8-K: HBT Financial Reports Strong Q2 2025 Earnings with Profitability Growth and Tangible Book Value Surge

HBT Financial, Inc. announced robust second quarter 2025 financial results, reporting net income of $19.2 million and a significant increase in tangible book value per share, alongside strong asset quality and an expanded net interest margin.

Summary

• Net income for the second quarter of 2025 was $19.2 million, or $0.61 per diluted share, an increase from $19.1 million ($0.60 per diluted share) in Q1 2025 and $18.1 million ($0.57 per diluted share) in Q2 2024.
• Adjusted net income reached $19.8 million, or $0.63 per diluted share, compared to $19.3 million ($0.61 per diluted share) in Q1 2025.
• Return on average assets (ROAA) was 1.53%, with adjusted ROAA at 1.58%.
• Return on average stockholders' equity (ROAE) was 13.47%, and return on average tangible common equity (ROATCE) was 15.55%, with adjusted ROATCE at 16.02%.
• Net interest margin increased 2 basis points to 4.14%, and on a tax-equivalent basis, it expanded 3 basis points to 4.19%.
• Tangible book value per share increased by $0.59 to $16.02, representing a 3.8% increase for the quarter and 17.4% over the last 12 months.
• Total loans outstanding decreased by $113.6 million to $3.35 billion at June 30, 2025, primarily due to seasonal paydowns on grain elevator lines of credit and higher property sales.
• Total deposits decreased by $78.1 million to $4.31 billion at June 30, 2025, mainly attributed to higher outflows for tax payments by depositors and lower balances in existing retail accounts.
• Asset quality remained strong, with nonperforming assets to total assets at 0.13% as of June 30, 2025.
• Net charge-offs were $1.0 million, or 0.12% of average loans on an annualized basis, for Q2 2025, an increase from $0.4 million (0.05% annualized) in Q1 2025.
• The allowance for credit losses stood at 1.24% of total loans and 741% of nonperforming loans at June 30, 2025.
• The company repurchased 135,997 shares of its common stock at a weighted average price of $21.30 during the second quarter of 2025, with $12.1 million remaining under the stock repurchase program authorized until January 1, 2026.

Sentiment

Score: 8

Explanation: The company reported strong financial results with increased profitability, expanded net interest margin, and significant growth in tangible book value. Asset quality remains robust, and capital ratios are well above regulatory requirements. While there was a slight decrease in loans and deposits, management expects loan growth to return. The overall outlook is positive, supported by strong industry recognition and a disciplined approach to risk management.

Positives

• Consistently strong earnings with net income increasing quarter-over-quarter and year-over-year.
• Adjusted pre-provision net revenue increased by 5.2% compared to the first quarter of 2025.
• Net interest margin expanded by 2 basis points to 4.14% (3 basis points to 4.19% on a tax-equivalent basis) due to improved yields on debt securities and lower funding costs.
• Asset quality remained strong with nonperforming assets at a low 0.13% of total assets.
• All capital ratios increased during the quarter and remain well above regulatory requirements, with the Common Equity Tier 1 capital ratio at 14.26%.
• Tangible book value per share increased significantly by 3.8% for the quarter and 17.4% over the last 12 months to $16.02.
• Cost of funds decreased 3 basis points to 1.29%, and total cost of deposits decreased 2 basis points to 1.19%.
• Debt securities yields increased 11 basis points to 2.60%.
• The company maintains a highly granular deposit base with 95.3% core deposits and no reliance on brokered deposits.
• The company has significant estimated liquidity sources totaling $2.15 billion.
• Strong industry recognition, including ranking 7th in Forbes' 2025 America's Best Banks and 16th in S&P Global Market Intelligence's 2024 large US community bank ranking.

Negatives

• Noninterest income decreased by 1.8% from the first quarter of 2025, primarily due to a larger negative mortgage servicing rights (MSR) fair value adjustment ($0.8 million negative in Q2 2025 vs. $0.3 million negative in Q1 2025).
• Total loans outstanding decreased by $113.6 million from March 31, 2025, primarily due to seasonal paydowns on grain elevator lines of credit and higher property sales.
• Total deposits decreased by $78.1 million from March 31, 2025, mainly due to higher outflows for tax payments and lower balances in existing retail accounts.
• Nonperforming assets increased by $0.9 million from March 31, 2025, primarily due to higher nonperforming loan balances in commercial and industrial and construction and land development segments.
• Net charge-offs increased to $1.0 million (0.12% annualized) in Q2 2025 from $0.4 million (0.05% annualized) in Q1 2025.
• The effective tax rate increased to 27.0% from 25.2% due to a nonrecurring reversal of a stranded tax effect and a lower tax benefit from stock-based compensation.

Risks

• The strength of 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 sheet.
• 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.
• The ability of the company to manage the risks associated with the foregoing as well as anticipated.

Future Outlook

The company expects loan growth in the 2% to 5% annualized range for Q3 2025, driven by higher loan pipelines and fewer projected payoffs. Deposit balances are expected to remain flat. Debt securities balances are anticipated to be maintained near current levels. Net interest margin is projected to remain at current levels in Q3 2025, with asset repricing and slight decreases in deposit costs expected to be offset by lower nonaccrual interest recoveries and loan fees. Noninterest income for Q3 2025 is expected to be in line with Q2 2025 results, and noninterest expense is projected to be between $31 million and $33 million. Asset quality is expected to remain solid, though a return to more normalized metrics and charge-offs may occur if the economy softens, potentially leading to volatility in CECL calculations. The stock repurchase program will continue to be used opportunistically. The subordinated debt becomes callable and floating rate in September 2025, with a potential $0.4 million loss if called due to accelerated amortization of transaction issuance costs. Current capital levels and operational structure support potential M&A opportunities.

Management Comments

• "During the second quarter of 2025, our team continued to deliver consistently strong earnings with adjusted net income of $19.8 million, or $0.63 per diluted share. This was driven by an increase in adjusted pre-provision net revenue of 5.2%, compared to the first quarter of 2025." J. Lance Carter, President and Chief Executive Officer.
• "Our strong profitability coupled with an improvement in our accumulated other comprehensive income due to lower interest rates resulted in a $0.59 increase in our tangible book value per share to $16.02, an increase of 3.8% for the quarter and 17.4% over the last 12 months." J. Lance Carter, President and Chief Executive Officer.
• "Our balance sheet remains strong as all capital ratios increased during the quarter and asset quality remained stable with nonperforming assets to total assets of only 0.13%." J. Lance Carter, President and Chief Executive Officer.
• "We expect to see loan growth return in the third quarter of 2025 due to higher loan pipelines at the end of the second quarter than at the end of the first quarter and fewer payoffs projected." J. Lance Carter, President and Chief Executive Officer.
• "Our credit discipline, strong profitability and solid balance sheet give us confidence that we are prepared for a variety of economic and interest rate environments. Our capital levels and operational structure support attractive acquisition opportunities should the right opportunity arise." J. Lance Carter, President and Chief Executive Officer.

Industry Context

HBT Financial operates in the U.S. banking sector, characterized by ongoing competition from traditional banks, credit unions, and fintech companies. The company's strong net interest margin expansion, driven by improved debt securities yields and lower funding costs, indicates effective interest rate risk management in a dynamic rate environment. Its low cost of deposits and high core deposit ratio provide a competitive funding advantage, allowing it to deploy capital into attractive loan opportunities. The company's consistent outperformance relative to peers in profitability, capitalization, funding base, and credit underwriting suggests a robust business model amidst broader industry challenges. The mention of M&A opportunities, particularly in the Chicago MSA with its numerous smaller banking institutions, aligns with ongoing consolidation trends in the banking industry.

Comparison to Industry Standards

• Ranked 7th out of 200 in the Forbes 2025 America's Best Banks ranking (based on 2024 results).
• Ranked 16th out of 208 in S&P Global Market Intelligence's 2024 large US community bank ranking.
• Ranked 6th out of community banks with total assets of $5 billion to $10 billion and 7th out of 300 publicly traded banks overall in Bank Director's The Best U.S. Banks 2025 edition.
• The company's deposit beta (23.6% in rising rate cycle, 17.2% in falling rate cycle) is consistently below peers, indicating a more stable and lower-cost deposit base.
• The company's cost of deposits (1.19% in Q2 2025) remains consistently below its peer median (e.g., 1.92% for peers in Q1 2025).
• Nonperforming assets to total assets (0.13% in Q2 2025) are significantly lower than the peer median (0.39% in Q1 2025).
• CET1 Capital Ratio (14.26% in Q2 2025) is higher than the peer median (11.62% in Q1 2025).

Stakeholder Impact

• Shareholders: Positive impact due to increased net income, diluted EPS, tangible book value per share, and ongoing stock repurchase program, potentially leading to increased share price and shareholder returns.
• Customers: Continued provision of comprehensive financial products and services through 66 full-service branches, with a focus on relationship-based banking.
• Employees: No specific impact mentioned, but the company's strong performance and potential M&A could imply stability or growth opportunities.
• Creditors: Strong capital ratios and asset quality indicate a healthy financial position, reducing credit risk for creditors.

Next Steps

• Expect loan growth in the 2% to 5% annualized range for Q3 2025.
• Expect deposit balances to be flat in Q3 2025.
• Intend to purchase debt securities to maintain current levels during Q3 2025.
• Expect net interest margin to remain at current levels in Q3 2025.
• Expect noninterest income for Q3 2025 to be in line with Q2 2025 results.
• Expect noninterest expense to be between $31 million and $33 million in Q3 2025.
• Continue to use the stock repurchase program opportunistically.
• Consider calling subordinated debt in September 2025 when it becomes callable and floating rate.
• Pursue attractive acquisition opportunities should they arise.

Key Dates

Recommendation

Keywords

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