425: HBT Financial Reports Q4 2025 Results, Advances CNB Merger

HBT Financial, Inc. announced robust fourth-quarter and full-year 2025 financial results, marked by strong balance sheet growth, excellent asset quality, and progress on its proposed merger with CNB Bank Shares, Inc.

Summary

• Net income for the fourth quarter of 2025 was $18.9 million, or $0.60 per diluted share, compared to $19.8 million ($0.63 diluted EPS) in Q3 2025 and $20.3 million ($0.64 diluted EPS) in Q4 2024.
• Adjusted net income for Q4 2025 was $20.1 million, or $0.64 per diluted share.
• Return on average assets (ROAA) was 1.47%, and adjusted ROAA was 1.57% for Q4 2025.
• Return on average tangible common equity (ROATCE) was 14.08%, and adjusted ROATCE was 14.97% for Q4 2025.
• Total loans outstanding increased by $56.2 million, or 6.6% on an annualized basis, during Q4 2025, reaching $3.46 billion.
• Total deposits increased by $12.1 million to $4.36 billion in Q4 2025, despite moving $50.0 million of wealth management deposits off-balance sheet due to strong liquidity.
• Asset quality remained strong with nonperforming assets to total assets stable at 0.17% at December 31, 2025.
• Net charge-offs to average loans were 0.10% on an annualized basis for Q4 2025 and 0.07% for the full year 2025.
• Net interest margin decreased 1 basis point to 4.12% in Q4 2025.
• Tangible book value per share increased to $17.20 at December 31, 2025, a 16.2% increase over the past year.
• The proposed merger with CNB Bank Shares, Inc. is progressing well, with anticipated closing and core system conversion expected in the first quarter of 2026.
• Acquisition-related expenses totaled $1.0 million in Q4 2025.

Sentiment

Score: 7

Explanation: The company reported a slight decline in GAAP net income and EPS quarter-over-quarter and year-over-year, and an increase in provision for credit losses and net charge-offs. However, adjusted metrics remained strong, asset quality is excellent, and the strategic merger is progressing well, indicating underlying operational strength and future growth potential. The strong capital and liquidity position, coupled with a new share repurchase program, reflects confidence.

Positives

• Adjusted net income of $20.1 million and adjusted diluted EPS of $0.64 for Q4 2025 demonstrate strong operational performance.
• Robust balance sheet growth with loans increasing $56.2 million (6.6% annualized) in Q4 2025, driven by new originations and higher line usage.
• Excellent asset quality maintained with nonperforming assets to total assets stable at 0.17% and modest net charge-offs (0.10% annualized Q4, 0.07% full year).
• Resilient net interest margin of 4.12%, supported by a 6 basis point decrease in funding costs to 1.23%.
• Tangible book value per share increased to $17.20 at December 31, 2025, marking a 16.2% increase over the past year.
• Strong liquidity and capital levels, with all regulatory capital requirements exceeded (e.g., Common Equity Tier 1 ratio of 14.42%).
• Progress on the CNB Bank Shares, Inc. merger, with integration planning on track for a Q1 2026 closing, enhancing market presence.
• A new stock repurchase program was authorized for up to $30.0 million, effective until January 1, 2027, signaling confidence in future performance.
• Wealth management fees increased by $0.2 million in Q4 2025, driven by farm management fees and higher assets under management.

Negatives

• Net income decreased to $18.9 million in Q4 2025 from $19.8 million in Q3 2025 and $20.3 million in Q4 2024.
• Diluted earnings per share decreased to $0.60 in Q4 2025 from $0.63 in Q3 2025 and $0.64 in Q4 2024.
• Net interest margin decreased 1 basis point to 4.12% from 4.13% in Q3 2025.
• Lower yields on loans, which decreased 13 basis points to 6.22%, primarily due to lower interest rates and a reduction in loan fees.
• Noninterest income decreased 14.9% from Q4 2024, primarily due to a negative mortgage servicing rights fair value adjustment of $0.3 million in Q4 2025 compared to a positive $1.3 million in Q4 2024.
• Noninterest expense increased 1.7% from Q3 2025, primarily due to $1.0 million of acquisition-related expenses.
• Provision for credit losses increased to $1.5 million in Q4 2025 from $0.6 million in Q3 2025, reflecting increased loan balances and changes within the portfolio.
• Net charge-offs increased to $0.8 million (0.10% annualized) in Q4 2025 from $0.1 million (0.02% annualized) in Q3 2025.

Risks

• The strength of local, state, national, and international economies and financial markets, including effects of inflationary pressures and supply chain constraints.
• The economic impact of future terrorist threats, widespread disease or pandemics, acts of war (e.g., Russian invasion of Ukraine, Middle East conflicts, Venezuela military activity), or other adverse events.
• 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 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.
• 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 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 sheet.
• 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 possibility that stockholders of CNB Bank Shares, Inc. may not approve the merger agreement.
• The risk that a condition to closing of the proposed transaction with CNB 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 with CNB.
• The diversion of management time on transaction-related issues related to the CNB merger.
• The ultimate timing, outcome, and results of integrating the operations of CNB into those of HBT.
• The effects of the merger with CNB on HBT's future financial condition, results of operations, strategy, and plans.
• Regulatory approvals of the transaction with CNB.

Future Outlook

Loan volumes are expected to be down slightly in Q1 2026, then up low-single digits for the full year 2026. Modest net interest margin (NIM) expansion is anticipated during 2026, based on the current yield curve, balance sheet composition, and the probability of two federal funds target rate reductions. Noninterest income is projected to grow in the low-single digits during 2026, while noninterest expense is expected to be between $32 million and $34 million per quarter, an approximate 3% increase from 2025. Asset quality is expected to remain solid, though metrics and charge-offs could slightly deteriorate if the economy softens, and changes in unemployment and GDP outlook may generate volatility in the Allowance for Credit Losses (ACL) calculation. The CNB merger is expected to close in late Q1 2026, with integration progressing as planned and no material changes to financial impact expectations.

Management Comments

• "Our fourth quarter results wrapped up a very successful 2025, with adjusted net income of $20.1 million, or $0.64 per diluted share, which was underpinned by strong balance sheet growth, excellent asset quality, and a resilient net interest margin."
• "Loans increased $56.2 million, or 6.6% on an annualized basis, during the fourth quarter of 2025. Deposits also increased during the quarter despite moving $50.0 million of wealth management deposits off balance sheet due to strong liquidity."
• "Asset quality remained strong with nonperforming assets to total assets remaining stable at 0.17% and charge-offs for the quarter remaining modest at 0.10%, on an annualized basis, and 0.07% for the full year."
• "Profitability remained strong during the fourth quarter of 2025, with an adjusted return on average assets of 1.57% and an adjusted return on average tangible common equity of 14.97%. In addition, tangible book value per share increased to $17.20 at December 31, 2025, a 16.2% increase over the past year."
• "Looking ahead to 2026, we feel our strong liquidity, capital, and asset quality levels position us for another solid year of performance."
• "We are excited about the proposed merger with CNB Bank Shares, Inc., which will be an attractive combination of our two franchises, materially enhancing our presence in the Chicago and St. Louis markets while also providing access to many new markets in central Illinois. We look forward to CNB Bank employees joining our team. The integration planning is progressing well, with anticipated closing and core system conversion expected to be completed in the first quarter of 2026."

Industry Context

HBT Financial's Q4 2025 results reflect a regional banking environment characterized by managing interest rate dynamics, with lower loan yields partially offset by reduced funding costs. The company's strong asset quality and resilient net interest margin position it favorably amidst ongoing economic uncertainties. The proposed merger with CNB Bank Shares, Inc. is a strategic move to expand market presence in key Illinois and St. Louis MSAs, aligning with broader industry trends of consolidation to achieve greater scale and efficiency. HBT's emphasis on a low-cost, granular deposit base and conservative credit culture provides a competitive advantage in a financial services sector facing increasing competition from both traditional and non-bank entities.

Comparison to Industry Standards

• HBT's adjusted Return on Average Assets (ROAA) of 1.58% for 2025 (1.57% in Q4) compares favorably to the peer median of 1.50% in 2024 and 1.30% for 3Q25 YTD, indicating superior profitability.
• The Common Equity Tier 1 (CET1) Capital Ratio of 14.42% at 4Q25 is significantly above the peer median of 11.97% for 3Q25 YTD, demonstrating robust capitalization.
• HBT's Cost of Funds of 1.28% for 2025 (1.23% in Q4) is substantially lower than the peer median of 2.12% for 3Q25 YTD, highlighting a superior and low-cost funding base.
• Nonperforming Assets to Total Assets of 0.17% at 4Q25 is significantly better than the peer median of 0.41% for 3Q25 YTD, reflecting conservative credit underwriting and exceptional asset quality.
• The company's recognition as 7th out of 200 in Forbes' 2025 America's Best Banks and 6th out of community banks with $5bn-$10bn assets in Bank Director's 2025 edition further validates its strong performance relative to industry benchmarks.

Corporate Governance

Stakeholder Impact

• Shareholders: Potential for increased value through the CNB merger, share repurchase program, and strong tangible book value growth, despite a slight decrease in diluted EPS.
• Employees: CNB Bank employees are expected to join the HBT team post-merger, indicating workforce integration.
• Customers: Enhanced presence in Chicago and St. Louis markets, providing access to new markets and potentially broader financial products and services.
• Creditors: Strong capital and liquidity levels indicate financial stability and ability to meet obligations.

Next Steps

• Closing of the proposed merger with CNB Bank Shares, Inc. in late Q1 2026, subject to customary closing conditions.
• Completion of core system conversion for the CNB merger in Q1 2026.
• Repurchase of up to $30.0 million of common stock under the new stock repurchase program, which is in effect until January 1, 2027.

Key Dates

Recommendation

While HBT Financial demonstrated strong underlying operational performance, excellent asset quality, and a resilient net interest margin, the slight quarter-over-quarter and year-over-year decline in GAAP net income and diluted EPS, coupled with increased provision for credit losses and net charge-offs, suggests a 'hold' position. The pending CNB merger offers significant strategic upside and market expansion, but its full financial impact and integration risks are yet to be fully realized. The new share repurchase program is a positive, but the immediate earnings trend warrants a cautious stance until the merger is complete and its benefits are clearer. The company's strong capital and liquidity provide a solid foundation, but the mixed Q4 results and forward-looking statements about potential asset quality deterioration in a softer economy suggest waiting for more definitive positive trends post-merger.

Keywords

HBT Financial, Heartland Bank, Q4 2025 Earnings, Financial Results, Banking, Regional Bank, Net Income, EPS, Loan Growth, Deposit Growth, Asset Quality, Net Interest Margin, Tangible Book Value, CNB Bank Shares Merger, Acquisition, Stock Repurchase, Illinois Banking, Iowa Banking, Commercial Real Estate, Wealth Management, SEC Filing