10-Q: HBT Financial Q3 2025 Earnings Rise, Announces CNB Acquisition

HBT Financial reports an 8.7% increase in Q3 2025 net income to $19.8 million and a 12.7% rise in YTD net income, alongside the announcement of its acquisition of CNB Bank Shares, Inc.

Summary

• Net income for Q3 2025 increased by 8.7% to $19.8 million ($0.63 diluted EPS) from $18.2 million ($0.57 diluted EPS) in Q3 2024.
• Net income for the nine months ended September 30, 2025, rose by 12.7% to $58.1 million ($1.84 diluted EPS) from $51.5 million ($1.62 diluted EPS) in the same period of 2024.
• Net interest income for Q3 2025 increased by $2.3 million (4.7%) to $50.0 million, driven by lower funding costs and improved debt securities yields.
• Net interest margin improved to 4.13% in Q3 2025 from 3.98% in Q3 2024.
• Total assets stood at $5.035 billion as of September 30, 2025, a slight increase from $5.033 billion at December 31, 2024.
• Total deposits increased by $28.9 million (0.7%) to $4.347 billion, with a significant transition of repurchase agreements to reciprocal interest-bearing demand accounts and $45.0 million of wealth management customer reciprocal money market deposits.
• Loans, before allowance for credit losses, decreased by $66.1 million (1.9%) to $3.400 billion, mainly due to early payoffs and refinancings.
• The company announced the acquisition of CNB Bank Shares, Inc. (CNBN) for approximately 5.5 million shares of HBT common stock and $33.8 million in cash, expected to close in Q1 2026.
• Total noninterest income increased by $1.1 million (13.1%) in Q3 2025, primarily due to a smaller negative mortgage servicing rights fair value adjustment and higher wealth management fees.
• Total noninterest expense increased by $1.2 million (3.8%) in Q3 2025, including a $0.4 million loss on extinguishment of debt from early payoff of subordinated notes.
• The allowance for credit losses remained stable at $41.9 million, with a provision for credit losses of $0.6 million in Q3 2025.
• Nonperforming assets increased by 7.8% to $8.6 million, mainly due to an increase in foreclosed assets.
• The company repurchased 39,631 shares of common stock at a weighted average price of $25.36 during Q3 2025, with $11.1 million remaining under the current authorization.
• Quarterly cash dividends increased to $0.21 per share in 2025 from $0.19 per share in 2024.

Sentiment

Score: 8

Explanation: The company demonstrated robust financial performance with significant increases in net income and net interest margin, alongside an improved efficiency ratio. The announced acquisition of CNB Bank Shares, Inc. is a strategic move to enhance market density and scale, promising future growth. Despite a slight decrease in loan balances and an increase in nonperforming assets, the overall financial health, strong capital position, increased dividends, and ongoing share repurchase program present a compelling investment case.

Positives

• Net income increased by 8.7% for Q3 2025 and 12.7% for YTD 2025.
• Net interest income grew by 4.7% in Q3 2025 and 4.9% YTD 2025.
• Net interest margin improved to 4.13% in Q3 2025 from 3.98% in Q3 2024.
• Wealth management fees increased by $0.5 million (Q3) and $0.9 million (YTD), driven by higher assets under management.
• Total deposits increased by 0.7% to $4.347 billion, with a favorable shift in deposit mix (repurchase agreements to interest-bearing demand).
• Strong capital ratios, with the company and its bank meeting all capital adequacy requirements and the bank being "well capitalized."
• Stock repurchase program in place, with $11.1 million remaining under current authorization.
• Increased quarterly cash dividends to $0.21 per share.
• Acquisition of CNB Bank Shares, Inc. is expected to increase density in key markets and add $1.8 billion in assets, $1.3 billion in loans, and $1.5 billion in deposits.

Negatives

• Loans, before allowance for credit losses, decreased by $66.1 million (1.9%) from December 31, 2024, primarily due to early payoffs and refinancings.
• Yield on loans decreased to 6.35% in Q3 2025 from 6.45% in Q3 2024.
• Nonperforming assets increased by 7.8% to $8.6 million, mainly due to an increase in foreclosed assets.
• A $0.4 million loss on extinguishment of debt was incurred due to the early payoff of subordinated notes.
• Unrealized losses on equity securities of $67 thousand in Q3 2025, compared to a $136 thousand gain in Q3 2024.
• Mortgage servicing rights fair value adjustment remained negative at ($514) thousand in Q3 2025, though less negative than Q3 2024.
• Interest-bearing deposits with banks yield decreased to 3.75% in Q3 2025 from 4.77% in Q3 2024.

Risks

• The strength of the local, state, national, and international economies and financial markets (including effects of inflationary pressures and supply chain constraints).
• Effects on the U.S. economy resulting from the threat or implementation of, or changes to, existing policies and executive orders including tariffs, immigration policy, regulatory or other governmental agencies, foreign policy and tax regulations.
• The economic impact of any future terrorist threats and attacks, widespread disease or pandemics, acts of war or other threats thereof (including the Russian invasion of Ukraine and ongoing conflicts in the Middle East), or other adverse 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.
• New and revised accounting policies and practices, as may be adopted by state and federal regulatory banking agencies, the Financial Accounting Standards Board or the Public Company Accounting Oversight Board.
• Changes in local, state and federal laws, regulations and governmental policies concerning the company's general business and any changes in response to bank failures.
• The imposition of tariffs or other governmental policies impacting the value of products produced by the company's commercial borrowers.
• Changes in interest rates and prepayment rates of the company's assets.
• Increased competition in the financial services sector, including from non-bank competitors such as credit unions and fintech companies, and the inability to attract new customers.
• Technological changes implemented by the company and other parties, including third-party vendors, which may have unforeseen consequences, including the development and implementation of tools incorporating artificial intelligence.
• Unexpected results of acquisitions, which may include failure to realize the anticipated benefits of acquisitions and the possibility that transaction costs may be greater than anticipated.
• The loss of key executives and employees, talent shortages and employee turnover.
• Changes in consumer spending.
• Unexpected outcomes or costs of existing or new litigation or other legal proceedings and regulatory actions involving the company.
• The economic impact on the company and its customers of climate change, natural disasters and of exceptional weather occurrences such as tornadoes, floods and blizzards.
• Fluctuations in the value of securities held in the securities portfolio, including as a result of changes in interest rates.
• Credit risks and risks from concentrations (by type of borrower, geographic area, collateral and industry) within the loan portfolio (including commercial real estate loans) and large loans to certain borrowers.
• The overall health of the local and national real estate market.
• The ability to maintain an adequate level of allowance for credit losses on loans.
• The concentration of large deposits from certain clients who have balances above current FDIC insurance limits and who may withdraw deposits to diversify their exposure.
• The ability to successfully manage liquidity risk, which may increase dependence on non-core funding sources such as brokered deposits, and may negatively impact the company's cost of funds.
• The level of nonperforming assets on the balance sheets.
• Interruptions involving information technology and communications systems or third-party servicers.
• The occurrence of fraudulent activity, breaches or failures of third-party vendors' information security controls or cybersecurity-related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools or as a result of insider fraud.
• The effectiveness of the company's risk management framework and internal disclosure controls and procedures.
• Asset quality and any loan charge-offs.
• The effects of changes in interest rates on net interest income, net interest margin, investments, loan originations, and modeling estimates relating to interest rate changes.
• Access to sources of liquidity and capital to address liquidity needs.
• Inability to receive dividends from the Bank, pay dividends to common stockholders or satisfy obligations as they become due.
• The effects of problems encountered by other financial institutions.
• Ability to achieve organic loan and deposit growth and the composition of such growth.
• 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 operations in the States of Illinois and Iowa.
• Ability to attract and retain customer deposits.
• Ability to maintain the Bank's reputation.
• Possible impairment of goodwill and other intangible assets.
• Market perceptions associated with certain aspects of the business.
• The possibility that stockholders of CNB Bank Shares, Inc. ("CNBN") may not approve the merger agreement between HBT and CNBN with respect to the proposed merger transaction.
• The risk that a condition to closing of the proposed transaction may not be satisfied, that either party may terminate the merger agreement or that the closing of the proposed transaction might be delayed or not occur at all.
• Potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed transaction.
• The diversion of management time on transaction-related issues.
• The ultimate timing, outcome and results of integrating the operations of CNBN into those of HBT.
• Regulatory approvals of the transaction.
• The effects of the current U.S. government shutdown, including the impact of prolonged closures or staffing reductions at government agencies effecting the business.
• Ability to meet obligations as a public company, including obligations under Section 404 of the Sarbanes-Oxley Act of 2002.
• Ability to manage the risks associated with the foregoing as well as anticipated.

Future Outlook

Management anticipates a mild slowdown for Q4 2025 followed by a gradual increase in economic activity over the remainder of the four-quarter forecast period. The unemployment rate is expected to increase slightly during Q4 2025 then decrease slightly in 2026, while GDP growth slows during Q4 2025 and then increases in 2026. The acquisition of CNB Bank Shares, Inc. is expected to close in Q1 2026, subject to approvals. Generally, increases in market interest rates are expected to increase net interest income and net interest margin, while decreases may decrease them, depending on timing and extent of fluctuations. Potential deterioration of economic conditions may lead to higher credit losses. The company expects to continue its stock repurchase program, with $11.1 million remaining under current authorization until January 1, 2026.

Management Comments

• "Management believed the current liquidity and available sources of liquidity are adequate to meet all of the reasonably foreseeable short-term and intermediate-term demands of the Bank."
• "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."
• "Management believed the current liquidity and available sources of liquidity are adequate to meet all of the reasonably foreseeable short-term and intermediate-term demands of the Holding Company."
• "Management was not aware of any known trends, events or uncertainties that had or were reasonably likely to have a material impact on the Company’s capital resources."
• "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, liquidity, prospects and results of operations."
• "The Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2025, the Company’s disclosure controls and procedures were effective."

Industry Context

The company operates within a regional banking environment in Illinois and Iowa, aiming to increase market density through the CNBN acquisition. The discussion of interest rate changes and their impact on net interest margin reflects broader trends in the financial services industry, where banks are navigating fluctuating interest rate environments set by the Federal Open Market Committee (FOMC). The mention of increased competition from non-bank competitors like credit unions and fintech companies highlights a key industry challenge. The focus on growing deposits through relationship-driven banking and community-focused marketing is a common strategy for regional banks to maintain a stable, low-cost funding base.

Comparison to Industry Standards

• The Bank's "well capitalized" status under regulatory prompt corrective action provisions indicates a strong capital position, generally exceeding minimum industry standards.
• The efficiency ratio of 53.17% for Q3 2025 is an improvement and is generally considered favorable within the banking industry, suggesting effective cost management relative to revenue generation.
• Return on average assets (ROAA) of 1.56% and return on average tangible common equity (ROATCE) of 15.28% for Q3 2025 are strong performance indicators, often exceeding typical averages for regional banks, demonstrating superior profitability.
• The net interest margin of 4.13% for Q3 2025 is robust, reflecting effective asset/liability management in a dynamic interest rate environment.

Corporate Governance

Legal Proceedings

• The company is sometimes party to legal actions that are routine and incidental to its business, but management does not expect these to have a material adverse effect on its financial statements.
• The company, like all banking organizations, is subject to heightened legal and regulatory compliance and litigation risk due to the extensive legal and regulatory landscape.

Stakeholder Impact

• Shareholders: Positive impact from increased net income, improved EPS, increased dividends, and ongoing stock repurchase program. Potential for future growth and increased market density from the CNBN acquisition. CNBN shareholders will become HBT shareholders.
• Employees: Potential for integration challenges and opportunities following the CNBN acquisition.
• Customers: Increased density in central Illinois, Chicago MSA, and St. Louis MSA markets could offer expanded services and convenience.
• Creditors: Strong capital ratios and adequate liquidity indicate a stable financial position.
• Regulatory Authorities: The company and its bank met all capital adequacy requirements and maintained effective disclosure controls.

Next Steps

• Integration of CNB Bank Shares, Inc. operations following the expected Q1 2026 closing.
• Continued execution of the stock repurchase program until January 1, 2026, with $11.1 million remaining.
• Monitoring of economic conditions, particularly unemployment rate and GDP growth, as they impact credit loss provisions.
• Compliance with new accounting standards: ASU 2023-09 (Income Taxes) effective for years beginning after December 15, 2024, and ASU 2024-03 (Income Statement Expenses) effective for years beginning after December 15, 2026.

Key Dates

Recommendation

The company demonstrated robust financial performance with significant increases in net income and net interest margin, alongside an improved efficiency ratio. The announced acquisition of CNB Bank Shares, Inc. is a strategic move to enhance market density and scale, promising future growth. Despite a slight decrease in loan balances and an increase in nonperforming assets, the overall financial health, strong capital position, increased dividends, and ongoing share repurchase program present a compelling investment case. The positive outlook on economic conditions and effective risk management further support a strong buy recommendation.

Keywords

Banking, Financial Services, Regional Bank, Illinois, Iowa, SEC Filing, 10-Q, Quarterly Report, Earnings, Net Income, Net Interest Margin, Deposits, Loans, Asset Quality, Credit Losses, Acquisition, Merger, CNB Bank Shares, Stock Repurchase, Dividends, Capital Ratios, Interest Rate Risk, Liquidity