HBT Financial, Inc. (NASDAQ:HBT) is a bank holding company with deep roots in central Illinois and eastern Iowa. Founded in 1920, the company has navigated through numerous economic cycles, adapting its strategies to deliver consistent financial results for its shareholders. Despite facing headwinds in recent years, HBT Financial has demonstrated its resilience, leveraging its strong market presence and prudent risk management to drive sustainable growth.

Business Overview and History HBT Financial, formerly known as Heartland Bancorp, traces its origins back to 1920 when it was established as Farmers State Bank in Bloomington, Illinois. Over the decades, the company has undergone several transformations, including name changes and strategic acquisitions, to solidify its position as a leading community bank in its core markets.

The company's growth trajectory has been marked by significant milestones. In the 1980s and 1990s, HBT Financial made several strategic acquisitions to expand its presence in central Illinois. A pivotal moment came in 2002 when the company converted from a mutual holding company structure to a stock holding company structure, enabling it to raise additional capital and pursue new growth opportunities.

In the early 2000s, HBT Financial began expanding into the Chicago metropolitan area, opening new branches and offices to serve this larger market. This expansion strategy allowed the company to diversify its geographic footprint and tap into new customer segments.

During the 2008 financial crisis, HBT Financial demonstrated its resilience by successfully navigating through the challenging economic environment. The company maintained strong asset quality and capitalized on opportunities to gain market share, emerging from the crisis in a stronger position.

In 2023, HBT Financial made a significant move by acquiring Town and Country Financial Corporation, further expanding its footprint in central Illinois and entering the metro-east St. Louis market. This acquisition not only strengthened the company's market share but also bolstered its product offerings and technological capabilities, positioning it for long-term growth. The integration of Town and Country was successfully completed in early 2024, adding new customers and capabilities to the HBT Financial platform.

Throughout its history, HBT Financial has remained committed to its community banking model, focusing on building deep relationships with customers and delivering personalized service. The company's stable leadership team and disciplined risk management have been instrumental in navigating various economic cycles and positioning HBT Financial for long-term success.

Financial Performance and Ratios HBT Financial's financial performance has been largely consistent, showcasing its ability to navigate through various economic environments. As of the latest reported quarter (Q3 2024), the company generated net income of $18.2 million, or $0.57 per diluted share, reflecting a return on average assets (ROAA) of 1.44% and a return on average stockholders' equity (ROAE) of 13.81%. Adjusted for non-recurring items, the company's net income stood at $19.2 million, or $0.61 per diluted share, with an adjusted ROAA of 1.53% and an adjusted ROAE of 14.62%.

The company's net interest margin, a critical metric for banks, expanded to 4.03% on a tax-equivalent basis during the third quarter, demonstrating its ability to effectively manage its interest-earning assets and liabilities. Additionally, HBT Financial maintained strong asset quality, with a non-performing assets to total assets ratio of 0.17% and a net charge-off ratio of 0.07% on an annualized basis.

For the most recent fiscal year (2023), HBT Financial reported revenue of $225.72 million, net income of $65.84 million, operating cash flow of $65.83 million, and free cash flow of $62.70 million. In the most recent quarter (Q3 2024), the company generated revenue of $56.44 million, net income of $18.18 million, operating cash flow of $25.52 million, and free cash flow of $24.57 million. Compared to Q3 2023, revenue decreased by 2.3% primarily due to a $1.5 million negative mortgage servicing rights fair value adjustment, and a $0.8 million loss on sale of securities in Q3 2023 that was not present in Q3 2024. Net income decreased by 7.8% primarily due to the items mentioned, as well as a $0.7 million increase in salaries expense.

HBT Financial operates primarily in Illinois and eastern Iowa. As of September 30, 2024, the company had $3.03 billion in loans and $4.17 billion in deposits in Illinois, and $336.25 million in loans and $111 million in deposits in Iowa.

Liquidity and Solvency HBT Financial's balance sheet remains healthy, with a loan-to-deposit ratio of 78.72% as of September 30, 2024. The company's core deposits, which include non-interest-bearing and low-cost accounts, accounted for 94.30% of total deposits, providing a stable funding base. Furthermore, the company's capital ratios, such as the Common Equity Tier 1 ratio of 15.10% and the Total Capital ratio of 16.13%, exceeded regulatory requirements, underscoring its financial strength and ability to withstand potential economic downturns.

As of September 30, 2024, HBT Financial reported a debt-to-equity ratio of 0.22, indicating a conservative capital structure. The company held $179.67 million in cash and cash equivalents, providing ample liquidity for operations and potential growth opportunities. Additionally, HBT Financial had access to $1.20 billion in additional borrowing capacity from the Federal Home Loan Bank (FHLB), Federal Reserve, and federal funds lines of credit, further bolstering its liquidity position.

Business Segments and Product Offerings HBT Financial operates through several key business segments, catering to a diverse range of financial needs in its markets:

1. Commercial and Industrial Loans: The company originates loans for working capital, equipment purchases, and business expansions across various industries.

2. Commercial Real Estate Loans: HBT provides financing for both owner-occupied and non-owner occupied commercial properties, including retail, office, warehouse, and multi-family buildings.

3. Construction and Land Development Loans: This segment offers loans for residential and commercial property development, as well as land acquisition and development.

4. Multi-Family Loans: HBT finances the purchase and refinancing of apartment buildings and other multi-unit residential properties.

5. One-to-Four Family Residential Loans: The bank originates loans for both owner-occupied and non-owner-occupied residential properties.

6. Agricultural and Farmland Loans: HBT provides financing for farmland purchases and operating loans to agricultural producers.

7. Municipal, Consumer, and Other Loans: This segment includes loans to state and local governments, as well as consumer-oriented products such as home equity lines of credit and auto loans.

As of September 30, 2024, HBT Financial reported total loans of $3.37 billion and total deposits of $4.28 billion. For the first nine months of 2024, the company generated net interest income of $141.45 million and noninterest income of $23.94 million, resulting in a net income of $51.51 million.

Challenges and Opportunities Like many financial institutions, HBT Financial has navigated through various challenges in recent years, including the COVID-19 pandemic, rising interest rates, and intensifying competition from non-traditional players in the banking industry. The company has proactively addressed these challenges by diversifying its revenue streams, enhancing its digital banking capabilities, and maintaining a disciplined risk management approach.

The banking industry has generally seen moderate growth in recent years, with challenges around rising interest rates, competition from fintech companies, and evolving consumer preferences toward digital banking. HBT Financial has been adapting to these trends by investing in technology and talent development to drive operational efficiencies and enhance its digital offerings.

Looking ahead, HBT Financial is well-positioned to capitalize on emerging opportunities in its core markets. The company's focus on relationship-driven banking, commitment to community involvement, and strategic acquisitions have positioned it to benefit from the continued economic growth in central Illinois and eastern Iowa. Additionally, the company's investments in technology and talent development are expected to drive further operational efficiencies and support its long-term growth aspirations.

Conclusion HBT Financial, Inc. has demonstrated its resilience and adaptability through its long history of serving the financial needs of its communities. By leveraging its strong market position, prudent risk management, and strategic initiatives, the company has weathered various challenges and emerged as a trusted financial partner in its core markets. As HBT Financial continues to navigate the evolving banking landscape, its commitment to delivering value for its shareholders and supporting the growth of the communities it serves will be key drivers of its long-term success. With a diverse range of financial products and services, a solid balance sheet, and a focus on operational efficiency, HBT Financial is well-equipped to face future challenges and capitalize on growth opportunities in the dynamic banking industry.