Company Background and History
HBT Financial, Inc. (NASDAQ:HBT) is a bank holding company with deep roots in the Midwest, tracing its origins back to 1920 when M.B. Drake, the grandfather of the current Executive Chairman, Fred Drake, helped found a community bank in Cornland, Illinois. Over the decades, the company has grown both organically and through strategic acquisitions, establishing itself as a leading provider of financial services throughout Illinois and eastern Iowa.
The company's history is a testament to its ability to adapt and thrive in the face of changing economic conditions. HBT Financial has weathered numerous challenges, including the 2008-2009 global financial crisis and the COVID-19 pandemic, emerging from these events with its financial strength intact and its commitment to its community-focused approach unwavering.
The Drake family's involvement in the banking industry has been instrumental in shaping HBT Financial's growth and success. In 1982, George Drake, M.B.'s son and Fred's father, incorporated the company as one of the first multi-bank holding companies in Illinois. This forward-thinking move set the stage for HBT Financial's expansion strategy, which has included the successful integration of more than a dozen community bank acquisitions over the years.
Business Model and Strategy
HBT Financial's community banking approach has been a cornerstone of its success. The company emphasizes personal relationships, responsive local decision-making, and a comprehensive suite of financial products and services. This strategy, coupled with the company's Midwestern values of hard work and perseverance, has enabled HBT Financial to generate consistently strong earnings and maintain high levels of asset quality throughout its history.
As of December 31, 2024, HBT Financial had total assets of $5.0 billion, loans held for investment of $3.5 billion, and total deposits of $4.3 billion. The company's diversified loan portfolio is predominantly comprised of commercial and commercial real estate loans, which account for approximately 79% of the total loan book. The bank's strong deposit base, with a substantial portion of low-cost core deposits, has been a key driver of its consistent financial performance.
Risk Management
One of the hallmarks of HBT Financial's success has been its disciplined approach to credit risk management. The company's robust underwriting standards and proactive portfolio monitoring have allowed it to maintain exceptional asset quality, even during challenging economic environments. As of December 31, 2024, the company's nonperforming assets to total assets ratio stood at a mere 0.16%, well below industry averages.
Growth Strategy
HBT Financial's growth strategy has been a blend of organic expansion and strategic acquisitions. In February 2023, the company completed its acquisition of Town and Country Financial Corporation, which further enhanced its footprint in central Illinois and expanded its presence into the metro-east St. Louis market. The integration of Town and Country has been seamless, and the company has been able to capitalize on the synergies created by the merger. This acquisition added $937.2 million in total assets, $635.4 million in total loans, and $720.4 million in total deposits to the company's balance sheet, marking a significant milestone in HBT Financial's growth trajectory.
Financials
The company's financial performance has been consistently strong, with net income of $71.8 million for the year ended December 31, 2024, up from $65.8 million in the previous year. The company's return on average assets (ROAA) and return on average tangible common equity (ROATCE) for the same period were 1.43% and 16.45%, respectively, reflecting its ability to generate robust earnings while maintaining a conservative risk profile.
For the most recent quarter (Q4 2024), HBT Financial reported revenue of $59.4 million and net income of $20.3 million. The company achieved a 4.9% year-over-year increase in revenue compared to the same quarter in the prior year. This growth demonstrates the company's ability to expand its business and capitalize on market opportunities.
The company's loan portfolio composition as of December 31, 2024, was as follows: commercial and industrial (12.4%), commercial real estate - owner occupied (9.3%), commercial real estate - non-owner occupied (25.9%), construction and land development (10.8%), multi-family (12.4%), one-to-four family residential (13.4%), agricultural and farmland (8.5%), and municipal, consumer, and other (7.3%). The allowance for credit losses on the loan portfolio totaled $42.0 million.
HBT Financial's deposit base remained strong, with total deposits of $4.32 billion as of December 31, 2024, consisting of $1.05 billion in noninterest-bearing deposits and $3.27 billion in interest-bearing deposits. The cost of total deposits was 1.30% for the year ended December 31, 2024.
In terms of financial performance, net interest income decreased 1.2% to $188.9 million in 2024, while the net interest margin decreased to 3.96% from 4.09% in the prior year. Noninterest income totaled $35.6 million, a decrease of 1.3% from 2023, primarily due to net losses on the sale of debt securities. Noninterest expense decreased 5.3% to $124.0 million, reflecting the absence of acquisition-related expenses incurred in 2023. The company's efficiency ratio on a tax-equivalent basis improved to 53.46% in 2024 from 55.81% in 2023.
Liquidity
HBT Financial's liquidity position remains solid, with a loan-to-deposit ratio of 80.27% as of December 31, 2024. The company's regulatory capital ratios exceed the well-capitalized thresholds, providing a strong cushion against unexpected events. The debt-to-equity ratio stood at 0.19, indicating a conservative approach to leverage. The company's cash balance was $137.7 million, further strengthening its liquidity position.
Business Overview
HBT Financial offers a diverse range of financial products and services through its subsidiary, Heartland Bank and Trust Company. These include traditional banking services, wealth management, and residential mortgage origination and servicing. The company's wealth management division provides financial planning, trust and custodial services, investment management, corporate retirement plan consulting and administration, and retail brokerage services. Additionally, the agricultural services department operates under the wealth management division, offering farm management services and brokering farmland sales and crop insurance throughout HBT Financial's markets.
Future Outlook
Looking ahead, HBT Financial remains well-positioned to continue its growth trajectory. The company's experienced management team, disciplined risk management practices, and commitment to serving its local communities have been the keys to its success. As the banking industry navigates the challenges posed by rising interest rates, economic uncertainties, and increased competition from non-traditional players, HBT Financial's focus on relationship-based banking and prudent risk management should enable it to maintain its competitive edge and deliver sustainable value to its shareholders.
For the full-year 2023, HBT provided guidance for earnings per share (EPS) in the range of $2.45 to $2.55, representing an expected increase compared to the 2022 actual EPS of $2.50. This guidance reflects the company's confidence in its ability to continue growing and improving its financial performance.
Conclusion
In conclusion, HBT Financial, Inc. is a community bank with a proven track record of navigating through various economic cycles. Its steadfast commitment to its Midwestern values, conservative risk management approach, and strategic growth initiatives have positioned the company as a resilient and reliable financial services provider in its markets. As the company continues to build on its legacy of success, investors may find HBT Financial's story compelling and worthy of further exploration.