
| More than Five Years |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| One Year or Less |
| through Five Years |
| through Ten Years |
| More than Ten Years |
| Total |
| ||||||||||||||||
|
|
|
|
| Weighted |
|
|
|
| Weighted |
|
|
|
| Weighted |
|
|
|
| Weighted |
|
|
|
| Weighted |
| |
|
| Amortized |
| Average |
| Amortized |
| Average |
| Amortized |
| Average |
| Amortized |
| Average |
| Amortized |
| Average |
| ||||||
|
| Cost |
| Yield |
| Cost |
| Yield |
| Cost |
| Yield |
| Cost |
| Yield |
| Cost |
| Yield |
| ||||||
|
| (dollars in thousands) |
| ||||||||||||||||||||||||
Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency |
| $ | — |
| — |
| $ | 11,436 |
| 2.42 | % | $ | 27,197 |
| 2.87 | % | $ | — |
|
| — |
| $ | 38,633 |
| 2.74 | % |
Municipal |
|
| 31,005 |
| 2.33 | % |
| 69,329 |
| 2.62 | % |
| 42,196 |
| 2.50 | % |
| 7,528 |
|
| 2.42 | % |
| 150,058 |
| 2.52 | % |
Mortgage-backed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency residential |
|
| 8 |
| 4.76 | % |
| 4,622 |
| 2.21 | % |
| 85,085 |
| 2.58 | % |
| 125,588 |
|
| 2.73 | % |
| 215,303 |
| 2.66 | % |
Agency commercial |
|
| 3,166 |
| 1.57 | % |
| 72,668 |
| 2.56 | % |
| 9,681 |
| 2.96 | % |
| 42,035 |
|
| 2.81 | % |
| 127,550 |
| 2.65 | % |
Private-label |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| 22 |
|
| 2.70 | % |
| 22 |
| 2.70 | % |
Corporate |
|
| 24,904 |
| 2.33 | % |
| 31,828 |
| 2.72 | % |
| 20,470 |
| 4.88 | % |
| — |
|
| — |
|
| 77,202 |
| 3.17 | % |
Total available-for-sale |
|
| 59,083 |
| 2.29 | % |
| 189,883 |
| 2.59 | % |
| 184,629 |
| 2.88 | % |
| 175,173 |
|
| 2.74 | % |
| 608,768 |
| 2.69 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal |
|
| 146 |
| 3.41 | % |
| 25,160 |
| 3.05 | % |
| 26,209 |
| 3.35 | % |
| 3,667 |
|
| 3.92 | % |
| 55,182 |
| 3.25 | % |
Agency mortgage-backed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency residential |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| 20,336 |
|
| 2.36 | % |
| 20,336 |
| 2.36 | % |
Agency commercial |
|
| — |
| — |
|
| 2,237 |
| 2.05 | % |
| 15,546 |
| 2.91 | % |
| 6,560 |
|
| 3.33 | % |
| 24,343 |
| 2.94 | % |
Total held to maturity securities |
|
| 146 |
| 3.41 | % |
| 27,397 |
| 2.96 | % |
| 41,755 |
| 3.19 | % |
| 30,563 |
|
| 2.75 | % |
| 99,861 |
| 2.99 | % |
Total debt securities |
| $ | 59,229 |
| 2.29 | % | $ | 217,280 |
| 2.64 | % | $ | 226,384 |
| 2.94 | % | $ | 205,736 |
|
| 2.74 | % | $ | 708,629 |
| 2.73 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2018 | |||||||||||||||||||||||||
|
|
|
|
|
|
| More Than One Year |
| More than Five Years |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| One Year or Less |
| through Five Years |
| through Ten Years |
| More than Ten Years |
| Total |
| ||||||||||||||||
|
|
|
|
| Weighted |
|
|
|
| Weighted |
|
|
|
| Weighted |
|
|
|
| Weighted |
|
|
|
| Weighted |
| |
|
| Amortized |
| Average |
| Amortized |
| Average |
| Amortized |
| Average |
| Amortized |
| Average |
| Amortized |
| Average |
| ||||||
|
| Cost |
| Yield |
| Cost |
| Yield |
| Cost |
| Yield |
| Cost |
| Yield |
| Cost |
| Yield |
| ||||||
|
| (dollars in thousands) |
| ||||||||||||||||||||||||
Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency |
| $ | 6,001 |
| 1.57 | % | $ | 11,458 |
| 2.43 | % | $ | 29,518 |
| 2.87 | % | $ | — |
|
| — |
| $ | 46,977 |
| 2.60 | % |
Municipal |
|
| 29,538 |
| 2.19 | % |
| 77,183 |
| 2.56 | % |
| 44,356 |
| 2.55 | % |
| 10,880 |
|
| 2.40 | % |
| 161,957 |
| 2.48 | % |
Mortgage-backed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency residential |
|
| 92 |
| 1.85 | % |
| 6,265 |
| 2.14 | % |
| 78,994 |
| 2.54 | % |
| 150,552 |
|
| 3.04 | % |
| 235,903 |
| 2.85 | % |
Agency commercial |
|
| 5,559 |
| 1.03 | % |
| 70,710 |
| 2.30 | % |
| 18,317 |
| 3.16 | % |
| 57,292 |
|
| 2.89 | % |
| 151,878 |
| 2.58 | % |
Private-label |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| 254 |
|
| 4.52 | % |
| 254 |
| 4.52 | % |
Corporate |
|
| 25,508 |
| 2.63 | % |
| 51,625 |
| 2.62 | % |
| 9,985 |
| 4.59 | % |
| — |
|
| — |
|
| 87,118 |
| 2.85 | % |
Total available-for-sale |
|
| 66,698 |
| 2.21 | % |
| 217,241 |
| 2.47 | % |
| 181,170 |
| 2.77 | % |
| 218,978 |
|
| 2.97 | % |
| 684,087 |
| 2.69 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal |
|
| 698 |
| 2.31 | % |
| 19,048 |
| 2.96 | % |
| 47,753 |
| 3.21 | % |
| 5,677 |
|
| 3.85 | % |
| 73,176 |
| 3.18 | % |
Mortgage-backed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency residential |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| 23,192 |
|
| 2.25 | % |
| 23,192 |
| 2.25 | % |
Agency commercial |
|
| — |
| — |
|
| 2,267 |
| 2.05 | % |
| 13,208 |
| 2.81 | % |
| 9,872 |
|
| 3.24 | % |
| 25,347 |
| 2.91 | % |
Total held to maturity securities |
|
| 698 |
| 2.31 | % |
| 21,315 |
| 2.86 | % |
| 60,961 |
| 3.12 | % |
| 38,741 |
|
| 2.73 | % |
| 121,715 |
| 2.95 | % |
Total debt securities |
| $ | 67,396 |
| 2.21 | % | $ | 238,556 |
| 2.51 | % | $ | 242,131 |
| 2.86 | % | $ | 257,719 |
|
| 2.93 | % | $ | 805,802 |
| 2.72 | % |
74
| | | | | | | | | | | | | | | | |
| | September 30, 2022 | | |||||||||||||
| | Available-for-Sale |
| Held-to-Maturity |
| Total | | |||||||||
|
| | |
| Weighted |
| | |
| Weighted |
| | |
| Weighted |
|
|
| Amortized |
| Average |
| Amortized |
| Average |
| Amortized |
| Average |
| |||
|
| Cost |
| Yield |
| Cost |
| Yield |
| Cost |
| Yield | | |||
|
| (dollars in thousands) | | |||||||||||||
Due in 1 year or less | | | | | | | | | | | | | | | | |
U.S. government agency | | $ | 2,005 |
| 0.15 | % | $ | — |
| — | % | $ | 2,005 |
| 0.15 | % |
Municipal | |
| 5,575 |
| 2.74 | |
| 2,492 |
| 3.56 | |
| 8,067 |
| 2.99 | |
Mortgage-backed: | |
|
|
|
| |
|
|
|
| |
|
|
|
| |
Agency residential | |
| 134 |
| 2.09 | |
| — |
| — | |
| 134 |
| 2.09 | |
Agency commercial | |
| 2,994 |
| 2.24 | |
| — |
| — | |
| 2,994 |
| 2.24 | |
Corporate | |
| 4,995 |
| 2.58 | |
| — |
| — | |
| 4,995 |
| 2.58 | |
Total | | $ | 15,703 |
| 2.26 | % | $ | 2,492 |
| 3.56 | % | $ | 18,195 |
| 2.44 | % |
| | | | | | | | | | | | | | | | |
Due after 1 year through 5 years | | | | | | | | | | | | | | | | |
U.S. Treasury | | $ | 119,734 | | 1.33 | % | $ | — | | — | % | $ | 119,734 | | 1.33 | % |
U.S. government agency | | | 40,920 |
| 2.55 | | | 10,000 |
| 2.18 | | | 50,920 |
| 2.48 | |
Municipal | |
| 57,900 |
| 2.09 | |
| 15,934 |
| 3.24 | |
| 73,834 |
| 2.34 | |
Mortgage-backed: | |
|
|
|
| |
|
|
|
| |
|
|
| | |
Agency residential | |
| 13,673 |
| 2.32 | |
| 8,389 |
| 1.62 | |
| 22,062 |
| 2.06 | |
Agency commercial | |
| 36,833 |
| 2.25 | |
| 11,563 |
| 3.07 | |
| 48,396 |
| 2.45 | |
Corporate | |
| 16,884 |
| 4.29 | |
| — |
| — | |
| 16,884 |
| 4.29 | |
Total | | $ | 285,944 |
| 2.00 | % | $ | 45,886 |
| 2.67 | % | $ | 331,830 |
| 2.09 | % |
| | | | | | | | | | | | | | | | |
Due after 5 years through 10 years | | | | | | | | | | | | | | | | |
U.S. Treasury | | $ | 50,161 | | 1.49 | % | $ | — | | — | % | $ | 50,161 | | 1.49 | % |
U.S. government agency | | | 18,503 |
| 2.24 | | | 59,640 |
| 2.46 | | | 78,143 |
| 2.41 | |
Municipal | |
| 143,423 |
| 1.74 | |
| 19,800 |
| 3.35 | |
| 163,223 |
| 1.94 | |
Mortgage-backed: | |
|
|
|
| |
|
|
|
| |
|
|
| | |
Agency residential | |
| 78,677 |
| 2.10 | |
| 3,964 |
| 3.51 | |
| 82,641 |
| 2.17 | |
Agency commercial | |
| 73,171 |
| 1.62 | |
| 234,337 |
| 1.75 | |
| 307,508 |
| 1.72 | |
Corporate | |
| 38,816 |
| 4.00 | |
| — |
| — | |
| 38,816 |
| 4.00 | |
Total | | $ | 402,751 |
| 2.00 | % | $ | 317,741 |
| 2.00 | % | $ | 720,492 |
| 2.00 | % |
| | | | | | | | | | | | | | | | |
Due after 10 years | | | | | | | | | | | | | | | | |
U.S. government agency | | $ | — |
| — | % | $ | 18,778 |
| 2.71 | % | $ | 18,778 |
| 2.71 | % |
Municipal | |
| 72,813 |
| 1.88 | |
| 4,618 |
| 3.56 | |
| 77,431 |
| 1.98 | |
Mortgage-backed: | |
|
|
|
| |
|
|
|
| |
|
|
| | |
Agency residential | |
| 131,254 |
| 2.42 | |
| 92,977 |
| 3.61 | |
| 224,231 |
| 2.92 | |
Agency commercial | |
| 41,679 |
| 2.01 | |
| 64,202 |
| 1.94 | |
| 105,881 |
| 1.97 | |
Corporate | |
| 2,000 |
| 4.50 | |
| — |
| — | |
| 2,000 |
| 4.50 | |
Total | | $ | 247,746 |
| 2.21 | % | $ | 180,575 |
| 2.92 | % | $ | 428,321 |
| 2.51 | % |
| | | | | | | | | | | | | | | | |
Total | | | | | | | | | | | | | | | | |
U.S. Treasury | | $ | 169,895 |
| 1.38 | % | $ | — |
| — | % | $ | 169,895 |
| 1.38 | % |
U.S. government agency | | | 61,428 |
| 2.38 | | | 88,418 |
| 2.48 | | | 149,846 |
| 2.44 | |
Municipal | |
| 279,711 |
| 1.87 | |
| 42,844 |
| 3.34 | |
| 322,555 |
| 2.07 | |
Mortgage-backed: | |
|
|
|
| |
|
|
|
| |
|
|
| | |
Agency residential | |
| 223,738 |
| 2.30 | |
| 105,330 |
| 3.45 | |
| 329,068 |
| 2.67 | |
Agency commercial | |
| 154,677 |
| 1.89 | |
| 310,102 |
| 1.84 | |
| 464,779 |
| 1.85 | |
Corporate | |
| 62,695 |
| 3.98 | |
| — |
| — | |
| 62,695 |
| 3.98 | |
Total | | $ | 952,144 |
| 2.06 | % | $ | 546,694 |
| 2.37 | % | $ | 1,498,838 |
| 2.17 | % |
75
SOURCES OF FUNDS
Deposits
Management continues to focus on growing core deposits, which exclude time deposits of $250,000 or more and brokerednon-maturity deposits, through the Company's relationship drivenCompany’s relationship-driven banking philosophy and community-focused marketing programs, and initiatives such as the development of our treasury management services for both small and large businesses. Additionally, the Banks continue to add and improve ancillary convenience services tied to deposit accounts, such as mobile and remote deposits and peer-to-peer payments, to solidify core deposit relationships.
62
The following tables set forth the distribution of average deposits, by account type.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Percent |
| ||||||||||||
|
| 2019 |
| 2018 |
| Change in |
| ||||||||||
|
| Average |
| Percent of |
| Weighted |
| Average |
| Percent of |
| Weighted |
| Average |
| ||
|
| Balance |
| Total Deposits |
| Average Cost * |
| Balance |
| Total Deposits |
| Average Cost * |
| Balance |
| ||
|
| (dollars in thousands) |
|
|
| ||||||||||||
Noninterest-bearing demand |
| $ | 651,085 |
| 23.7 | % | — | % | $ | 634,960 |
| 22.9 | % | — | % | 2.5 | % |
Interest-bearing demand |
|
| 812,526 |
| 29.6 | % | 0.17 | % |
| 820,619 |
| 29.6 | % | 0.18 | % | (1.0) | % |
Money market |
|
| 468,139 |
| 17.1 | % | 0.42 | % |
| 438,784 |
| 15.8 | % | 0.15 | % | 6.7 | % |
Savings |
|
| 428,447 |
| 15.6 | % | 0.07 | % |
| 428,725 |
| 15.4 | % | 0.07 | % | (0.1) | % |
Total non-maturity deposits |
|
| 2,360,197 |
| 86.0 | % | 0.16 | % |
| 2,323,088 |
| 83.7 | % | 0.11 | % | 1.6 | % |
Time |
|
| 383,070 |
| 14.0 | % | 1.13 | % |
| 453,543 |
| 16.3 | % | 0.89 | % | (15.5) | % |
Total deposits |
| $ | 2,743,267 |
| 100.0 | % | 0.29 | % | $ | 2,776,631 |
| 100.0 | % | 0.23 | % | (1.2) | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, |
| Percent |
| ||||||||||||
|
| 2019 |
| 2018 |
| Change in |
| ||||||||||
|
| Average |
| Percent of |
| Weighted |
| Average |
| Percent of |
| Weighted |
| Average |
| ||
|
| Balance |
| Total Deposits |
| Average Cost * |
| Balance |
| Total Deposits |
| Average Cost * |
| Balance |
| ||
|
| (dollars in thousands) |
|
|
| ||||||||||||
Noninterest-bearing demand |
| $ | 654,818 |
| 23.6 | % | — | % | $ | 652,149 |
| 23.2 | % | — | % | 0.4 | % |
Interest-bearing demand |
|
| 821,848 |
| 29.7 | % | 0.19 | % |
| 826,311 |
| 29.4 | % | 0.16 | % | (0.5) | % |
Money market |
|
| 455,469 |
| 16.4 | % | 0.40 | % |
| 448,266 |
| 16.0 | % | 0.15 | % | 1.6 | % |
Savings |
|
| 428,865 |
| 15.5 | % | 0.06 | % |
| 436,913 |
| 15.6 | % | 0.07 | % | (1.8) | % |
Total non-maturity deposits |
|
| 2,361,000 |
| 85.2 | % | 0.15 | % |
| 2,363,639 |
| 84.1 | % | 0.09 | % | (0.1) | % |
Time |
|
| 408,972 |
| 14.8 | % | 1.09 | % |
| 445,826 |
| 15.9 | % | 0.76 | % | (8.3) | % |
Total deposits |
| $ | 2,769,972 |
| 100.0 | % | 0.29 | % | $ | 2,809,465 |
| 100.0 | % | 0.20 | % | (1.4) | % |
* Annualized measure.
The Company has continued to deemphasize higher cost deposit categories, such as time deposits. Comparatively,Additionally, the Company'sBank continues to add and improve digital banking services to solidify deposit relationships.
The following table sets forth the distribution of average deposits, by account type:
| | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Percent |
| ||||||||||||
|
| 2022 |
| 2021 |
| Change in | | ||||||||||
|
| Average |
| Percent of |
| Weighted |
| Average |
| Percent of |
| Weighted |
| Average | | ||
|
| Balance |
| Total Deposits |
| Average Cost * |
| Balance |
| Total Deposits |
| Average Cost * |
| Balance | | ||
|
| (dollars in thousands) | | | | ||||||||||||
Noninterest-bearing | | $ | 1,031,407 |
| 28.1 | % | — | % | $ | 1,016,384 |
| 29.6 | % | — | % | 1.5 | % |
Interest-bearing demand | |
| 1,137,072 |
| 31.0 | | 0.05 | |
| 1,020,216 |
| 29.8 | | 0.05 | | 11.5 | |
Money market | |
| 577,388 |
| 15.8 | | 0.14 | |
| 510,183 |
| 14.9 | | 0.07 | | 13.2 | |
Savings | |
| 649,752 |
| 17.7 | | 0.03 | |
| 608,436 |
| 17.7 | | 0.03 | | 6.8 | |
Total non-maturity deposits | |
| 3,395,619 |
| 92.6 | | 0.05 | |
| 3,155,219 |
| 92.0 | | 0.03 | | 7.6 | |
Time | |
| 271,870 |
| 7.4 | | 0.27 | |
| 275,224 |
| 8.0 | | 0.42 | | (1.2) | |
Total deposits | | $ | 3,667,489 |
| 100.0 | % | 0.06 | % | $ | 3,430,443 |
| 100.0 | % | 0.07 | % | 6.9 | % |
| | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, | | Percent | | ||||||||||||
| | 2022 |
| 2021 |
| Change in | | ||||||||||
| | Average |
| Percent of |
| Weighted |
| Average |
| Percent of |
| Weighted |
| Average | | ||
| | Balance |
| Total Deposits |
| Average Cost * |
| Balance |
| Total Deposits |
| Average Cost * |
| Balance | | ||
| | (dollars in thousands) | | | |||||||||||||
Noninterest-bearing | | $ | 1,060,566 |
| 28.4 | % | — | % | $ | 976,884 |
| 29.1 | % | — | % | 8.6 | % |
Interest-bearing demand | |
| 1,146,635 |
| 30.7 | | 0.05 | |
| 1,012,557 |
| 30.2 | | 0.05 | | 13.2 | |
Money market | |
| 585,815 |
| 15.7 | | 0.10 | |
| 498,441 |
| 14.8 | | 0.07 | | 17.5 | |
Savings | |
| 653,659 |
| 17.5 | | 0.03 | |
| 584,226 |
| 17.4 | | 0.03 | | 11.9 | |
Total non-maturity deposits | |
| 3,446,675 |
| 92.3 | | 0.04 | |
| 3,072,108 |
| 91.5 | | 0.03 | | 12.2 | |
Time | |
| 289,000 |
| 7.7 | | 0.30 | |
| 286,685 |
| 8.5 | | 0.48 | | 0.8 | |
Total deposits | | $ | 3,735,675 |
| 100.0 | % | 0.06 | % | $ | 3,358,793 |
| 100.0 | % | 0.07 | % | 11.2 | % |
* Annualized measure.
Comparison of the Three Months Ended September 30, 2022 to the Three Months Ended September 30, 2021
The average balances of non-maturity deposits increased 7.6% from the three months ended September 30, 2021 to the three months ended September 30, 2022, with the increase primarily attributable to the NXT acquisition which added $139.4 million of non-maturity deposits on October 1, 2021. Time deposits decreased slightly due to continued run-off of higher cost time deposits which were mostly offset by the addition of $42.1 million of time deposits acquired from NXT.
Recent increases in market interest rates have remained more stable,increased competition for deposits. As a result, we expect deposit costs to increase during the rest of 2022 and deposits balances may decrease. Additionally, outgoing deposits may be replaced by higher cost funding sources, such as FHLB advances, brokered deposits, or other wholesale funding.
Comparison of the Nine Months Ended September 30, 2022 to the Nine Months Ended September 30, 2021
The average balances of non-maturity deposits increased 12.2% from the nine months ended September 30, 2021 to the nine months ended September 30, 2022, with recent growththe increase primarily attributable to higher balances maintained by deposit customers following the receipt of federal economic stimulus, in the money market category primarilyform of PPP loan proceeds by commercial customers and direct payments received by retail customers, although this trend began to reverse in the second quarter of 2022. Additionally, the NXT acquisition added $139.4 million of non-maturity deposits on October 1, 2021. Time deposits increased slightly due to a special rate offered on new accounts.the addition of $42.1 million of time deposits acquired from NXT which were mostly offset by the continued run-off of higher cost time deposits.
76
The following table sets forth time deposits by remaining maturity as of September 30, 2019.2022:
| | | | | | | | | | | | | | | | |||||||||||||||
|
| 3 Months or |
| Over 3 through |
| Over 6 through |
| Over |
| | | |||||||||||||||||||
|
| Less |
| 6 Months |
| 12 Months | | 12 Months | | Total | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
|
| 3 Months or |
| Over 3 through |
| Over 6 through |
|
|
|
|
|
| ||||||||||||||||||
|
| Less |
| 6 Months |
| 12 Months |
| Over 12 Months |
| Total | ||||||||||||||||||||
|
| (dollars in thousands) | ||||||||||||||||||||||||||||
|
| (dollars in thousands) | ||||||||||||||||||||||||||||
Time deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | |
Amounts less than $100,000 |
| $ | 48,447 |
| $ | 45,377 |
| $ | 73,793 |
| $ | 71,653 |
| $ | 239,270 | | $ | 38,274 | | $ | 34,853 | | $ | 51,659 | | $ | 54,376 | | $ | 179,162 |
Amounts of $100,000 but less than $250,000 |
|
| 20,074 |
|
| 14,329 |
|
| 29,654 |
|
| 28,718 |
|
| 92,775 | |||||||||||||||
Amounts of $100,000 or more but less than $250,000 | |
| 13,524 | |
| 11,564 | |
| 19,639 | |
| 19,390 | |
| 64,117 | |||||||||||||||
Amounts of $250,000 or more |
|
| 7,784 |
|
| 9,120 |
|
| 9,047 |
|
| 6,124 |
|
| 32,075 | |
| 9,190 | |
| 4,766 | |
| 7,175 | |
| 4,698 | |
| 25,829 |
Total time deposits |
| $ | 76,305 |
| $ | 68,826 |
| $ | 112,494 |
| $ | 106,495 |
| $ | 364,120 | | $ | 60,988 | | $ | 51,183 | | $ | 78,473 | | $ | 78,464 | | $ | 269,108 |
IMPACT OF INFLATIONAs of September 30, 2022 and December 31, 2021, the Bank’s uninsured deposits, including related accrued interest, were estimated to be $772.0 million and $845.7 million, respectively.
The consolidated financial statements and the related notes have been prepared in conformity with GAAP. GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The impact of inflation, if any, is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.
LIQUIDITY
Bank Liquidity
The overall objective of bank liquidity management is to ensure the availability of sufficient cash funds to meet all financial commitments and to take advantage of investment opportunities. The Banks manageBank manages liquidity in
63
order to meet deposit withdrawals on demand or at contractual maturity, to repay borrowings as they mature, and to fund new loans and investments as opportunities arise.
The BanksBank continuously monitor theirmonitors its liquidity positions to ensure that assets and liabilities are managed in a manner that will meet all of our short-term and long-term cash requirements. The Banks manage theirBank manages its liquidity position to meet theour daily cash flow needs, of clients, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives. The BanksBank also monitormonitors liquidity requirements in light of interest rate trends, changes in the economy, and the scheduled maturity and interest rate sensitivity of the investment and loan portfolios and deposits.deposits, and regulatory capital requirements.
As part of the Banks'Bank’s liquidity management strategy, the Banks areBank is also focused on minimizing costs of liquidity and attemptattempts to decrease these costs by promoting noninterest bearing and low-cost deposits and replacing higher cost funding including time deposits and borrowed funds. While the Banks doBank does not control the types of deposit instruments our clients choose, those choices can be influenced with the rates and the deposit specials offered.
Additional sources of liquidity include unpledged securities, federal funds purchased, and borrowings from the Federal Home Loan Bank of Chicago (FHLB).FHLB. Unpledged securities may be sold or pledged as collateral for borrowings to meet liquidity needs. Interest is charged at the prevailing market rate on federal funds purchased and FHLB borrowings. There were no outstanding federal funds purchased or FHLB borrowings at September 30, 2019 and December 31, 2018. Funds obtained fromavailable through federal funds purchased and FHLB borrowings are used primarily to meet day to daydaily liquidity needs. The total amount of the remaining credit available to the BanksBank from the FHLB at September 30, 2019 and December 31, 20182022 was $331.9 million and $337.0 million, respectively.$330.6 million.
As of September 30, 2019,2022, management believed adequatethe current liquidity existedand available sources of liquidity are adequate to meet all projected cash flow obligations of the Banks.reasonably foreseeable short-term and intermediate-term demands of the Bank. As of September 30, 2022, the Bank had no material commitments for capital expenditures.
77
Holding Company Liquidity
The Holding Company, or HBT Financial, Inc. on an unconsolidated basis, is a corporation separate and apart from the BanksBank and, therefore, it must provide for its own liquidity. As of September 30, 2022, the Holding Company had cash and cash equivalents of $22.7 million.
The Holding Company’s main source of funding is dividends declared and paid to it by the Banks. Statutory and regulatory limitations exist that affect the ability of the Banks to pay dividends to the Company. Management believes that these limitations will not impact the Company’s ability to meet its ongoing short-term cash obligations.
Bank. Due to state banking laws, neitherthe Bank may not declare dividends in any calendar year in an amount that would exceed the accumulated retained earnings, of such Bank 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 athe Bank to the Holding Company would be prohibited if the effect thereof would cause athe 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 and nine months ended September 30, 2022, the Bank paid $6.0 million and $18.0 million in dividends to the Holding Company, respectively. During the three and nine months ended September 30, 2021, the Bank did not pay a dividend to the Holding Company.
The liquidity needs of the Holding Company on an unconsolidated basis consist primarily of operating expenses, dividends to stockholders and interest payments on the subordinated debentures.notes and junior subordinated debentures, and shareholder distributions in the form of dividends and stock repurchases. During the three months ended September 30, 2022 and 2021, holding company operating expenses consisted of interest expense of $0.9 million and $0.8 million, respectively, and other operating expenses of $1.4 million and $1.3 million, respectively. During the nine months ended September 30, 2022 and 2021, holding company operating expenses consisted of interest expense of $2.6 million and $2.5 million, respectively, and other operating expenses of $4.0 million and $2.6 million, respectively.
Additionally, the Holding Company paid $4.6 million and $4.1 million of dividends to stockholders during the three months ended September 30, 2022 and 2021, respectively, and paid $14.0 million and $12.4 million of dividends to stockholders during the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, management was not aware of any known trends, events or uncertainties that had or were reasonably likely to have a material impact on the Holding Company’s liquidity.
As of September 30, 2019,2022, management believed adequatethe current liquidity existedand available sources of liquidity are adequate to meet all projected cash flow obligations of the Company.reasonably foreseeable short-term and intermediate-term demands of the Holding Company. As of September 30, 2022, the Holding Company had no material commitments for capital expenditures.
CAPITAL RESOURCES
The overall objectives of capital management are to ensure the availability of sufficient capital to support loan, deposit and other asset and liability growth opportunities and to maintain capital to absorb unforeseen losses or write-downs that are inherent in the business risks associated with the banking industry. The Company seeks to balance the need for higher capital levels to address such unforeseen risks and the goal to achieve an adequate return on the capital invested by our stockholders.
64
Regulatory Capital Requirements
The actualCompany and requiredBank are each subject to various regulatory capital amountsrequirements administered by federal and ratiosstate banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the financial statements of the Company (on a consolidated basis) and the Banks are listed below. Management believed that, as of September 30, 2019, the Company and the BanksBank.
78
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 September 30, 2022 and December 31, 2021, the capital conservation buffer requirement was 2.5% of risk-weighted assets.
As of September 30, 2022 and December 31, 2021, the Company and the Bank met all capital adequacy requirements to which wethey were subject. As of that date,those dates, the Banks wereBank was “well capitalized” under the regulatory prompt corrective action provisions.
The following table sets forth actual capital ratios of the Company and the Bank as of the dates indicated, as well as the minimum ratios for capital adequacy purposes with the capital conservation buffer, and the minimum ratios to be well capitalized under regulatory prompt corrective action provisions. For additional information, see “Note 14 – Regulatory Matters” to the consolidated financial statements.
| | | | | | | | | | | | |
| | |
| | | | | For Capital | | To Be Well | ||
| | |
| | | | | Adequacy Purposes | | Capitalized Under | ||
| | September 30, | | December 31, | | With Capital | | Prompt Corrective | ||||
|
| 2022 |
| 2021 |
| Conversation Buffer (1) |
| Action Provisions (2) | ||||
Total Capital (to Risk Weighted Assets) | | | | | | | | | | | | |
Consolidated HBT Financial, Inc. | | 16.34 | % | | 16.88 | % | | 10.50 | % | | N/A | |
Heartland Bank and Trust Company | | 15.60 | | | 15.94 | | | 10.50 | | | 10.00 | % |
| | | | | | | | | | | | |
Tier 1 Capital (to Risk Weighted Assets) | |
| | | | | | | | | �� | |
Consolidated HBT Financial, Inc. | | 14.26 | % | | 14.66 | % | | 8.50 | % | | N/A | |
Heartland Bank and Trust Company | | 14.79 | | | 15.09 | | | 8.50 | | | 8.00 | % |
| | | | | | | | | | | | |
Common Equity Tier 1 Capital (to Risk Weighted Assets) | |
| | | | | | | | |
| |
Consolidated HBT Financial, Inc. | | 13.08 | % | | 13.37 | % | | 7.00 | % | | N/A | |
Heartland Bank and Trust Company | | 14.79 | | | 15.09 | | | 7.00 | | | 6.50 | % |
| | | | | | | | | | | | |
Tier 1 Capital (to Average Assets) | |
| | | | | | | | |
| |
Consolidated HBT Financial, Inc. | | 10.44 | % | | 9.84 | % | | 4.00 | | | N/A | |
Heartland Bank and Trust Company | | 10.83 | | | 10.13 | | | 4.00 | | | 5.00 | % |
|
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|
| To Be Well |
| |||
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|
| For Capital |
| Capitalized Under |
| ||||||
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|
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|
|
| Adequacy |
| Prompt Corrective |
| ||||||
|
| Actual |
| Purposes |
| Action Provisions |
| |||||||||
|
| Amount |
| Ratio |
| Amount |
| Ratio |
| Amount |
| Ratio |
| |||
September 30, 2019 |
| (dollars in thousands) |
| |||||||||||||
Total Capital (to Risk Weighted Assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated HBT Financial, Inc. |
| $ | 371,681 |
| 14.88 | % | $ | 199,798 |
| 8.00 | % |
| N/A |
| N/A |
|
Heartland Bank |
| $ | 329,689 |
| 14.30 | % | $ | 184,457 |
| 8.00 | % | $ | 230,572 |
| 10.00 | % |
Lincoln Bank |
| $ | 37,349 |
| 19.88 | % | $ | 15,031 |
| 8.00 | % | $ | 18,789 |
| 10.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital (to Risk Weighted Assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated HBT Financial, Inc. |
| $ | 348,920 |
| 13.97 | % | $ | 149,848 |
| 6.00 | % |
| N/A |
| N/A |
|
Heartland Bank |
| $ | 309,145 |
| 13.41 | % | $ | 138,343 |
| 6.00 | % | $ | 184,457 |
| 8.00 | % |
Lincoln Bank |
| $ | 35,132 |
| 18.70 | % | $ | 11,274 |
| 6.00 | % | $ | 15,031 |
| 8.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
Common Equity Tier 1 Capital (to Risk Weighted Assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated HBT Financial, Inc. |
| $ | 312,519 |
| 12.51 | % | $ | 112,386 |
| 4.50 | % |
| N/A |
| N/A |
|
Heartland Bank |
| $ | 309,145 |
| 13.41 | % | $ | 103,757 |
| 4.50 | % | $ | 149,871 |
| 6.50 | % |
Lincoln Bank |
| $ | 35,132 |
| 18.70 | % | $ | 8,455 |
| 4.50 | % | $ | 12,213 |
| 6.50 | % |
|
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|
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Tier 1 Capital (to Average Assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated HBT Financial, Inc. |
| $ | 348,920 |
| 11.02 | % | $ | 126,601 |
| 4.00 | % |
| N/A |
| N/A |
|
Heartland Bank |
| $ | 309,145 |
| 11.00 | % | $ | 112,366 |
| 4.00 | % | $ | 140,458 |
| 5.00 | % |
Lincoln Bank |
| $ | 35,132 |
| 9.96 | % | $ | 14,104 |
| 4.00 | % | $ | 17,631 |
| 5.00 | % |
| (1) | The Tier 1 capital to average assets ratio (known as the “leverage ratio”) is not impacted by the capital conservation buffer. |
| (2) | The prompt corrective action provisions are not applicable to bank holding companies. |
N/A Not applicable.
As of September 30, 2019, we2022, management was not aware of any known trends, events or uncertainties that had noor were reasonably likely to have a material commitments forimpact on the Company’s capital expenditures.resources.
Cash Dividends
The below table summarizesDuring 2021, the Company paid quarterly cash dividends of $0.15 per share. On January 25, 2022, the Company announced an increase of $0.01 and paid by quarter for ninea $0.16 per share dividend during the first, second, and third quarters of 2022.
Stock Repurchase Program
Under the Company’s stock repurchase program, the Company repurchased 78,571 shares of its common stock at a weighted average price of $18.22 during the three months ended September 30, 20192022. The stock repurchase program has been paused until completion of the vote of Town and Country’s shareholders on the year ended December 31, 2018.
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| 2019 |
| 2018 | |||||||||||||||||
|
| Third Quarter |
| Second Quarter |
| First Quarter |
| Fourth Quarter |
| Third Quarter |
| Second Quarter |
| First Quarter | |||||||
|
| (dollars in thousands) | |||||||||||||||||||
Regular |
| $ | 2,704 |
| $ | 2,704 |
| $ | 2,704 |
| $ | 2,101 |
| $ | 2,101 |
| $ | 2,105 |
| $ | 2,105 |
Tax |
|
| 6,662 |
|
| 7,048 |
|
| 6,094 |
|
| 6,751 |
|
| 7,055 |
|
| 7,092 |
|
| 6,305 |
Special |
|
| — |
|
| — |
|
| 27,041 |
|
| 2,000 |
|
| — |
|
| — |
|
| 5,006 |
Total cash dividends |
| $ | 9,366 |
| $ | 9,752 |
| $ | 35,839 |
| $ | 10,852 |
| $ | 9,156 |
| $ | 9,197 |
| $ | 13,416 |
merger. Repurchases were conducted in compliance with Rule 10b-18 and in compliance with Regulation M under the Exchange Act. 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, 2023. As of September 30, 2022, the Company had $10.2 million remaining under the current stock repurchase authorization.
On October 1, 2019, the Company’s board of directors declared a special dividend payable to the Company’s stockholders of record as of October 2, 2019, in the aggregate amount of approximately $170 million. The special dividend was paid on October 22, 2019 using net proceeds from the Company’s initial public offering and the proceeds of dividends received from Heartland Bank and Lincoln Bank.
6579
OFF-BALANCE SHEET ARRANGEMENTS
As a financial services provider, the BanksBank routinely areis a party to various financial instruments with off-balance sheet risks, such as commitments to extend credit, standby letters of credit, unused lines of credit, and commitments to sell loans.loans, and interest rate swaps. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process afforded to loans originated by the Banks.Bank. Although commitments to extend credit are considered in determiningwhile evaluating our allowance for loan losses, atas of September 30, 20192022 and December 31, 2018,2021, there were no provisionreserves for losses on commitments to extend credit, and there were no specific or general allowance for losses on such commitments, as there has been no historical loss experience with commitments to extend credit and no probable and reasonably estimable losses were inherent in the portfolio as a result of the commitments to extend credit.unfunded commitments. For additional information, see “Note 1614 – Commitments and Contingencies” to the consolidated financial statements.
CONTRACTUAL OBLIGATIONS
There have been no material changes to our contractual obligations and other funding needs as disclosed in our prospectus filed with the SEC on October 11, 2019.
JOBS ACT ACCOUNTING ELECTION
We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act permits us an extended transition period for complying with new or revised accounting standards affecting public companies. 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.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company has established various accounting policies that govern the application of accounting principles generally accepted in the United State of America in the preparation of its consolidated financial statements.
Critical accounting estimates are those that are critical to the portrayal and understanding of the Company'sCompany’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'sCompany’s critical accounting estimates. The following accounting estimate could be deemed critical:
ThereAllowance for Loan losses
The allowance for loan losses (“allowance”) is an estimate of loan losses inherent in the Company’s loan portfolio. The allowance represents amounts that have been no material changesestablished to our critical accounting policiesrecognize incurred credit losses in the loan portfolio that are both probable and estimates as comparedreasonably estimable at the date of the consolidated financial statements. The allowance is established through a provision for loan losses which is charged to expense. Additions to the critical accounting policiesallowance are expected to maintain the adequacy of the total allowance. Loan losses are charged off against the allowance when the Company determines the loan balance to be uncollectible. Cash received on previously charged off amounts is recorded as a recovery to the allowance.
The allowance consists of two primary components, general reserves and estimates describedspecific reserves related to impaired loans. General reserves cover non-impaired loans, or loans collectively evaluated for impairment, and are based on historical losses adjusted for qualitative factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the most recent 16-quarter period. Qualitative factor adjustments primarily consider current economic metrics, such as national and regional unemployment rates, and current credit quality metrics of each portfolio segment, such as past due and risk rating percentages, relative to historical levels. These qualitative factor adjustments are inherently subjective.
Specific reserves cover impaired loans, or loans individually evaluated for impairment, and are primarily measured based on the fair value of collateral. Adjustments to the fair value of collateral are made for anticipated selling costs. A specific reserve may be zero if the fair value of collateral on the measurement date is greater than the carrying balance of the impaired loan. Additionally, the present value of expected future cash flows discounted at the original contractual interest rate may also be used, when practical.
While the Company uses the best information available to make evaluations, future adjustments to the allowance for loan losses may become necessary if conditions change substantially from the conditions used in previous evaluations. Determinations as to the Company's prospectus filed withrisk classification of loans and the SEC on October 11, 2019. For more information, please referamount of the allowance for loan losses are subject to “Note 1 – Summaryreview by regulatory agencies, which can require that the Company establish additional loss allowances.
80
NON-GAAP FINANCIAL INFORMATION
This Quarterly Report on Form 10‑Q10-Q contains certain financial information determined by methods other than those in accordance with GAAP. These measures include net interest income (tax-equivalent basis), net interest margin (tax-equivalent basis), efficiency ratio (tax-equivalent basis), tangible common equity, tangible assets,
66
tangible common equity to tangible assets, originated loans and acquired loans and any ratios derived therefrom, core deposits, core deposits to total deposits, return on tangible common equity, adjusted C Corp equivalent net income, adjusted C Corp equivalent earnings per share – basic and diluted, 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. The tax equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a federal tax rate of 21% and state income tax rate of 9.5%.
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 foreclosed assets (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 or Lincoln Bank. 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.
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 directlyclosely comparable GAAP financial measures appear below.
Non-GAAP Financial Measure | Definition | How the Measure Provides Useful Information to Investors | |
Adjusted Net Income | ● Net income, with the following adjustments: - excludes acquisition expenses, - excludes branch closure expenses, - excludes charges related to termination of certain employee benefit plans, - excludes net earnings (losses) from closed or sold operations, - excludes realized gains (losses) on sales of closed branch premises, - excludes realized gains (losses) on sales of securities, - excludes mortgage servicing rights fair value adjustment, and - the income tax effect of these pre-tax adjustments. | ● Enhances comparisons to prior periods and, accordingly, facilitates the development of future projections and earnings growth prospects. ● We also sometimes refer to ratios that include Adjusted Net Income, such as: - Adjusted Return on Average Assets, which is Adjusted Net Income divided by average assets. - Adjusted Return on Average Equity, which is Adjusted Net Income divided by average equity. - Adjusted Earnings Per Share - Basic, which is Adjusted Net Income allocated to common shares divided by weighted average common shares outstanding. - Adjusted Earnings Per Share – Diluted, which is Adjusted Net Income allocated to common shares divided by weighted average common shares outstanding, including all dilutive potential shares. | |
Net Interest Income (Tax Equivalent Basis) | ● Net interest income adjusted for the tax-favored status of tax-exempt loans and securities. (1) | ● We believe the tax equivalent basis is the preferred industry measurement of net interest income. ● Enhances comparability of net interest income arising from taxable and tax-exempt sources. ● We also sometimes refer to Net Interest Margin (Tax Equivalent Basis), which is Net Interest Income (Tax Equivalent Basis) divided by average interest-earning assets. | |
Efficiency Ratio (Tax Equivalent Basis) | ● Noninterest expense less amortization of intangible assets divided by the sum of net interest income (tax equivalent basis) and noninterest income. (1) | ● Provides a measure of productivity in the banking industry. ● Calculated to measure the cost of generating one dollar of revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. | |
| (1) | Tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%. |
81
Non-GAAP Financial Measure | Definition | How the Measure Provides Useful Information to Investors |
Tangible Common Equity to Tangible Assets | ● Tangible Common Equity is total stockholders’ equity less goodwill and other intangible assets. ● Tangible Assets is total assets less goodwill and other intangible assets. | ● Generally used by investors, our management, and banking regulators to evaluate capital adequacy. ● Facilitates comparison of our earnings with the earnings of other banking organization with significant amounts of goodwill or intangible assets. ● We also sometimes refer to ratios that include Tangible Common Equity, such as: - Tangible Book Value Per Share, which is Tangible Common Equity divided by shares of common stock outstanding. - Return on Average Tangible Common Equity, which is net income divided by average Tangible Common Equity. - Adjusted Return on Average Tangible Common Equity, which is Adjusted Net Income divided by average Tangible Common Equity. |
Core Deposits | ● Total deposits, excluding: - Time deposits of $250,000 or more, and - Brokered deposits | ● Provides investors with information regarding the stability of the Company’s sources of funds. ● We also sometimes refer to the ratio of Core Deposits to total deposits. |
82
Reconciliation of Non-GAAP Financial Measure - Adjusted C Corp equivalent net income, adjusted C Corp equivalent earnings per share – basicNet Income and diluted, and adjusted C Corp equivalent returnAdjusted Return on average assetsAverage Assets
| | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | | ||||
|
| (dollars in thousands) | | ||||||||||
Net income | | $ | 15,627 | | $ | 13,715 | | $ | 43,316 | | $ | 42,677 | |
Adjustments: | | | | | | | | | | | | | |
Acquisition expenses | | | (462) | | | (380) | | | (462) | | | (537) | |
Branch closure expenses | | | — | | | (644) | | | — | | | (748) | |
Gains (losses) on sales of closed branch premises | | | (38) | | | — | | | 141 | | | — | |
Mortgage servicing rights fair value adjustment | |
| 351 | |
| 40 | |
| 2,446 | |
| 1,425 | |
Total adjustments | |
| (149) | |
| (984) | |
| 2,125 | |
| 140 | |
Tax effect of adjustments | |
| (80) | |
| 220 | |
| (728) | |
| (143) | |
Less adjustments after tax effect | |
| (229) | |
| (764) | |
| 1,397 | |
| (3) | |
Adjusted net income | | $ | 15,856 | | $ | 14,479 | | $ | 41,919 | | $ | 42,680 | |
| | | | | | | | | | | | | |
Average assets | | $ | 4,208,722 | | $ | 3,965,051 | | $ | 4,278,997 | | $ | 3,884,115 | |
| | | | | | | | | | | | | |
Return on average assets * | |
| 1.47 | % |
| 1.37 | % |
| 1.35 | % |
| 1.47 | % |
Adjusted return on average assets * | |
| 1.49 | |
| 1.45 | |
| 1.31 | |
| 1.47 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
|
| September 30, 2019 |
| September 30, 2018 |
| September 30, 2019 |
| September 30, 2018 |
| ||||
|
| (dollars in thousands, except share and per share data) |
| ||||||||||
Net income |
| $ | 17,437 |
| $ | 17,592 |
| $ | 50,778 |
| $ | 51,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C Corp equivalent net income (2) |
| $ | 13,122 |
| $ | 13,228 |
| $ | 38,284 |
| $ | 39,103 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (losses) from closed or sold operations, including gains on sale (1) |
|
| (3) |
|
| (35) |
|
| 533 |
|
| (852) |
|
Charges related to termination of certain employee benefit plans |
|
| (845) |
|
| - |
|
| (4,161) |
|
| - |
|
Realized gains (losses) on sales of securities |
|
| - |
|
| 262 |
|
| - |
|
| 262 |
|
Mortgage servicing rights fair value adjustment |
|
| (860) |
|
| (93) |
|
| (2,982) |
|
| 274 |
|
Total adjustments |
|
| (1,708) |
|
| 134 |
|
| (6,610) |
|
| (316) |
|
C Corp equivalent tax effect of adjustments |
|
| 487 |
|
| (38) |
|
| 1,884 |
|
| 90 |
|
Less adjustments after C Corp equivalent tax effect |
|
| (1,221) |
|
| 96 |
|
| (4,726) |
|
| (226) |
|
Adjusted C Corp equivalent net income |
| $ | 14,343 |
| $ | 13,132 |
| $ | 43,010 |
| $ | 39,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets |
| $ | 3,202,642 |
| $ | 3,220,584 |
| $ | 3,224,000 |
| $ | 3,257,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets * |
|
| 2.18 | % |
| 2.18 | % |
| 2.10 | % |
| 2.12 | % |
C Corp equivalent return on average assets * (2) |
|
| 1.64 | % |
| 1.64 | % |
| 1.58 | % |
| 1.60 | % |
Adjusted C Corp equivalent return on average assets * |
|
| 1.79 | % |
| 1.63 | % |
| 1.78 | % |
| 1.61 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding |
|
| 18,027,512 |
|
| 18,027,512 |
|
| 18,027,512 |
|
| 18,054,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - Basic and Diluted |
| $ | 0.97 |
| $ | 0.98 |
| $ | 2.82 |
| $ | 2.87 |
|
C Corp equivalent Earnings per share - Basic and Diluted (2) |
|
| 0.73 |
|
| 0.73 |
|
| 2.12 |
|
| 2.17 |
|
Adjusted C Corp equivalent earnings per share - Basic and diluted |
|
| 0.80 |
|
| 0.73 |
|
| 2.39 |
|
| 2.18 |
|
* Annualized measure.
|
|
|
|
Adjusted C Corp equivalent net income and adjusted C Corp equivalent earnings per share adjust for net earnings (losses) from closed or sold operations, charges related to termination of certain employee benefit
67
plans, realized gains (losses) on sales of securities and mortgage servicing rights fair value adjustment. We believe these non-GAAP financial measures provide investors additional insights into operational performance of the Company. Adjusted C Corp equivalent return on average assets is calculated by dividing adjusted C Corp equivalent net income for a period by average assets for the period.
Reconciliation of Non-GAAP Financial Measure - Adjusted Earnings Per Share
| | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| ||||
| | (dollars in thousands, except per share amounts) | | ||||||||||
Numerator: | | | | | | | | | | | | | |
Net income | | $ | 15,627 | | $ | 13,715 | | $ | 43,316 | | $ | 42,677 | |
Earnings allocated to participating securities (1) | | | (17) | | | (25) | | | (51) | | | (81) | |
Numerator for earnings per share - basic and diluted | | $ | 15,610 | | $ | 13,690 | | $ | 43,265 | | $ | 42,596 | |
| | | | | | | | | | | | | |
Adjusted net income | | $ | 15,856 | | $ | 14,479 | | $ | 41,919 | | $ | 42,680 | |
Earnings allocated to participating securities (1) | | | (17) | | | (27) | | | (49) | | | (81) | |
Numerator for adjusted earnings per share - basic and diluted | | $ | 15,839 | | $ | 14,452 | | $ | 41,870 | | $ | 42,599 | |
| | | | | | | | | | | | | |
Denominator: | | | | | | | | | | | | | |
Weighted average common shares outstanding | | | 28,787,662 | | | 27,340,926 | | | 28,887,757 | | | 27,377,809 | |
Dilutive effect of outstanding restricted stock units | | | 72,643 | | | 13,921 | | | 56,761 | | | 11,412 | |
Weighted average common shares outstanding, including all dilutive potential shares | | | 28,860,305 | | | 27,354,847 | | | 28,944,518 | | | 27,389,221 | |
| | | | | | | | | | | | | |
Earnings per share - Basic | | $ | 0.54 | | $ | 0.50 | | $ | 1.50 | | $ | 1.56 | |
Earnings per share - Diluted | | $ | 0.54 | | $ | 0.50 | | $ | 1.49 | | $ | 1.56 | |
| | | | | | | | | | | | | |
Adjusted earnings per share - Basic | | $ | 0.55 | | $ | 0.53 | | $ | 1.45 | | $ | 1.56 | |
Adjusted earnings per share - Diluted | | $ | 0.55 | | $ | 0.53 | | $ | 1.45 | | $ | 1.56 | |
| (1) | The Company has granted certain restricted stock units that contain non-forfeitable rights to dividend equivalents. Such restricted stock units are considered participating securities. As such, we have included these restricted stock units in the calculation of basic earnings per share and calculate basic earnings per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. |
83
Reconciliation of Non-GAAP Financial Measure – Net Interest Income and Net Interest Margin (Tax Equivalent Basis)
| | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | | ||||
|
| (dollars in thousands) | | ||||||||||
Net interest income (tax equivalent basis) | | | | | | | | | | | | | |
Net interest income | | $ | 37,390 | | $ | 30,715 | | $ | 103,691 | | $ | 89,544 | |
Tax-equivalent adjustment (1) | |
| 674 | |
| 508 | |
| 1,801 | |
| 1,514 | |
Net interest income (tax equivalent basis) (1) | | $ | 38,064 | | $ | 31,223 | | $ | 105,492 | | $ | 91,058 | |
| | | | | | | | | | | | | |
Net interest margin (tax equivalent basis) | |
|
| |
|
| |
|
| |
|
| |
Net interest margin * | |
| 3.65 | % |
| 3.18 | % |
| 3.36 | % |
| 3.19 | % |
Tax-equivalent adjustment * (1) | |
| 0.07 | |
| 0.05 | |
| 0.05 | |
| 0.05 | |
Net interest margin (tax equivalent basis) * (1) | |
| 3.72 | % |
| 3.23 | % |
| 3.41 | % |
| 3.24 | % |
| | | | | | | | | | | | | |
Average interest-earning assets | | $ | 4,059,978 | | $ | 3,831,886 | | $ | 4,131,221 | | $ | 3,755,897 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
|
| September 30, 2019 |
| September 30, 2018 |
| September 30, 2019 |
| September 30, 2018 |
| ||||
|
| (dollars in thousands) |
| ||||||||||
Net interest income (tax equivalent basis) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
| $ | 33,141 |
| $ | 32,601 |
| $ | 101,524 |
| $ | 96,366 |
|
Tax-equivalent adjustment (1) |
|
| 559 |
|
| 677 |
|
| 1,775 |
|
| 2,020 |
|
Net interest income (tax equivalent basis) (1) |
| $ | 33,700 |
| $ | 33,278 |
| $ | 103,299 |
| $ | 98,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (tax equivalent basis) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin * |
|
| 4.31 | % |
| 4.22 | % |
| 4.37 | % |
| 4.12 | % |
Tax-equivalent adjustment * (1) |
|
| 0.07 | % |
| 0.09 | % |
| 0.08 | % |
| 0.09 | % |
Net interest margin (tax equivalent basis) * (1) |
|
| 4.38 | % |
| 4.31 | % |
| 4.45 | % |
| 4.21 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets |
| $ | 3,075,822 |
| $ | 3,089,094 |
| $ | 3,097,374 |
| $ | 3,116,915 |
|
* Annualized measure.
| (1) | On a tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%. |
(1) On a C Corp tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%.
Net interest income (tax-equivalent basis) and net interest margin (tax-equivalent basis) are non-GAAP financial measures that adjust for the tax-favored status of net interest income from loans and investments using a federal tax rate of 21% and state income tax rate of 9.5%. We believe net interest income (tax-equivalent basis) and net interest margin (tax-equivalent basis) are the preferred industry measurement of net interest income, and these non-GAAP financial measures enhance comparability of net interest income arising from taxable and tax-exempt sources. The most directly comparable financial measure calculated in accordance with GAAP is our net interest income and net interest margin.
68
Reconciliation of Non-GAAP Financial Measure - Efficiency Ratio (Tax Equivalent Basis)
| | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | | ||||
|
| (dollars in thousands) | | ||||||||||
Efficiency ratio (tax equivalent basis) | | | | | | | | | | | | | |
Total noninterest expense | | $ | 23,998 | | $ | 22,167 | | $ | 71,997 | | $ | 66,865 | |
Less: amortization of intangible assets | |
| 243 | |
| 252 | |
| 733 | |
| 799 | |
Adjusted noninterest expense | | $ | 23,755 | | $ | 21,915 | | $ | 71,264 | | $ | 66,066 | |
| | | | | | | | | | | | | |
Net interest income | | $ | 37,390 | | $ | 30,715 | | $ | 103,691 | | $ | 89,544 | |
Total noninterest income | |
| 8,234 | |
| 8,392 | |
| 26,828 | |
| 27,974 | |
Operating revenue | |
| 45,624 | |
| 39,107 | |
| 130,519 | |
| 117,518 | |
Tax-equivalent adjustment (1) | |
| 674 | |
| 508 | |
| 1,801 | |
| 1,514 | |
Operating revenue (tax-equivalent basis) (1) | | $ | 46,298 | | $ | 39,615 | | $ | 132,320 | | $ | 119,032 | |
| | | | | | | | | | | | | |
Efficiency ratio | |
| 52.07 | % |
| 56.04 | % |
| 54.60 | % |
| 56.22 | % |
Efficiency ratio (tax equivalent basis) (1) | |
| 51.31 | |
| 55.32 | |
| 53.86 | |
| 55.50 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
|
| September 30, 2019 |
| September 30, 2018 |
| September 30, 2019 |
| September 30, 2018 |
| ||||
|
| (dollars in thousands) |
| ||||||||||
Efficiency ratio (tax equivalent basis) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense |
| $ | 22,303 |
| $ | 21,937 |
| $ | 69,076 |
| $ | 66,877 |
|
Less: amortization of intangible assets |
|
| 335 |
|
| 389 |
|
| 1,087 |
|
| 1,169 |
|
Adjusted noninterest expense |
| $ | 21,968 |
| $ | 21,548 |
| $ | 67,989 |
| $ | 65,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
| $ | 33,141 |
| $ | 32,601 |
| $ | 101,524 |
| $ | 96,366 |
|
Total noninterest income |
|
| 7,582 |
|
| 8,407 |
|
| 22,415 |
|
| 24,811 |
|
Operating revenue |
|
| 40,723 |
|
| 41,008 |
|
| 123,939 |
|
| 121,177 |
|
Tax-equivalent adjustment (1) |
|
| 559 |
|
| 677 |
|
| 1,775 |
|
| 2,020 |
|
Operating revenue (tax-equivalent basis) (1) |
| $ | 41,282 |
| $ | 41,685 |
| $ | 125,714 |
| $ | 123,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency ratio |
|
| 53.94 | % |
| 52.55 | % |
| 54.86 | % |
| 54.22 | % |
Efficiency ratio (tax equivalent basis) (1) |
|
| 53.21 | % |
| 51.69 | % |
| 54.08 | % |
| 53.34 | % |
| (1) | On a tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%. |
(1) On a C Corp tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%.
Efficiency ratio (tax-equivalent basis) provides a measure of productivity in the banking industry. This ratio is calculated to measure the cost of generating one dollar of revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. We calculate this ratio by dividing adjusted noninterest expense by the sum of net interest income on a tax equivalent basis using a federal tax rate of 21% and a state income tax rate of 9.5%.
6984
Reconciliation of Non-GAAP Financial Measure - Tangible Common Equity to Tangible Assets and Tangible Book Value Per Share
| | | | | | | |
|
| September 30, 2022 |
| December 31, 2021 |
| ||
| | (dollars in thousands, except per share data) | | ||||
Tangible Common Equity | | | | | | | |
Total stockholders' equity | | $ | 359,073 | | $ | 411,881 | |
Less: Goodwill | | | 29,322 | | | 29,322 | |
Less: Core deposit intangible assets, net | | | 1,210 | | | 1,943 | |
Tangible common equity | | $ | 328,541 | | $ | 380,616 | |
| | | | | | | |
Tangible Assets | | | | | | | |
Total assets | | $ | 4,213,324 | | $ | 4,314,254 | |
Less: Goodwill | | | 29,322 | | | 29,322 | |
Less: Core deposit intangible assets, net | | | 1,210 | | | 1,943 | |
Tangible assets | | $ | 4,182,792 | | $ | 4,282,989 | |
| | | | | | | |
Total stockholders' equity to total assets | | | 8.52 | % | | 9.55 | % |
Tangible common equity to tangible assets | | | 7.85 | | | 8.89 | |
| | | | | | | |
Shares of common stock outstanding | | | 28,752,626 | |
| 28,986,061 | |
| | | | | | | |
Book value per share | | $ | 12.49 | | $ | 14.21 | |
Tangible book value per share | | | 11.43 | | | 13.13 | |
Reconciliation of Non-GAAP Financial Measure – Return on Average Tangible Common Equity, Adjusted C Corp Equivalent Return on Average Stockholders’ Equity, and Adjusted C Corp Equivalent Return on Average Tangible Common Equity
| | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | | ||||
| | (dollars in thousands) | | ||||||||||
Average Tangible Common Equity | | | | | | | | | | | | | |
Total stockholders' equity | | $ | 380,983 | | $ | 380,863 | | $ | 388,509 |
| $ | 369,933 | |
Less: Goodwill | |
| 29,322 | |
| 23,620 | |
| 29,322 |
|
| 23,620 | |
Less: Core deposit intangible assets, net | |
| 1,356 | |
| 2,152 | |
| 1,597 |
|
| 2,414 | |
Average tangible common equity | | $ | 350,305 | | $ | 355,091 | | $ | 357,590 |
| $ | 343,899 | |
| | | | | | | | | | | | | |
Net income | | $ | 15,627 | | $ | 13,715 | | $ | 43,316 |
| $ | 42,677 | |
Adjusted net income | |
| 15,856 | |
| 14,479 | |
| 41,919 |
| | 42,680 | |
| | | | | | | | | | | | | |
Return on average stockholders' equity * | |
| 16.27 | % |
| 14.29 | % |
| 14.91 | % | | 15.42 | % |
Return on average tangible common equity * | |
| 17.70 | |
| 15.32 | |
| 16.20 | | | 16.59 | |
| | | | | | | | | | | | | |
Adjusted return on average stockholders' equity * | |
| 16.51 | % |
| 15.08 | % |
| 14.43 | % | | 15.43 | % |
Adjusted return on average tangible common equity * | |
| 17.96 | |
| 16.18 | |
| 15.67 | | | 16.59 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2019 |
| December 31, 2018 |
| ||
|
|
|
|
|
|
|
| (dollars in thousands) |
| ||||
Tangible Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity |
|
|
|
|
|
|
| $ | 348,936 |
| $ | 340,396 |
|
Less: Goodwill |
|
|
|
|
|
|
|
| 23,620 |
|
| 23,620 |
|
Less: Core deposit intangible assets, net |
|
|
|
|
|
|
|
| 4,366 |
|
| 5,453 |
|
Tangible common equity |
|
|
|
|
|
|
| $ | 320,950 |
| $ | 311,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
| $ | 3,166,613 |
| $ | 3,249,569 |
|
Less: Goodwill |
|
|
|
|
|
|
|
| 23,620 |
|
| 23,620 |
|
Less: Core deposit intangible assets, net |
|
|
|
|
|
|
|
| 4,366 |
|
| 5,453 |
|
Tangible assets |
|
|
|
|
|
|
| $ | 3,138,627 |
| $ | 3,220,496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity to total assets |
|
|
|
|
|
|
|
| 11.02 | % |
| 10.48 | % |
Tangible common equity to tangible assets |
|
|
|
|
|
|
|
| 10.23 | % |
| 9.67 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
|
| September 30, 2019 |
| September 30, 2018 |
| September 30, 2019 |
| September 30, 2018 |
| ||||
|
| (dollars in thousands) |
| ||||||||||
Average Tangible Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity |
| $ | 348,750 |
| $ | 332,151 |
| $ | 344,844 |
| $ | 327,998 |
|
Less: Goodwill |
|
| 23,620 |
|
| 23,620 |
|
| 23,620 |
|
| 23,620 |
|
Less: Core deposit intangible assets, net |
|
| 4,561 |
|
| 6,070 |
|
| 4,924 |
|
| 6,456 |
|
Average tangible common equity |
| $ | 320,569 |
| $ | 302,461 |
| $ | 316,300 |
| $ | 297,922 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 17,437 |
| $ | 17,592 |
| $ | 50,778 |
| $ | 51,879 |
|
C Corp equivalent net income (1) |
|
| 13,122 |
|
| 13,228 |
|
| 38,284 |
|
| 39,103 |
|
Adjusted C Corp equivalent net income |
|
| 14,343 |
|
| 13,132 |
|
| 43,010 |
|
| 39,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average stockholders' equity * |
|
| 20.00 | % |
| 21.19 | % |
| 19.63 | % |
| 21.09 | % |
C Corp equivalent return on average stockholders' equity * (1) |
|
| 15.05 | % |
| 15.93 | % |
| 14.80 | % |
| 15.90 | % |
Adjusted C Corp equivalent return on average stockholders' equity * |
|
| 16.45 | % |
| 15.81 | % |
| 16.63 | % |
| 15.99 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average tangible common equity * |
|
| 21.76 | % |
| 23.27 | % |
| 21.40 | % |
| 23.22 | % |
C Corp equivalent return on average tangible common equity * (1) |
|
| 16.37 | % |
| 17.49 | % |
| 16.14 | % |
| 17.50 | % |
Adjusted C Corp equivalent return on average tangible common equity * |
|
| 17.90 | % |
| 17.37 | % |
| 18.13 | % |
| 17.60 | % |
* Annualized measure.
|
|
Tangible common equity and tangible assets are non-GAAP financial measures generally used by investors to evaluate capital adequacy. We calculate: (i) tangible common equity as total stockholders’ equity less goodwill and other intangible assets; (ii) tangible assets as total assets less goodwill and other intangible assets, (iii) tangible common equity to tangible assets as the ratio of tangible common equity (as described in clause (i)) to tangible assets (as described in clause (ii)). Adjusted C Corp equivalent return on average stockholders’ equity is a non-GAAP financial measure that is calculated by dividing adjusted C Corp equivalent net income for a period by average stockholders' equity for the period. Adjusted C Corp equivalent return on average tangible common equity is a non-GAAP financial measure that is calculated by dividing adjusted C Corp equivalent net income for a period by average tangible common equity for the period. We believe that these non-GAAP financial measures, and the related ratios such as adjusted C Corp equivalent return on average stockholders’ equity and adjusted C Corp equivalent return on average tangible common equity, are important information to be provided to investors because investors, our management, and banking regulators can use the tangible book value in conjunction with more traditional bank capital ratios to assess our capital adequacy without the effect of our goodwill and core deposit intangible assets and compare our capital adequacy with the capital adequacy of other banking organizations with significant amounts of goodwill and/or core deposit intangible
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assets, which typically stem from the use of the purchase accounting method of accounting for mergers and acquisitions.
Reconciliation of Non-GAAP Financial Measure - Core Deposits
| | | | | | | |
| | September 30, 2022 | | December 31, 2021 | | ||
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| (dollars in thousands) | | ||||
Core Deposits | | | | | | | |
Total deposits | | $ | 3,643,443 | | $ | 3,738,185 | |
Less: time deposits of $250,000 or more | |
| 25,829 | | | 59,512 | |
Less: brokered deposits | |
| — | | | 4,238 | |
Core deposits | | $ | 3,617,614 | | $ | 3,674,435 | |
| | | | | | | |
Core deposits to total deposits | |
| 99.29 | % | | 98.29 | % |
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| September 30, 2019 |
| December 31, 2018 |
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| (dollars in thousands) |
| ||||
Core Deposits |
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Total deposits |
| $ | 2,704,058 |
| $ | 2,795,970 |
|
Less: time deposits of $250,000 or more |
|
| 32,075 |
|
| 36,875 |
|
Less: brokered deposits |
|
| — |
|
| — |
|
Core deposits |
| $ | 2,671,983 |
| $ | 2,759,095 |
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Core deposits to total deposits |
|
| 98.81 | % |
| 98.68 | % |
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Core deposits exclude time depositsTable of $250,000 or more and brokered deposits. We believe this non-GAAP financial measure provides investors with information regarding the stability of the Company's sources of funds.Contents
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Managing risk is an essential part of successfully managing a financial institution. Our most prominent risk exposures are interest rate risk and credit risk. Interest rate risk is the potential reduction of net interest income as a result of changes in interest rates. Credit risk is the risk of not collecting the interest and/or the principal balance of a loan or investment when it is due and is disclosed in detail above.
Interest Rate Risk
TheOur most significant form of market risk is interest rate risk inherent in the normal course of lending and deposit-taking activities. Interest rate risk is the potential reduction of net interest income as a result of changes in interest rates. Management believes that our ability to successfully respond to changes in interest rates will have a significant impact on our financial results. To that end, management actively monitors and manages our interest rate exposure.
The Company’s Asset/Liability Management Committee (ALCO)(“ALCO”), which is authorized by the Company’s board of directors, monitors our interest rate sensitivity and makes decisions relating to that process. The ALCO’s goal is to structure our asset/liability composition to maximize net interest income while managing interest rate risk so as to minimize the adverse impact of changes in interest rates on net interest income and capital in either a rising or declining interest rate environment. Profitability is affected by fluctuations in interest rates. A sudden and substantial change in interest rates may adversely impact our earnings because the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis.
We monitor the impact of changes in interest rates on our net interest income and economic value of equity or EVE,(“EVE”) using rate shock analysis. Net interest income simulations measure the short-term earnings exposure from changes in market rates of interest in a rigorous and explicit fashion. Our current financial position is combined with assumptions regarding future business to calculate net interest income under varying hypothetical rate scenarios. EVE measures our long-term earnings exposure from changes in market rates of interest. EVE is defined as the present value of assets minus the present value of liabilities at a point in time. A decrease in EVE due to a specified rate change indicates a decline in the long-term earnings capacity of the balance sheet assuming that the rate change remains in effect over the life of the current balance sheet.
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The following table sets forth as of September 30, 2019, the estimated impact on our EVE and net interest income of immediate and parallel changes in interest rates at the specified levels.
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| Increase (Decrease) in |
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| Estimated Increase |
| Estimated Net Interest Income |
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| (Decrease) in EVE |
| Year 1 |
| Year 2 |
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| | | | | | | Increase (Decrease) in |
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| Estimated Increase |
| Estimated Net Interest Income | | |||||||||||||||||||||||||||
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| (Decrease) in EVE |
| Year 1 |
| Year 2 | | |||||||||||||||||||||||||
Change in Interest Rates (basis points) |
| Amount |
| Percent |
| Amount |
| Percent |
| Amount |
| Percent |
|
| Amount |
| Percent |
| Amount |
| Percent |
| Amount |
| Percent | | ||||||
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| (dollars in thousands) |
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| | (dollars in thousands) | | |||||||||||||||||||||||||||||
September 30, 2022 | | | | | | | | | | | | | | | | | ||||||||||||||||
+400 |
| $ | 194,449 |
| 39.4 | % | $ | 21,736 |
| 17.5 | % | $ | 28,376 |
| 23.2 | % | | $ | 100,521 |
| 12.7 | % | $ | 18,090 |
| 10.8 | % | $ | 30,453 |
| 16.9 | % |
+300 |
|
| 160,755 |
| 32.6 | % |
| 17,088 |
| 13.8 | % |
| 22,665 |
| 18.5 | % | |
| 92,248 |
| 11.7 | |
| 14,152 |
| 8.4 | | | 24,407 |
| 13.5 | |
+200 |
|
| 118,640 |
| 24.1 | % |
| 11,818 |
| 9.5 | % |
| 15,974 |
| 13.1 | % | |
| 73,526 |
| 9.3 | |
| 9,817 |
| 5.9 | | | 17,334 |
| 9.6 | |
+100 |
|
| 64,260 |
| 13.0 | % |
| 6,130 |
| 4.9 | % |
| 8,479 |
| 6.9 | % | |
| 44,161 |
| 5.6 | |
| 5,115 |
| 3.0 | | | 9,293 |
| 5.1 | |
Flat |
|
| — |
| — | % |
| — |
| — | % |
| — |
| — | % | ||||||||||||||||
-100 |
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| (91,930) |
| (18.6) | % |
| (11,096) |
| (9.0) | % |
| (15,575) |
| (12.7) | % | |
| (70,856) |
| (9.0) | |
| (8,801) |
| (5.2) | | | (13,809) |
| (7.6) | |
-200 |
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| (93,640) |
| (19.0) | % |
| (20,144) |
| (16.3) | % |
| (28,077) |
| (22.9) | % | | | (168,345) |
| (21.3) | |
| (20,005) |
| (11.9) | | | (31,410) |
| (17.4) | |
| | | | | | | | | | | | | | | | | ||||||||||||||||
December 31, 2021 | | | | | | | | | | | | | | | | | ||||||||||||||||
+400 | | $ | 92,106 |
| 19.7 | % | $ | 23,230 |
| 18.7 | % | $ | 38,485 |
| 31.7 | % | ||||||||||||||||
+300 | |
| 76,708 |
| 16.4 | |
| 17,938 |
| 14.5 | | | 30,487 |
| 25.1 | | ||||||||||||||||
+200 | |
| 51,627 |
| 11.1 | |
| 12,154 |
| 9.8 | | | 21,339 |
| 17.6 | | ||||||||||||||||
+100 | |
| 12,453 |
| 2.7 | |
| 5,818 |
| 4.7 | | | 11,062 |
| 9.1 | | ||||||||||||||||
-100 | |
| 34,852 |
| 7.5 | |
| (4,098) |
| (3.3) | | | (7,746) |
| (6.4) | | ||||||||||||||||
This data does not reflect any actions that we may undertake in response to changes in interest rates, such as changes in rates paid on certain deposit accounts based on local competitive factors or changes in earning assets mix, which could reduce the actual impact on EVE and net interest income, if any.
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Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in EVE and net interest income requires that we make certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The EVE and net interest income table presented above assumes that the composition of our interest-rate-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and, accordingly, the data does not reflect any actions that we may undertake in response to changes in interest rates, such as changes in rates paid on certain deposit accounts based on local competitive factors.factors, which could change the actual impact on EVE and net interest income. The table also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or the repricing characteristics of specific assets and liabilities. Accordingly, although the EVE and net interest income table provides an indication of our sensitivity to interest rate changes at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results.
Credit Risk
Credit risk is the risk that borrowers or counterparties will be unable or unwilling to repay their obligations in accordance with the underlying contractual terms. We manage and control credit risk in the loan and lease portfolio by adhering to well-defined underwriting criteria and account administration standards established by management. Our loan policy documents underwriting standards, approval levels, exposure limits and other limits or standards deemed necessary and prudent. Portfolio diversification at the borrower, industry, and product levels is actively managed to mitigate concentration risk. In addition, credit risk management also includesincludes an independent loan review process that assesses compliance with loan policy, compliance with loan documentation standards, accuracy of the risk rating and overall credit quality of the loan portfolio.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this report was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2019,2022, the end of the period covered by this report, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is: (i) accumulated and
72
communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure; and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
(b) Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) or Rule 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 20192022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
87
PART II. OTHER INFORMATION
We are sometimes party to legal actions that are routine and incidental to our business. Management, in consultation with legal counsel, does not expect the ultimate disposition of any or a combination of these matters to have a material adverse effect on our assets, business, cash flow, financial condition, (financial or otherwise), liquidity, prospects and results of operations. However,operations; however, given the nature, scope and complexity of the extensive legal and regulatory landscape applicable to our business, including laws and regulations governing consumer protection, fair lending, fair labor, privacy, information security and anti-money laundering and anti-terrorism laws, we, like all banking organizations, are subject to heightened legal and regulatory compliance and litigation risk.
There have been no material changes to the risk factors disclosed under the heading “Risk Factors” in our prospectusAnnual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on OctoberMarch 11, 2019.2022.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
None.
UseIssuer Purchases of Proceeds from Initial Public OfferingEquity Securities
On October 10, 2019, our registration statementDecember 14, 2021, the Company’s board of directors approved a stock repurchase program that authorizes the Company to repurchase up to $15 million of its common stock. The stock repurchase program will be in effect until January 1, 2023 with the timing of purchases and number of shares repurchased dependent upon a variety of factors including price, trading volume, corporate and regulatory requirements, and market conditions. The Company is not obligated to purchase any shares under the stock repurchase program, and the stock repurchase program may be suspended or discontinued at any time without notice. The stock repurchase program has been paused until completion of the vote of Town and Country’s shareholders on Form S-1 (Registration No. 333-233747) was declared effective by the SEC for our underwritten initial public offering (the “IPO”) in which we sold a totalmerger.
The following table sets forth information about the Company’s purchases of 9,429,794 shares of ourits common stock at a price toduring the publicthird quarter of $16.00 per share. Keefe, Bruyette & Woods, Inc.2022, all of which were conducted in compliance with Rule 10b-18 and J.P. Morgan Securities LLC acted as representatives ofRegulation M under the underwriters for the offering.Exchange Act:
| | | | | | | | | | |
| | | | | | | Total Number of Shares | | Approximate Dollar Value of | |
| | Total Number | | Average | | Purchased as Part of | | Shares That May Yet be Purchased | ||
| | of Shares | | Price Paid | | Publicly Announced | | Under the Plans or Programs | ||
Period |
| Purchased |
| Per Share |
| Plans or Programs |
| (in thousands) | ||
July 1 - 31, 2022 | | 24,828 | | $ | 17.71 | | 24,828 | | $ | 11,209 |
August 1 - 31, 2022 | | 39,842 | | | 18.63 | | 39,842 | | | 10,467 |
September 1 - 30, 2022 | | 13,901 | | | 17.96 | | 13,901 | | | 10,217 |
Total | | 78,571 | | $ | 18.22 | | 78,571 | | $ | 10,217 |
The offering commenced on October 1, 2019. The sale of the initial 8,300,000 shares closed on October 16, 2019, and the sale of an additional 1,129,794 shares pursuant to the exercise of the underwriters’ option to purchase additional shares closed on October 31, 2019. We received total net proceeds, after deducting estimated underwriting discounts and commissions and offering expenses payable by the Company, of approximately $138 million. We used approximately $121 million of the net proceeds of the offering, together with the proceeds of dividends to us from Heartland Bank and Trust Company (“Heartland Bank”) and State Bank of Lincoln (“Lincoln Bank”), to pay a $170 million distribution to our pre-IPO stockholders. We used approximately $17 million of the net proceeds of the offering to make a capital contribution to Heartland Bank.
Repurchases of Equity Securities
None.
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Item88
ITEM 4. MINE SAFETY DISCLOSURES
None.
None.
None.
Exhibit No. |
| Description |
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| | |
| | |
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10.1 § | | |
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10.2 § | | |
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31.1 | | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a). |
| | |
31.2 | | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a). |
| | |
32.1 | | Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350. |
| | |
32.2 | | Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350. |
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101.INS | |
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101.SCH | |
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101.CAL | |
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101.LAB | |
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101.PRE | |
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101.DEF | |
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104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibits 101). |
* | Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule will be furnished to the SEC upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any document so furnished. |
** | This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent the Company specifically incorporates it by reference. |
§ | A management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K. |
*This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.
7489
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| HBT FINANCIAL, INC. | |
| | |
November | By: | /s/ Matthew J. Doherty |
| | Matthew J. Doherty |
| | Chief Financial Officer |
| | (on behalf of the registrant and as principal financial officer) |
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