Executive Summary / Key Takeaways

• HBT Financial, Inc. (NASDAQ:HBT) is executing a clear growth strategy, anchored by its community banking model and enhanced by digital service offerings, culminating in the significant acquisition of CNB Bank Shares, Inc. (CNBN) expected in Q1 2026.
• The company demonstrated robust financial performance in the first nine months of 2025, with net income rising 12.7% year-over-year to $58.07 million, driven by lower funding costs and improved debt securities yields.
• HBT's asset quality remains strong, with a low net charge-offs to average total loans ratio, reflecting disciplined credit risk management and a favorable economic environment.
• The strategic acquisition of CNB Bank Shares, Inc. is poised to significantly increase HBT's market density in key Illinois and St. Louis MSA markets, offering a clear catalyst for future growth.
• While benefiting from a favorable interest rate environment, HBT faces competitive pressures from larger regional banks and fintechs, necessitating continued focus on digital enhancements and efficient operations.

The Heartland's Enduring Strength: A Foundation for Growth

HBT Financial, Inc., headquartered in Bloomington, Illinois, has cultivated a deep-rooted legacy in community banking since its inception in 1920 through Heartland Bank and Trust Company. The company's enduring motto, "small enough to know you, big enough to serve you," encapsulates its relationship-based approach, which has been instrumental in building a formidable presence across Illinois and eastern Iowa. This strategy has translated into a leading deposit share in many of its central Illinois markets, providing a stable and low-cost funding base that underpins its consistent financial performance.

HBT's business model is centered on providing a comprehensive suite of financial products and services to consumers, businesses, and municipal entities. This includes a diverse loan portfolio spanning commercial and industrial, real estate, agricultural, and residential segments, alongside robust wealth management and digital banking services. The company's strategic initiatives emphasize preserving strong community ties, deploying excess deposit funding into loan growth opportunities, and maintaining a prudent approach to credit underwriting.

Technological Edge in a Relationship-Driven Model

While HBT Financial does not boast a singular, proprietary "core technology" in the manufacturing sense, its technological differentiation lies in its strategic application of digital banking services to enhance its community-focused model. The company offers a comprehensive suite of digital banking services, including online and mobile banking, digital payment services, and personal financial management tools. These offerings provide tangible benefits by improving customer accessibility and convenience, allowing HBT to extend its personalized service beyond physical branches. This digital integration is a strategic initiative aimed at meeting evolving customer demands and maintaining competitiveness in a rapidly digitizing financial landscape.

HBT's approach to technology also involves a keen awareness of associated risks. The company acknowledges the potential for unforeseen consequences from technological changes, including the development and implementation of artificial intelligence tools. This proactive risk management, encompassing cybersecurity and information security controls, is crucial for safeguarding customer data and maintaining trust in its digital platforms. The strategic intent behind HBT's technology roadmap is to leverage digital solutions to support its overall business strategy, enhance capabilities, and meet future customer needs, ensuring its operational effectiveness in a competitive environment.

Competitive Landscape: Regional Strength Amidst Broader Pressures

HBT operates in a competitive environment, vying with a mix of regional banks and emerging fintech companies. Its primary direct competitors include established regional players like Wintrust Financial Corporation (WTFC), Old National Bancorp (ONB), Fifth Third Bancorp (FITB), and Associated Banc-Corp (ASB). HBT's strength lies in its localized customer engagement and niche services, particularly in agricultural lending and specialized wealth management offerings like farmland management and trustee services. These specialized services provide a unique value proposition, fostering strong customer retention and potentially leading to more robust fee-based revenue growth.

However, HBT's regional scale presents certain vulnerabilities. Larger competitors like Fifth Third Bancorp, with their extensive branch networks and advanced technological capabilities, may have an edge in product breadth and processing speed for digital payments. Wintrust Financial Corporation and Old National Bancorp, through their aggressive M&A strategies, also expand their market reach and product offerings, potentially outpacing HBT in overall market share capture. HBT's operational efficiency in retail banking and municipal lending is competitive, but its pace of innovation in digital services may lag behind some larger, more technologically focused rivals. The company also faces increased competition from non-bank entities like credit unions and fintech companies, which offer accessible digital payment solutions and lower-cost banking options, potentially eroding HBT's market share in retail and treasury services.

Financial Performance: A Story of Margin Expansion and Strategic Capital Deployment

HBT Financial delivered a compelling financial performance for the first nine months of 2025, demonstrating the effectiveness of its strategic focus amidst a dynamic interest rate environment. For the nine months ended September 30, 2025, net income increased by a significant 12.7% to $58.07 million, compared to $51.51 million in the same period of 2024. This growth was primarily fueled by a $6.90 million increase in net interest income, which reached $148.40 million, up 4.9% year-over-year. The expansion in net interest income was largely attributable to lower funding costs, higher yields on debt securities, and an increase in average loan balances. The net interest margin also saw a favorable increase to 4.13% for the nine-month period, up from 3.96% in 2024, driven by decreased funding costs and a beneficial shift in the mix of interest-earning assets.

Noninterest income also contributed positively, rising 18.2% to $28.30 million for the nine months ended September 30, 2025, compared to $23.94 million in the prior year. This was notably supported by a $0.90 million increase in wealth management fees, reflecting higher values of assets under management and an increase in agricultural real estate brokerage commissions. Furthermore, the company reported a minimal $49 thousand loss on sales of securities in 2025, a substantial improvement from the $3.40 million loss in 2024.

On the expense side, total noninterest expense for the nine months ended September 30, 2025, increased by 3.5% to $96.40 million. This was mainly due to a $1.50 million rise in employee benefits, driven by higher medical costs, and a $0.50 million increase in salaries due to annual merit increases. The company also incurred a $0.40 million loss on the extinguishment of debt associated with the early payoff of $40 million of subordinated notes in September 2025, a strategic move to optimize its funding structure.

HBT's asset quality remains robust, with total nonperforming assets at $8.60 million as of September 30, 2025, representing a modest increase from $8 million at December 31, 2024, primarily due to an increase in foreclosed assets. The allowance for credit losses to loans stood at a healthy 1.23%. The net charge-offs to average total loans ratio has remained low, a testament to management's disciplined credit monitoring and collection efforts, further supported by stable economic conditions.

Strategic Initiatives and Outlook

A pivotal strategic move for HBT Financial is the announced merger agreement to acquire CNB Bank Shares, Inc. (CNBN) and its subsidiary, CNB Bank, on October 20, 2025. This acquisition, expected to close in the first quarter of 2026, is set to significantly increase HBT's density in the central Illinois, Chicago MSA, and St. Louis MSA markets. The transaction, valued at approximately 5.50 million shares of HBT Financial's common stock and $33.80 million in cash, will see CNBN shareholders holding approximately 15% of HBT's outstanding common stock. This strategic expansion is a clear growth catalyst, promising enhanced market presence and operational efficiencies.

Management's economic forecast anticipates a mild slowdown in the fourth quarter of 2025, followed by a gradual increase in economic activity in 2026. The unemployment rate is projected to increase slightly before decreasing, and GDP growth is expected to slow before accelerating in 2026. While the Federal Open Market Committee's (FOMC) recent interest rate reductions have contributed to lower funding costs and improved net interest margin, future decreases in market interest rates could exert downward pressure on net interest margin, as the positive impact on maturing fixed-rate assets may not fully offset the negative impact on floating-rate loans. Conversely, increases in market interest rates are generally expected to boost net interest income and net interest margin.

HBT also continues its capital management strategy, having repurchased 39,631 shares of its common stock during the third quarter of 2025 at a weighted average price of $25.36. With $11.10 million remaining under the current stock repurchase authorization until January 1, 2026, the company demonstrates a commitment to returning value to shareholders.

Risks and Challenges

Despite a strong performance, HBT Financial faces several risks. Interest rate risk remains a significant concern, as fluctuations can adversely impact net interest income and the value of its securities portfolio. The company's asset-sensitive balance sheet presents challenges in a falling rate environment, as the impact on floating-rate loans may not be fully offset by changes in deposit costs. Credit risk, particularly from concentrations in commercial real estate loans, is actively managed through disciplined underwriting and monitoring, but a deterioration in economic conditions could lead to higher credit losses.

Increased competition from both traditional banks and fintech companies poses a continuous challenge, potentially impacting HBT's ability to attract new customers and grow organically. The company's presence in slower-growth geographic markets has been noted as a factor limiting near-term organic growth prospects. Furthermore, technological risks, including cybersecurity incidents and fraudulent activity, especially those leveraging sophisticated tools like artificial intelligence, represent a constant threat to information security and operational integrity. The successful integration of CNB Bank Shares, Inc. also carries execution risks, including the possibility of failing to realize anticipated benefits or incurring higher-than-expected transaction costs.

Conclusion

HBT Financial, Inc. stands as a resilient regional banking institution, successfully leveraging its community-centric model and strategic digital enhancements to deliver solid financial results. The company's consistent profitability, robust asset quality, and disciplined capital management underscore its operational strength. The impending acquisition of CNB Bank Shares, Inc. represents a significant strategic pivot, promising to deepen market penetration and provide a clear pathway for future growth, thereby enhancing its competitive standing in key Midwestern markets.

While HBT must remain vigilant against interest rate volatility, evolving competitive pressures from larger rivals and fintechs, and the ever-present threat of cybersecurity, its foundational strengths and proactive strategic initiatives position it favorably. The company's ability to seamlessly integrate its digital offerings with its relationship-based banking, coupled with a strategic expansion through M&A, forms a compelling investment thesis for discerning investors seeking a financially sound regional bank with a clear growth trajectory.