This in-depth report, updated on October 27, 2025, provides a comprehensive five-angle analysis of HBT Financial, Inc. (HBT), examining its business model, financial statements, past performance, future growth, and intrinsic fair value. Our evaluation benchmarks HBT against key peers such as Midland States Bancorp, Inc. (MSBI), First Busey Corporation (BUSE), and QCR Holdings, Inc., synthesizing all takeaways through the value investing framework of Warren Buffett and Charlie Munger.
Mixed. HBT Financial is a high-quality, profitable community bank with a stable but modest outlook. Its core strength is an excellent low-cost deposit base, which fuels superior profitability and a healthy net interest margin. The bank demonstrates strong financial health, with a Return on Equity over 13% and very efficient operations. Valuation appears reasonable, with a Price-to-Earnings ratio around 10 and a solid 3.36% dividend yield. However, growth prospects are limited by its concentration in the slow-growing Illinois economy. The bank is also heavily reliant on interest income, making it less diversified than many peers. HBT is best suited for conservative, income-oriented investors, not those seeking dynamic growth.
US: NASDAQ
HBT Financial, Inc., through its subsidiary Heartland Bank and Trust Company, operates as a quintessential community bank focused on serving Central and Northeastern Illinois. Its business model is straightforward and traditional: gathering deposits from local individuals and businesses and using those funds to make loans within the same communities. The bank's core operations revolve around relationship-based banking, where personal service and local decision-making are paramount. The main product lines that generate the vast majority of its revenue are commercial lending (including commercial real estate and commercial & industrial loans), agricultural lending, and residential real estate lending. These lending activities are funded primarily by a stable base of core deposits, including checking, savings, and money market accounts from its local customer base.
The largest component of HBT's business is commercial lending, which encompasses commercial real estate (CRE), owner-occupied real estate, and commercial and industrial (C&I) loans. Together, these loans represent over 65% of the bank's total loan portfolio. The market for commercial lending in Illinois is highly competitive, featuring a mix of small community banks, regional players, and large national institutions. The profitability in this segment is tied to the health of the local economy and interest rate cycles. HBT competes against regional peers like First Mid Bancshares and Busey Bank by emphasizing its local expertise and quicker, more personalized service. Its customers are primarily small-to-medium-sized businesses that value relationships and local knowledge over the scale and product breadth of larger competitors. The stickiness of these relationships is high, as businesses often bundle their lending and deposit services with a single trusted institution. HBT's moat in this area is its deep community integration and underwriting expertise specific to its geographic footprint, allowing it to manage risk effectively while serving a client base that larger banks may overlook. However, this strength is also a vulnerability, as its fortunes are directly tied to the economic vitality of Central and Northeastern Illinois.
Agricultural lending is HBT's most distinct and specialized service, representing over 20% of its loan portfolio. This is a critical product line given the bank's location in the heart of Illinois farm country. The market for agricultural finance is subject to unique variables, including commodity prices, weather patterns, and government agricultural policy, making it a niche that requires deep expertise. Competition comes from other local banks with agricultural desks and the government-sponsored Farm Credit System. HBT differentiates itself through generations of experience in this sector, employing lenders with specific agricultural backgrounds who understand the unique cash flow cycles and credit needs of farmers and agribusinesses. The customers are local farm operators and related businesses, whose banking relationships are often multi-generational and extremely sticky. The moat here is significant and durable; it is built on specialized knowledge that is difficult for generalist banks to replicate. This expertise allows HBT to price loans appropriately for the risk and maintain high credit quality through various agricultural cycles, providing a stable, high-quality earnings stream.
HBT's operations are funded by its deposit-gathering activities, which are central to its business model. The bank focuses on attracting and retaining low-cost core deposits, with noninterest-bearing demand deposits making up a significant portion—around 31% of total deposits. The market for deposits is intensely competitive, with banks, credit unions, and non-bank fintech companies all vying for customer funds. HBT competes by leveraging its physical branch network of 61 locations as community hubs and by offering personalized customer service, which fosters loyalty. Its primary deposit customers are the same local individuals and businesses that it lends to, creating a symbiotic relationship that enhances customer stickiness. A customer with a checking account, a mortgage, and a small business loan is highly unlikely to switch providers over minor rate differences. This loyal, low-cost deposit base forms a powerful moat, providing HBT with a cheaper and more stable source of funding than rivals who must rely more on higher-cost time deposits (CDs) or wholesale funding. This funding advantage directly translates into a healthier net interest margin, which is the primary driver of the bank's profitability.
In conclusion, HBT Financial's business model is that of a disciplined and focused community bank. Its competitive moat is not derived from national scale or technological superiority but from deep, defensible niches in its local markets. The agricultural lending expertise provides a unique competitive advantage that insulates it from larger, less specialized competitors. This is complemented by a strong core deposit franchise built on trust and community presence, which provides a stable, low-cost funding advantage. While this model has proven to be resilient and profitable, its durability is contingent on the economic health of its specific Illinois markets and the agricultural sector.
The primary risk to HBT's business model is its lack of diversification. Its geographic concentration makes it highly susceptible to a downturn in the local economy. Furthermore, its heavy reliance on net interest income (the spread between loan interest earned and deposit interest paid) makes its earnings sensitive to fluctuations in interest rates. The bank's relatively small contribution from fee-generating businesses, such as wealth management or treasury services, means it has fewer buffers during periods of compressing interest margins. While its moat is strong within its chosen niches, the business lacks the broader diversification that could provide greater stability through different economic cycles. Therefore, while the core business is strong, its resilience is geographically and operationally constrained.
HBT Financial's recent financial statements paint a picture of a stable and highly profitable regional bank. Revenue and net interest income have shown modest but steady growth in the most recent quarters, with net interest income increasing to $49.99 million in the third quarter of 2025. This performance is supported by what appears to be effective management of its interest-earning assets and funding costs. The bank's profitability is a clear strength, with a Return on Assets (ROA) of 1.57% and Return on Equity (ROE) of 13.4%, both of which are strong for the regional banking industry and indicate efficient use of its asset base and shareholder capital to generate profits.
The balance sheet demonstrates considerable resilience. With total assets of approximately $5 billion, the bank maintains a very conservative loan-to-deposit ratio of 78.2%, meaning it funds its lending activities comfortably through its stable deposit base without excessive reliance on other borrowings. This provides a significant liquidity buffer. Furthermore, its leverage is exceptionally low, with a debt-to-equity ratio of just 0.1, which minimizes financial risk and enhances its ability to withstand economic downturns. The tangible book value per share has also been consistently growing, from $14.80 at the end of 2024 to $16.64 in the latest quarter, creating value for shareholders.
A key highlight for HBT Financial is its operational efficiency. The bank has consistently maintained an efficiency ratio of around 54%, a level considered excellent in the banking sector. This means a relatively low portion of its revenue is consumed by operating expenses, allowing more to flow to the bottom line. While detailed data on nonperforming loans is not provided, the very low provisions for loan losses ($0.6 million in the last quarter) suggest management has high confidence in the quality of its loan portfolio. Overall, HBT Financial's foundation appears very stable, characterized by strong profitability, a liquid and low-leverage balance sheet, and disciplined expense control.
This analysis covers HBT Financial's past performance for the fiscal years 2020 through 2024. During this period, the bank has shown a solid track record of execution, growing its balance sheet and earnings through both organic means and acquisitions. Revenue grew at a compound annual growth rate (CAGR) of approximately 11.8%, while earnings per share (EPS) increased at an even faster 14.1% CAGR. This growth demonstrates the company's ability to scale its operations effectively within its Midwestern footprint.
The bank's profitability has been a standout feature. Over the last three years (FY2022-2024), its return on equity (ROE) has consistently hovered between 13.8% and 15.3%, a strong performance that outpaces many regional bank peers. This high level of profitability is supported by a healthy net interest margin (NIM), which expanded during the recent rate-hiking cycle, and excellent operational efficiency. The bank's efficiency ratio has remained in the mid-50% range, indicating disciplined cost management. This operational strength suggests a resilient business model capable of generating consistent returns.
From a balance sheet perspective, HBT has managed its growth prudently. Both loans and deposits have grown steadily, with 4-year CAGRs of 11.3% and 8.4% respectively. The loan-to-deposit ratio has remained conservative, ending FY2024 at around 80%, which provides a good liquidity cushion and is more conservative than peers like Midland States Bancorp. Cash flow from operations has been reliably positive, comfortably covering dividend payments. However, the bank's capital return strategy presents a mixed picture. While dividends have grown consistently, this has been accompanied by significant share dilution, with diluted shares outstanding increasing from 27 million to 32 million over the period, primarily due to stock-based acquisitions. This dilution has blunted the per-share value creation for existing shareholders. Overall, HBT's history shows a well-managed, profitable bank, but investors should be mindful of how its acquisition-led growth has impacted the share count.
The regional and community banking industry is navigating a period of significant change, with the next 3-5 years expected to be defined by interest rate normalization, technological disruption, and ongoing consolidation. After a period of rapid rate hikes, the industry now faces a potentially stable or declining rate environment, which will pressure net interest margins (NIMs) for banks that are asset-sensitive. A key catalyst for demand will be the overall health of the U.S. economy; a soft landing could spur renewed loan demand from small and medium-sized businesses, the core clientele for banks like HBT. Conversely, a recession would dampen credit growth and increase credit losses. The U.S. regional banking market is projected to see modest growth, with total assets expected to grow at a CAGR of around 2-4%.
Technological shifts are forcing community banks to invest heavily in digital platforms to compete with fintechs and large national banks. Customers increasingly expect seamless digital onboarding, mobile banking, and personalized services. This trend makes it harder for smaller banks with limited IT budgets to keep pace, raising the barrier to entry and competitive intensity. Furthermore, regulatory scrutiny on capital and liquidity remains elevated, particularly for banks with significant commercial real estate exposure or high levels of uninsured deposits. This environment is expected to fuel further M&A activity, as smaller banks look to gain scale and efficiency by merging with larger regional players. Banks that can successfully integrate technology while maintaining their relationship-based service model will be best positioned to thrive.
As of October 24, 2025, with a stock price of $25.02, a detailed analysis of HBT Financial, Inc. suggests the company is trading within a reasonable range of its intrinsic worth. Various valuation methods point to a fair value that brackets the current market price, indicating neither a significant bargain nor an overvaluation. An analysis of the price versus an estimated fair value range of $23.79–$26.03 suggests the stock is trading almost exactly at the midpoint, indicating limited immediate upside or downside from its current level.
The most common valuation methods for banks involve comparing them to their peers using earnings and book value multiples. HBT's trailing P/E ratio is 10.09, below the industry average of 11.74, which could suggest a fair value around $29.11 if it traded at the peer average. A more conservative multiple implies a value closer to $26.00. Another critical metric, Price to Tangible Book Value (P/TBV), stands at 1.50x. For a bank with HBT's strong profitability (ROE of 13.4%), this multiple sits at the lower end of the typical range of 1.5x to 2.3x, suggesting its valuation is reasonable and not overstretched relative to its performance.
For banks, a dividend-based approach also offers a useful perspective on shareholder returns. HBT provides an attractive dividend yield of 3.36%, supported by a sustainable payout ratio of 33.87%. This indicates earnings comfortably cover the dividend with room for future growth, a sign of management's confidence. While the dividend provides a solid income stream, it doesn't suggest significant undervaluation on its own but aligns with a fairly valued stock that returns a portion of profits to shareholders.
In a triangulated view, the P/E and P/TBV methods are weighted most heavily as they are industry-standard for bank valuation. The P/E multiple suggests a value slightly above the current price, while the P/TBV multiple points to a value slightly below. Averaging these approaches results in a fair value range of approximately $23.79 to $26.03. The current price sits comfortably within this band, reinforcing the conclusion that HBT Financial is currently fairly valued.
Warren Buffett's investment thesis for regional banks centers on finding simple, understandable businesses with a durable low-cost deposit franchise, conservative management, and strong capital, all purchased at a discount to intrinsic value. HBT Financial would appeal to him due to its fortress-like balance sheet, evidenced by a Common Equity Tier 1 (CET1) ratio of ~12.5%, which provides a substantial safety cushion. The bank's consistent ability to generate high returns on shareholder equity, with a Return on Average Equity (ROAE) of ~13%, while trading at a discount to its book value (~0.95x P/B) would represent a significant margin of safety. The primary risk Buffett would identify is HBT's geographic concentration in the slower-growing Illinois economy, making it vulnerable to a regional downturn. If forced to choose the three best stocks from the provided list based on his philosophy, Buffett would likely select HBT Financial for its superior blend of profitability and value, German American Bancorp for its impeccable long-term credit quality and stability, and First Busey for its greater scale and geographic diversification. Ultimately, given its high profitability, strong capitalization, and low valuation, Buffett would likely view HBT as a compelling investment. A sharp deterioration in the Illinois economy or a significant rise in the stock price that erodes the margin of safety could change this decision.
Charlie Munger would approach the banking sector with a focus on avoiding stupidity, favoring simple, over-capitalized banks with durable low-cost funding moats. HBT Financial would strongly appeal to him, as it exemplifies a well-run institution with its high Common Equity Tier 1 ratio of ~12.5% and superior profitability shown by a ~13% return on average equity. The fact that this high-quality operation trades at a fair price, around ~7.5x earnings and below its book value, squarely fits his investment philosophy. He would recognize HBT's stable, low-cost core deposit base as a genuine competitive advantage that allows for its superior net interest margin. Munger's primary concern would be the bank's geographic concentration in Illinois, which presents a significant risk should the regional economy falter. In the 2025 economic environment, given the combination of quality, conservatism, and a compelling valuation, he would likely view HBT as a rational, long-term investment. For retail investors, the takeaway is that HBT represents a clear opportunity to buy a high-performing, conservatively managed bank at a price that offers a margin of safety.
HBT’s management wisely uses its cash by retaining roughly 74% of its earnings, as shown by its low ~26% dividend payout ratio. This retained capital is reinvested into the business to support organic growth, compounding shareholder equity at a high ~13% ROE. This is a far more effective strategy for long-term value creation than paying a higher dividend, especially compared to peers like Midland States Bancorp with a ~45% payout ratio.
If forced to pick three top regional banks, Munger would likely select HBT Financial (HBT) for its ideal combination of quality and value, German American Bancorp (GABC) as a benchmark for pristine credit quality and long-term stability, and perhaps First Busey Corporation (BUSE) as a solid, larger-scale operator offering geographic diversification. Munger would reconsider his investment if HBT's disciplined underwriting faltered, evidenced by rising loan losses, or if management strayed from its prudent operational focus through a foolish acquisition.
Bill Ackman would view the banking sector as a search for high-quality, simple, and predictable franchises with pricing power, which in banking translates to a low-cost, sticky deposit base. HBT Financial would appeal to him due to its best-in-class profitability, evidenced by a return on average equity of ~13% that significantly outpaces peers like Midland States Bancorp's ~9%, and its strong capital position with a CET1 ratio of ~12.5%. However, he would be deterred by its small scale and geographic concentration in the slow-growing Illinois market, as his strategy favors businesses with a long growth runway and global or national scale. The lack of a clear catalyst, such as a necessary operational turnaround or a strategic consolidation opportunity, would make it a passive investment, which does not fit his activist approach. Ultimately, Ackman would likely avoid HBT, seeing it as a well-run but small pond. If forced to choose top regional banks, Ackman would favor Veritex Holdings (VBTX) for its platform in the high-growth Texas market, Enterprise Financial Services (EFSC) for its larger scale and specialized commercial moat, and HBT for its sheer operational quality at a low price (~7.5x P/E). A decision to sell to a larger bank or embark on a series of accretive acquisitions could change his mind.
HBT Financial, Inc. operates as a classic community bank, a model that carries both inherent strengths and weaknesses when compared to the broader peer group of regional banks. Its primary competitive advantage is its deep-rooted presence in its local Illinois markets, which fosters strong customer relationships and a stable, low-cost deposit base. This foundation allows HBT to generate a consistently high net interest margin (NIM), which is the core driver of its profitability. In an environment of fluctuating interest rates, a strong NIM is a significant asset, and HBT often outperforms many of its peers in this regard, as well as in key efficiency and return on equity (ROE) metrics. This demonstrates a well-managed, profitable core operation.
However, HBT's focused business model also presents its most significant challenges. Its relatively small size, with assets around $4.5 billion, means it lacks the economies of scale that larger regional competitors enjoy. These larger banks can invest more heavily in technology, marketing, and a wider array of financial products, attracting a broader customer base. Furthermore, HBT's heavy reliance on the economic health of central and northeastern Illinois creates substantial concentration risk. A downturn in the local economy could disproportionately affect its loan portfolio and growth prospects, a risk that is more diluted for competitors with a multi-state footprint.
From an investment perspective, this positions HBT as a tale of quality versus scale. The bank's financial performance is robust for its size, suggesting high-quality underwriting and operational discipline. It offers a solid dividend yield backed by a conservative payout ratio, appealing to income-focused investors. Yet, it competes against larger institutions that may offer more dynamic growth opportunities through market expansion and acquisitions. Therefore, HBT's stock is best suited for investors who prioritize profitability and income from a well-run, traditional bank and are comfortable with the risks associated with its limited geographic scope.
Midland States Bancorp, Inc. (MSBI) represents one of HBT's closest competitors in terms of both geography and size, making for a very direct comparison. Both are community-focused banks operating primarily in Illinois. HBT consistently demonstrates superior operational performance, boasting higher profitability and efficiency ratios. MSBI, while a solid institution, trails HBT in key metrics like return on equity and net interest margin. The primary appeal for an MSBI investor over HBT would be its higher dividend yield, but this comes at the cost of lower core profitability and a less efficient operation. For investors prioritizing operational excellence and a stronger balance sheet, HBT holds a clear edge.
In terms of business and moat, HBT has a slight advantage. Both banks have strong local brands built over a century; HBT was founded in 1920 and MSBI in 1881. However, HBT demonstrates superior quality in its deposit base, with a higher percentage of low-cost core deposits, which is a critical advantage in managing funding costs. While their scale is nearly identical, with HBT at ~$4.5 billion in assets and MSBI at ~$4.8 billion, HBT's network of 61 branches is slightly larger than MSBI's 50+. Critically, HBT maintains a stronger regulatory capital position with a Common Equity Tier 1 (CET1) ratio of ~12.5% compared to MSBI's ~11.8%, indicating a larger safety cushion. Winner: HBT Financial, Inc. for its stronger capital and funding base.
An analysis of their financial statements reveals HBT's superior quality. HBT's revenue growth has been stronger, and its profitability is significantly better, with a trailing twelve months (TTM) return on average equity (ROAE) of ~13% versus MSBI's ~9%. This shows HBT is more effective at generating profit from its shareholders' capital. HBT is also more efficient, with an efficiency ratio of ~56% (lower is better) compared to MSBI's ~62%. On the balance sheet, HBT is more conservatively managed with a loan-to-deposit ratio of ~88% versus ~92% for MSBI, suggesting less liquidity risk. While MSBI offers a higher dividend yield, HBT's lower payout ratio of ~26% versus MSBI's ~45% makes its dividend safer and more sustainable. Overall Financials Winner: HBT Financial, Inc. due to its clear superiority in profitability, efficiency, and balance sheet strength.
Looking at past performance, HBT has been the stronger performer. Over the last five years, HBT has delivered higher revenue and earnings per share (EPS) compound annual growth rates (~8% revenue CAGR for HBT vs. ~4% for MSBI). This superior fundamental growth has translated into better shareholder returns. HBT's 3-year total shareholder return (TSR) of ~25% has outpaced MSBI's ~15%. Furthermore, HBT has maintained a more stable and higher net interest margin throughout recent interest rate cycles, showcasing better asset-liability management. In terms of risk, both stocks exhibit similar volatility, but HBT's stronger performance metrics suggest it has rewarded shareholders more for the risk taken. Overall Past Performance Winner: HBT Financial, Inc. for its consistent track record of higher growth and returns.
Both companies' future growth is heavily dependent on the economic conditions in the Midwest, particularly Illinois. MSBI has occasionally guided for slightly more aggressive loan growth, in the ~4-6% range, compared to HBT's more measured ~3-5%. However, HBT's existing advantage in profitability and efficiency gives it more flexibility to invest in growth initiatives or weather economic headwinds. HBT's stronger net interest margin suggests better pricing power on its loans or a more advantageous funding structure, a key driver for future earnings. Neither company has a significant geographic expansion plan, making organic growth within their existing footprint the primary driver. Overall Growth Outlook Winner: HBT Financial, Inc., as its superior profitability provides a more stable foundation for sustainable growth.
From a valuation perspective, the choice is nuanced but favors HBT. HBT trades at a Price-to-Earnings (P/E) ratio of ~7.5x, which is cheaper than MSBI's ~10x. On a Price-to-Book (P/B) basis, a key metric for banks, MSBI is slightly cheaper at ~0.90x compared to HBT's ~0.95x. However, HBT's discount to book value is less warranted given its significantly higher return on equity (~13% vs. ~9%). The quality vs. price argument strongly supports HBT; investors pay a similar price relative to book value but get a much more profitable and efficient bank. While MSBI's dividend yield of ~5.0% is tempting compared to HBT's ~3.5%, HBT's lower valuation on an earnings basis makes it the better value today on a risk-adjusted basis.
Winner: HBT Financial, Inc. over Midland States Bancorp, Inc. HBT establishes its superiority through consistently stronger operational and financial metrics. Its key strengths are a significantly higher return on equity (~13% vs. MSBI's ~9%), a more efficient operation (efficiency ratio of ~56% vs. ~62%), and a stronger capital position. MSBI's primary advantage is its higher dividend yield, but this appears to be compensation for its weaker profitability and less efficient business model. The main risk for both is their shared reliance on the Illinois economy, but HBT's healthier financial profile makes it better equipped to handle economic stress. Ultimately, HBT offers investors a higher-quality banking operation at a more attractive earnings-based valuation.
First Busey Corporation (BUSE) is a larger regional competitor with a more diversified geographic footprint across Illinois, Missouri, and Florida, giving it an immediate advantage in scale and market diversity over HBT. With assets approaching $12 billion, BUSE is more than double the size of HBT. This scale allows for greater investment in technology and a broader product suite. However, HBT often showcases superior profitability on a per-asset basis, with a stronger net interest margin and return on assets. The choice between them comes down to an investor's preference: the stability and growth potential of BUSE's larger, more diversified platform versus the higher-margin, geographically focused operation of HBT.
Analyzing their business moats, BUSE has a clear edge in scale and network effects. Its larger asset base (~$12B vs. HBT's ~$4.5B) provides significant economies of scale in marketing, compliance, and technology. BUSE's network of over 60 locations spans multiple states, reducing its dependence on any single local economy, a key risk for HBT. Both companies have strong local brands and benefit from high regulatory barriers to entry. However, HBT has historically maintained a stronger capital position, with a CET1 ratio of ~12.5% compared to BUSE's ~11.5%. Despite this, BUSE's diversification is a more powerful competitive advantage in the long run. Winner: First Busey Corporation due to its superior scale and geographic diversification.
Financially, the comparison presents a trade-off between HBT's profitability and BUSE's scale. HBT consistently reports a higher net interest margin (NIM), often above 3.5%, while BUSE's is typically closer to 3.1%. This feeds into HBT's superior return on assets (ROA) of ~1.2% versus BUSE's ~0.9%. This means HBT squeezes more profit from its assets. However, BUSE's larger revenue base gives it more absolute dollars to reinvest. BUSE also has a more diversified revenue stream with a larger wealth management business. In terms of efficiency, HBT's ratio of ~56% is better than BUSE's ~63%. Overall Financials Winner: HBT Financial, Inc. on a qualitative basis due to its higher margins and returns, though BUSE's scale cannot be ignored.
Historically, both companies have been solid performers, but BUSE's larger size has allowed it to pursue growth through acquisitions, leading to lumpier but often stronger top-line growth. Over the past five years, BUSE's revenue CAGR has been slightly higher than HBT's due to M&A activity. However, HBT's organic earnings growth has been more consistent. In terms of total shareholder return (TSR), performance has been comparable over a 5-year period, but HBT has shown lower volatility, reflecting its stable operating model. BUSE's M&A strategy introduces integration risk, which has at times weighed on its stock performance. Overall Past Performance Winner: HBT Financial, Inc. for delivering more stable and predictable returns without the risks of serial acquisitions.
Looking ahead, BUSE has more levers to pull for future growth. Its presence in higher-growth markets like Florida provides a significant tailwind that HBT, concentrated in the slower-growing Midwest, lacks. BUSE's wealth management division also offers a source of non-interest income growth that is less sensitive to interest rate changes. HBT's growth is more directly tied to its ability to expand its loan book in its existing markets. While HBT may continue to be more profitable on a percentage basis, BUSE's potential for absolute growth in earnings is likely higher due to its superior market positioning and diversified business lines. Overall Growth Outlook Winner: First Busey Corporation due to its exposure to faster-growing markets and more diversified revenue streams.
From a valuation standpoint, both stocks often trade at similar multiples, making the choice dependent on an investor's outlook. Both typically trade near or slightly below their tangible book value. HBT often trades at a slightly lower P/E ratio, such as ~7.5x compared to BUSE's ~9x, which reflects its smaller size and higher geographic risk. Their dividend yields are also often comparable, in the 3-4% range. The quality vs. price decision here is clear: HBT offers higher profitability ratios for a lower earnings multiple. An investor is paying less for a more efficient operation, but accepting the concentration risk. BUSE's valuation is justified by its diversification and scale. Which is better value today: HBT Financial, Inc., as its valuation discount seems to more than compensate for its lack of diversification compared to BUSE.
Winner: HBT Financial, Inc. over First Busey Corporation. While BUSE's larger scale and geographic diversification are significant strengths, HBT wins on the basis of its superior operational quality and more attractive valuation. HBT consistently delivers higher profitability, evidenced by a stronger ROA (~1.2% vs. ~0.9%) and a better efficiency ratio (~56% vs. ~63%). Its primary weakness is its geographic concentration in Illinois, which is a material risk. However, its current valuation with a P/E ratio of ~7.5x appears to adequately price in this risk. BUSE is a solid, stable choice, but HBT offers a more compelling combination of quality and value for investors willing to accept its focused market strategy.
QCR Holdings, Inc. (QCRH) presents an interesting comparison as a high-growth, specialty-focused bank that contrasts with HBT's more traditional community banking model. Headquartered in Moline, Illinois, QCRH has a similar geographic focus but differentiates itself through a correspondent banking division and niche commercial lending. This strategy has fueled faster growth than HBT, but often with lower core profitability margins. An investor choosing between the two must weigh QCRH's dynamic growth engine against HBT's more stable, profitable, and traditional approach.
QCRH's business and moat are built on a different foundation than HBT's. While HBT's moat is its deep community entrenchment and low-cost deposit base, QCRH's is its specialized expertise. Its correspondent banking services create sticky, long-term relationships with smaller banks, a unique network effect. In terms of scale, QCRH has grown to ~$8 billion in assets, making it significantly larger than HBT's ~$4.5 billion. This gives QCRH a scale advantage. However, HBT's moat is arguably more durable, relying on a stable community banking model, whereas QCRH's specialty niches could be more susceptible to economic cycles. HBT's capital ratios are also typically stronger, with a CET1 of ~12.5% vs. QCRH's ~10.5%. Winner: HBT Financial, Inc. for its more resilient business model and stronger capital base.
Financially, the story is one of growth versus profitability. QCRH has consistently delivered higher loan and revenue growth, often in the double digits, far outpacing HBT's steady single-digit growth. However, this growth comes at a cost. HBT's net interest margin of ~3.6% is typically much stronger than QCRH's, which hovers around 3.0%. This is because QCRH's funding can be more expensive. Consequently, HBT is more profitable, with an ROA of ~1.2% and ROE of ~13%, compared to QCRH's ROA of ~1.0% and ROE of ~11%. HBT is also more efficient (~56% ratio vs. QCRH's ~60%). Overall Financials Winner: HBT Financial, Inc., as its superior profitability and efficiency metrics point to a higher-quality operation.
Looking at past performance, QCRH has been the clear winner on growth. Its 5-year revenue and EPS CAGR have significantly outpaced HBT's, driven by its successful niche lending strategies. This has translated into strong shareholder returns, with QCRH's 5-year TSR often exceeding HBT's. However, QCRH's stock has also exhibited higher volatility (beta ~1.4 vs. HBT's ~1.1), reflecting the market's perception of its higher-risk growth model. HBT has provided more stable, albeit lower, returns. Margin trends have favored HBT, which has better protected its NIM during rate fluctuations. Overall Past Performance Winner: QCR Holdings, Inc. for its superior growth and total shareholder returns, despite the higher risk.
For future growth, QCRH holds a distinct advantage. Its established specialty lending platforms provide a clear and scalable path for future expansion that is less dependent on the general economic health of its local communities than HBT's model. Management at QCRH has a proven track record of identifying and capitalizing on new market niches. HBT's growth, by contrast, is likely to remain steady and organic, linked to GDP growth in its footprint. Analysts' consensus estimates typically project higher EPS growth for QCRH than for HBT in the coming years. Overall Growth Outlook Winner: QCR Holdings, Inc. due to its proven, scalable growth strategy.
Valuation often reflects this growth-versus-quality trade-off. QCRH typically trades at a higher P/E multiple than HBT, for example ~9.5x versus HBT's ~7.5x, as investors are willing to pay a premium for its superior growth prospects. On a P/B basis, they are often closer, both trading near their tangible book values. HBT offers a higher dividend yield (~3.5%) than QCRH (~1.5%), appealing more to income investors. The quality vs. price argument is that HBT is the cheaper, higher-quality, higher-yielding stock, while QCRH is the more expensive growth story. Which is better value today: HBT Financial, Inc., for investors with a lower risk tolerance, as its valuation provides a greater margin of safety for a more profitable bank.
Winner: HBT Financial, Inc. over QCR Holdings, Inc. This verdict favors stability and quality over aggressive growth. HBT's key strengths are its superior profitability (ROE of ~13% vs. QCRH's ~11%), higher net interest margin, and stronger capital base (~12.5% CET1 vs. ~10.5%). QCRH's notable weakness is its lower-margin business model and higher-risk profile, though its primary strength is a powerful and proven growth engine. The main risk for HBT is its slow-growth market, while the risk for QCRH is that its specialty lending niches could underperform in a sharp economic downturn. For a long-term investor, HBT's consistent profitability and more conservative approach make it the more reliable choice.
German American Bancorp, Inc. (GABC) is a community bank primarily operating in Indiana and Kentucky, making it a close operational peer to HBT, though in different states. Both banks champion a conservative, relationship-based banking model. GABC is slightly larger than HBT and has a long history of steady growth and consistent dividend payments. The comparison highlights two very similar, high-quality community banks, with the key differentiators being their respective geographic markets and slight differences in their financial metrics. GABC is known for its pristine credit quality, while HBT often has a slight edge in profitability.
Both banks possess strong and similar business moats. Their moats are built on deep community ties and brand recognition in their local markets; GABC has been operating for over 110 years. In terms of scale, GABC is larger with assets of ~$6.5 billion compared to HBT's ~$4.5 billion, giving it a modest scale advantage. Both have strong deposit franchises, which is key to keeping funding costs low. Their network effects are confined to their respective regions. On regulatory capital, both are very well-capitalized, with CET1 ratios typically well above 10%, though HBT's ~12.5% is often slightly higher than GABC's ~11%. The key difference is geography; GABC's markets in southern Indiana may offer slightly better growth dynamics than HBT's in central Illinois. Winner: German American Bancorp, Inc. due to its slightly larger scale and potentially more favorable geographic footprint.
An analysis of their financial statements shows two high-performing banks. HBT typically has a slight edge on profitability metrics. HBT's net interest margin (NIM) of ~3.6% is usually higher than GABC's ~3.4%, and its return on equity (ROE) of ~13% is superior to GABC's ~10%. This indicates HBT is more effective at generating profits. However, GABC is renowned for its operational efficiency and stellar credit quality, often reporting lower net charge-off rates than peers. Both have similar efficiency ratios in the 55-60% range. GABC also has a more diversified revenue stream from its wealth management and insurance businesses, which contribute a larger share of its total revenue than at HBT. Overall Financials Winner: HBT Financial, Inc. for its superior core profitability, though GABC's credit quality and revenue diversity are notable strengths.
Past performance for both banks has been characterized by steady, consistent growth rather than spectacular gains. Both have grown their book value and dividends at a reliable pace for decades. Over the last 5 years, their revenue and EPS growth have been in the mid-single-digit range, with neither dramatically outperforming the other. Total shareholder returns have also been similar over the long term, reflecting their status as stable, conservative investments. GABC has a longer track record as a public company and an impressive history of dividend increases. In terms of risk, both have low stock volatility. Overall Past Performance Winner: Even, as both banks have executed their conservative strategies flawlessly over the long term.
Future growth prospects for both HBT and GABC are modest and largely tied to the economic health of their respective regions. Neither is positioned for rapid expansion, but rather for continued organic loan growth and potential small, in-market acquisitions. GABC's presence in some faster-growing Indiana metro areas may give it a slight edge in market demand. HBT's higher profitability gives it more capacity to reinvest in technology or talent to drive growth. Both are well-positioned to benefit from any consolidation in the community banking sector, either as acquirers or as attractive targets. Overall Growth Outlook Winner: Even, as their growth paths are very similar and rely on disciplined execution of the same playbook.
From a valuation perspective, GABC often trades at a premium to HBT and other community bank peers. GABC's P/E ratio is frequently in the 10-12x range, while HBT's is lower at ~7.5x. Similarly, GABC trades at a higher P/B multiple, often around 1.2x compared to HBT's ~0.95x. This premium is a reflection of the market's high regard for GABC's pristine credit quality and long history of consistent performance. HBT, while also a high-quality bank, does not command the same premium. Their dividend yields are typically comparable. The quality vs. price argument makes HBT the better value. While GABC is an excellent bank, its premium valuation may limit future returns. Which is better value today: HBT Financial, Inc., as it offers similar quality at a significantly lower valuation.
Winner: HBT Financial, Inc. over German American Bancorp, Inc. This is a close contest between two high-quality community banks, but HBT gets the nod based on valuation. HBT's primary strengths are its superior profitability metrics, including a higher ROE (~13% vs. GABC's ~10%), and its much more attractive valuation (~7.5x P/E vs. ~11x). GABC's strengths are its impeccable credit quality and a slight scale advantage. The key risk for both is their geographic concentration, though their conservative underwriting mitigates this. While GABC is an exceptionally well-run institution, HBT provides investors with a more profitable operation at a price that offers a greater margin of safety and potential for appreciation.
Veritex Holdings, Inc. (VBTX) is a Texas-based community bank that provides a sharp contrast to HBT in terms of its operating environment. While both are community-focused, VBTX operates in the dynamic, high-growth metropolitan markets of Dallas-Fort Worth and Houston. This has allowed VBTX to grow much more rapidly than HBT, which is based in the more mature markets of Illinois. VBTX's strategy is focused on aggressive organic growth and strategic M&A within these thriving markets. The comparison pits HBT's stable, high-margin model against VBTX's high-growth, but potentially more volatile, Sun Belt strategy.
In terms of business and moat, VBTX has a significant geographic advantage. Its focus on the Texas market, one of the fastest-growing economies in the U.S., provides a powerful tailwind for loan demand and deposit gathering. This high-growth market is VBTX's primary moat. In terms of scale, VBTX has grown to over ~$11 billion in assets, more than double HBT's size. HBT's moat is its entrenched position in its local Illinois communities and its stable, low-cost deposit base. Both face intense competition, but VBTX's competition is from other high-growth banks, while HBT's is from more established players. HBT's capital position (~12.5% CET1) is typically stronger than VBTX's (~10%), reflecting HBT's more conservative stance. Winner: Veritex Holdings, Inc. due to its vastly superior operating market, which is a more significant long-term advantage than HBT's capital strength.
Financially, the differences are stark. VBTX consistently produces high double-digit loan growth, dwarfing HBT's low single-digit growth. This has led to much faster revenue growth for VBTX. However, HBT is the more profitable and efficient operator. HBT's net interest margin of ~3.6% and efficiency ratio of ~56% are both significantly better than VBTX's typical NIM of ~3.2% and efficiency ratio of ~60%. This translates to a higher return on assets for HBT (~1.2% vs. VBTX's ~0.9%). VBTX's profitability has been impacted by the costs of its rapid expansion and intense competition for deposits in Texas. Overall Financials Winner: HBT Financial, Inc. for its superior core profitability and operational efficiency.
Past performance clearly reflects their different strategies. VBTX has been a tremendous growth story, with its 5-year revenue and EPS CAGR far surpassing HBT's. This growth has led to periods of very strong stock performance for VBTX. However, its stock is also much more volatile and has experienced deeper drawdowns during periods of economic uncertainty, especially concerns around commercial real estate, where VBTX has higher exposure. HBT's performance has been slower but much more stable. HBT's strength has been in preserving its margins, while VBTX's have been more variable. Overall Past Performance Winner: Veritex Holdings, Inc. for delivering far superior long-term growth and shareholder returns, albeit with higher volatility.
For future growth, VBTX is in a far better position. Its Texas markets are projected to continue to outperform the national average in population and job growth, creating a fertile environment for loan origination. VBTX has a clear runway for continued organic growth and is an active participant in M&A. HBT's growth is constrained by the slower economic pulse of the Midwest. While HBT can grow by taking market share, it is not supported by the same demographic tailwinds. Analyst estimates consistently forecast higher long-term growth for VBTX. Overall Growth Outlook Winner: Veritex Holdings, Inc. by a wide margin due to its geographic advantage.
Valuation typically reflects this dichotomy. VBTX often trades at a P/E multiple of ~10x and a P/B ratio above 1.0x, a premium that investors award for its high-growth profile. HBT trades at lower multiples (~7.5x P/E, ~0.95x P/B) that reflect its slower growth and Midwest location. HBT offers a higher and safer dividend yield (~3.5% with a ~26% payout ratio) compared to VBTX's (~3.0% with a ~30% payout ratio). The quality vs. price argument favors HBT for conservative investors; it is a statistically cheaper stock with better profitability metrics. VBTX is a bet on continued Texas growth. Which is better value today: HBT Financial, Inc. for those prioritizing a margin of safety, as VBTX's premium valuation carries risk if its growth moderates.
Winner: HBT Financial, Inc. over Veritex Holdings, Inc. This verdict favors profitability and valuation over a high-growth narrative. HBT is the superior operator, as evidenced by its stronger net interest margin (~3.6% vs ~3.2%), higher return on assets (~1.2% vs ~0.9%), and better efficiency. VBTX's undeniable strength is its position in the booming Texas market, which is also its key risk; a downturn in the Texas real estate market would hit VBTX hard. While VBTX offers more exciting growth potential, HBT provides a more profitable, more conservatively managed bank at a lower valuation. For an investor looking for reliable performance and a margin of safety, HBT is the more prudent choice.
Enterprise Financial Services Corp (EFSC) is a commercially-focused bank with a multi-state footprint in the Southwest and Midwest, including HBT's home state of Illinois. With assets over $14 billion, EFSC is significantly larger and more diversified than HBT. Its business model is centered on serving the needs of private businesses and their owners, offering a wider array of commercial and wealth management services. This makes EFSC less of a traditional community bank and more of a specialized commercial lender. The comparison pits HBT's stable, retail-focused model against EFSC's larger, more cyclical, but potentially higher-growth commercial banking platform.
EFSC's business moat is its specialized expertise in commercial and industrial (C&I) lending and its established relationships with business owners across multiple states. This specialization creates a loyal client base. Its scale (~$14B in assets vs. HBT's ~$4.5B) is a major advantage, enabling larger loan sizes and more sophisticated product offerings. Its geographic diversity across states like Arizona, California, and Missouri also reduces its reliance on a single economy. HBT's moat is its core deposit franchise and deep community roots, a more stable but less scalable model. EFSC's CET1 capital ratio of ~11.5% is solid but lower than HBT's ~12.5%, reflecting a slightly more aggressive balance sheet posture. Winner: Enterprise Financial Services Corp due to its superior scale, diversification, and specialized commercial moat.
From a financial perspective, EFSC's commercial focus leads to a different profile than HBT. EFSC has historically generated stronger loan growth, driven by its C&I lending activities. However, HBT is typically the more profitable bank on a core basis. HBT's net interest margin of ~3.6% is consistently higher than EFSC's, which is often closer to 3.3%. HBT also tends to post a higher return on assets (~1.2% vs. EFSC's ~1.1%) and a better efficiency ratio (~56% vs. ~58%). EFSC's earnings can be more volatile due to the cyclical nature of commercial lending and its reliance on fee income from specialized services. Overall Financials Winner: HBT Financial, Inc. for its higher and more stable profitability metrics.
In terms of past performance, EFSC has a strong track record of growth, often fueled by strategic acquisitions that have expanded its geographic footprint and service offerings. Its 5-year revenue and EPS growth have generally outpaced HBT's more modest, organic growth. This has often translated into stronger total shareholder returns for EFSC over the long term. However, EFSC's stock performance is also more sensitive to the business cycle. In periods of economic weakness, concerns over credit quality in its commercial portfolio can lead to steeper stock price declines than experienced by the more stable HBT. Overall Past Performance Winner: Enterprise Financial Services Corp for its superior long-term growth and returns, acknowledging its higher cyclicality.
Looking to the future, EFSC has a clearer path to growth. Its multi-state presence in attractive markets and its strong commercial banking platform position it to capitalize on business expansion. The company has a successful history of integrating acquisitions and is likely to continue this strategy. HBT's growth is more limited and dependent on the health of the Illinois economy. EFSC's broader array of fee-generating businesses, such as wealth management and tax credit services, provides diversified revenue streams that can fuel future growth. Overall Growth Outlook Winner: Enterprise Financial Services Corp due to its larger platform, acquisition capabilities, and diversified business model.
Valuation often reflects the market's view of these differing profiles. Both banks tend to trade at reasonable valuations, often below the industry average. EFSC frequently trades at a P/E ratio of ~8x and a P/B ratio below 1.0x. HBT trades at a similar P/E of ~7.5x and a P/B of ~0.95x. Their dividend yields are also typically comparable, in the 3-4% range. The quality vs. price decision is interesting: HBT is the more profitable and less risky bank, available at a slight discount. EFSC offers better growth prospects and diversification for a similar price. Which is better value today: HBT Financial, Inc. Its higher profitability and stronger capital base provide a greater margin of safety for what is essentially the same price on an earnings basis.
Winner: HBT Financial, Inc. over Enterprise Financial Services Corp. This verdict favors HBT's superior profitability and lower-risk profile over EFSC's scale and growth potential. HBT's key strengths are its robust net interest margin (~3.6% vs. ~3.3%) and higher return on assets, which point to a more efficient and profitable core operation. EFSC's primary weakness is the cyclicality of its commercial-heavy loan book, which poses a greater risk during economic downturns, even with its geographic diversification. While EFSC has a better growth story, HBT offers a higher-quality, more resilient business at a compelling valuation, making it the more attractive choice for risk-conscious investors.
Based on industry classification and performance score:
HBT Financial operates a traditional community banking model, deeply rooted in the agricultural and commercial economies of Central and Northeastern Illinois. The bank's primary strength is its moat in agricultural lending, built on specialized expertise and long-standing local relationships. This is supported by a solid, low-cost core deposit base, which provides stable funding. However, the business is geographically concentrated and heavily reliant on interest income, with a weak contribution from fees. The investor takeaway is mixed; HBT is a stable, well-run community bank with a defensible niche, but it lacks diversification in both revenue and geography, posing concentration risks.
The bank's revenue is heavily dependent on net interest income, with a relatively small and undiversified stream of fee income, exposing it to greater earnings volatility from interest rate changes.
A significant weakness in HBT's business model is its low level of fee income, also known as noninterest income. In the first quarter of 2024, noninterest income was just $8.8 million, representing only 15% of total revenue ($58.4 million). This is below the typical regional bank average, which often ranges from 20% to 25%. A higher contribution from fees can buffer a bank's earnings when its net interest margin (the profit made on loans) is squeezed by interest rate changes. HBT's fee income is primarily driven by basic service charges and card income, lacking significant contributions from more scalable sources like wealth management or mortgage banking. This heavy reliance on interest-related revenue makes the bank's earnings less diversified and more vulnerable to the interest rate cycle than peers with more robust fee-generating businesses.
HBT has a well-balanced deposit mix from local retail and commercial customers and minimal reliance on volatile brokered deposits, indicating a healthy and stable funding profile.
HBT's deposit base appears well-diversified across local sources, consistent with its community banking model. The mix is primarily composed of retail and commercial customer accounts, reflecting the bank's dual focus on serving individuals and small-to-medium-sized businesses in its communities. Importantly, the bank has negligible reliance on brokered deposits, which are market-rate funds that can be less stable and more expensive than organic core deposits. This demonstrates the strength of its internal deposit-gathering capabilities through its branch network and customer relationships. While specific data on the top depositors is not publicly detailed, the overall composition suggests low concentration risk. This balanced and organic funding mix is a hallmark of a disciplined community bank and reduces its sensitivity to market shocks or liquidity pressures.
HBT has built a strong and defensible moat through its specialized expertise in agricultural lending, a critical economic driver in its local markets.
HBT's expertise in agricultural lending is a clear competitive differentiator and a powerful moat. Agriculture and agricultural real estate loans make up over 21% of the bank's total loan portfolio, a significant concentration that reflects deep specialization. This is not a business that larger, generalist banks can easily enter, as it requires nuanced understanding of crop cycles, commodity prices, and government programs. This niche focus allows HBT to attract and retain high-quality, loyal customers who value the bank's expertise. While commercial real estate is its largest category at around 50% of loans, the agricultural franchise is what truly sets it apart from typical community banks. This proven expertise in a specialized local industry provides pricing power and helps sustain strong credit quality, forming the core of the bank's lending identity and long-term resilience.
The bank possesses an excellent, low-cost core deposit base with a high proportion of noninterest-bearing accounts, providing a stable and cheap funding source that is a key competitive advantage.
HBT's funding profile is a significant strength, anchored by a sticky and low-cost deposit base. As of the first quarter of 2024, noninterest-bearing deposits constituted 31% of total deposits. This is a powerful advantage, as these are essentially free funds for the bank to lend out. The overall cost of total deposits was 1.83%, which is competitive in the current rate environment and allows the bank to maintain a healthy net interest margin. The bank's uninsured deposits stood at approximately 31% (excluding collateralized public funds), which is a manageable level and reflects a base of sticky operating accounts from local businesses. This strong core deposit franchise, built on long-term community relationships, is less likely to flee during market stress and provides a durable funding advantage over banks more reliant on higher-cost CDs or wholesale funding.
HBT maintains a dense and efficient branch network concentrated in its core Illinois markets, which is highly effective for gathering local deposits but creates significant geographic concentration risk.
HBT Financial operates a network of 61 branches, almost exclusively located in Central and Northeastern Illinois. This concentrated physical presence is a cornerstone of its community banking strategy. The network's efficiency is strong, with average deposits per branch around $88 million ($5.38 billion in total deposits / 61 branches), indicating healthy productivity. This dense local network supports HBT's relationship-based model, making it a convenient and trusted choice for local customers and helping to attract a stable, low-cost deposit base. However, this geographic focus is a double-edged sword. While it creates a strong local brand, it leaves the bank's performance entirely dependent on the economic health of a single region of one state. A downturn in the local Illinois economy could disproportionately impact HBT compared to more geographically diversified peers. Despite this risk, the network's current efficiency and alignment with the bank's core strategy are effective.
HBT Financial shows strong financial health, underpinned by excellent profitability and disciplined cost management. Key metrics highlight its stability, including a high Return on Assets of 1.57%, a robust Return on Equity of 13.4%, and a very strong efficiency ratio around 54%. The bank's balance sheet is also solid, with a healthy loan-to-deposit ratio of 78.2%, indicating ample liquidity. While some specific credit quality and interest rate sensitivity data is not available, the overall picture suggests a well-managed and financially sound institution. The investor takeaway is positive based on its current financial statements.
The bank exhibits a very strong capital and liquidity position, with a low loan-to-deposit ratio and minimal leverage providing a substantial safety cushion.
HBT Financial's capital and liquidity buffers are robust. The bank's loan-to-deposit ratio in the most recent quarter was 78.2% (calculated from $3.4 billion in gross loans and $4.35 billion in deposits). This is well below the typical industry benchmark of 80-90% and signifies that the bank has more than enough stable deposit funding for its loan portfolio, which is a significant strength in terms of liquidity. This conservative funding profile reduces reliance on more volatile and expensive wholesale funding.
From a capital perspective, while a CET1 ratio is not provided, other metrics point to a strong position. The tangible common equity to total assets ratio is a healthy 10.4% ($523.55 million tangible equity / $5.04 billion total assets), indicating a solid capital base to absorb potential losses. Furthermore, the bank's debt-to-equity ratio is extremely low at 0.1, reflecting very little leverage on its balance sheet. This combination of strong liquidity and high capital levels makes the bank highly resilient to financial stress.
The bank's low provisions for credit losses and adequate reserve levels suggest management is confident in the health of its loan portfolio, though key nonperforming loan data is unavailable.
HBT Financial appears to maintain solid credit discipline, though a complete analysis is limited by the absence of data on nonperforming loans (NPLs) and net charge-offs. The bank's allowance for credit losses stood at $41.9 million against a gross loan portfolio of $3.4 billion in the latest quarter. This results in a reserve coverage ratio of 1.23% of total loans, which is generally considered adequate and in line with industry norms for a community bank, suggesting a prudent approach to reserving for potential losses.
The provision for credit losses has remained very low, at just $0.6 million in the most recent quarter and $0.53 million in the prior one. These minimal provisions, especially when compared to the pre-tax income of over $26 million, signal that management does not foresee significant credit deterioration in its portfolio. While direct metrics on loan performance are missing, the low provisioning and adequate reserve levels provide confidence in the bank's current credit quality.
The bank appears to be managing interest rate changes effectively, as evidenced by its growing net interest income and a widening spread between interest earned and interest paid.
While specific metrics like the duration of the securities portfolio or the percentage of variable-rate loans are not provided, HBT Financial's income statement suggests successful management of interest rate sensitivity. In the most recent quarter, net interest income grew by 4.72% year-over-year, reaching $49.99 million. More importantly, comparing the second and third quarters of 2025 shows that total interest income grew faster than total interest expense, indicating that its assets are repricing more favorably than its liabilities in the current rate environment. This ability to protect and grow its net interest spread is a critical strength for a bank.
However, investors should be aware that a significant portion of the bank's assets is in investment and mortgage-backed securities ($1.27 billion combined), which are sensitive to interest rate fluctuations. Without explicit data on accumulated other comprehensive income (AOCI) or unrealized losses, it is difficult to fully assess the potential impact of rate changes on the bank's tangible equity. Despite this lack of detail, the positive trend in core earnings from interest spreads supports a passing grade.
The bank is successfully growing its net interest income, demonstrating its ability to maintain a healthy spread between what it earns on loans and pays for deposits.
While the specific net interest margin (NIM) percentage is not provided, the underlying components point to a healthy and well-managed interest spread. HBT's net interest income (NII), the core profit source for a bank, grew 4.72% year-over-year to $49.99 million in the third quarter of 2025. This steady growth shows the bank is effectively navigating the interest rate environment. Comparing recent quarters, total interest income grew slightly faster than total interest expense, which is a positive sign for margin stability or expansion.
The bank earned $64.34 million in interest income while paying out only $14.35 million in interest expense in its most recent quarter. This wide and stable spread is the foundation of its strong profitability. The consistent growth in NII, which is the bank's primary revenue stream, confirms that its core lending and funding operations are performing well.
With an efficiency ratio around `54%`, the bank demonstrates excellent cost control, operating far more efficiently than many of its peers.
HBT Financial exhibits exceptional discipline in managing its expenses. The bank’s efficiency ratio, which measures noninterest expense as a percentage of revenue, was 54.3% in the last two quarters. This is a very strong result, as a ratio below 60% is considered good and below 55% is typically seen as excellent for community banks. It indicates that management runs a lean operation, effectively converting revenue into profit without excessive overhead.
In the most recent quarter, total noninterest expense was $32.51 million against total revenues of $59.84 million. The largest component, salaries and employee benefits, stood at $19.67 million, representing a manageable 60.5% of total noninterest expenses. This high level of efficiency is a significant competitive advantage, allowing the bank to be more profitable than less disciplined peers and providing flexibility to invest in growth or return capital to shareholders.
HBT Financial has demonstrated a strong and consistent operating history over the last five years, marked by steady balance sheet growth and superior profitability. The bank has successfully grown earnings per share at a compound annual rate of about 14% and maintained a high return on equity, averaging over 13% in recent years. Its key strengths are excellent cost control, reflected in a low efficiency ratio around 55%, and a healthy net interest margin. The primary weakness has been significant shareholder dilution resulting from acquisitions. The investor takeaway is mixed; while HBT is a high-quality and profitable operator, the benefits have been partially offset by an expanding share count.
The bank has achieved steady and impressive growth in both its loan portfolio and deposit base over the last five years while maintaining a conservative and stable loan-to-deposit ratio.
HBT has demonstrated a consistent ability to grow its core business. From FY2020 to FY2024, gross loans increased from $2.25 billion to $3.47 billion, representing a compound annual growth rate (CAGR) of 11.3%. Over the same period, total deposits grew from $3.13 billion to $4.32 billion, a CAGR of 8.4%. This balanced growth in both sides of the balance sheet indicates healthy customer acquisition and market share gains within its operating footprint.
Crucially, management has maintained a prudent approach to liquidity. The bank's loan-to-deposit ratio has remained stable, moving from 71.8% in FY2020 to a still-conservative 80.3% in FY2024. This level is well below many peers and provides a strong liquidity buffer, indicating the bank is not overly reliant on wholesale funding and has ample capacity to fund future loan growth with its core deposit base.
The bank has a strong track record of maintaining a superior net interest margin and a highly efficient operation, which are key drivers of its impressive profitability.
HBT has demonstrated excellent control over its core profitability drivers. Net interest income (NII) grew at a strong 12.6% CAGR from FY2020 to FY2024. This was supported by a strong net interest margin (NIM) that expanded significantly as interest rates rose, peaking above 4% in 2023 and settling at a healthy 3.74% in 2024 (approximated using average assets). This performance is stronger than many peers, indicating good asset-liability management.
Equally important is the bank's operational efficiency. The efficiency ratio, which measures non-interest expenses as a percentage of revenue, improved from over 60% in FY2020 to the mid-50s in subsequent years, ending FY2024 at 55.3%. A lower ratio is better, and this consistently strong result places HBT among the more efficient operators in the community banking sector. This combination of a strong NIM and tight cost control is a powerful engine for generating shareholder returns.
Despite some year-to-year volatility in net income, the bank has delivered strong long-term EPS growth, supported by a consistently high and stable return on equity.
HBT's earnings per share (EPS) grew from $1.34 in FY2020 to $2.27 in FY2024, a strong 4-year compound annual growth rate of 14.1%. While the year-over-year growth numbers have been choppy, with a sharp recovery in FY2021 followed by more modest growth, the overall trend is decisively positive. This performance is superior to slower-growing peers like Midland States Bancorp.
The underlying strength of the bank's earnings power is best seen in its return on equity (ROE). After dipping in 2020, ROE has been remarkably stable and high, averaging 14.5% from FY2021 to FY2024. This level of profitability is a hallmark of a high-quality financial institution and shows that management has been highly effective at generating profits from its capital base, even as the company has grown.
The bank's credit metrics appear stable and well-managed, with provisions for loan losses remaining low and reserves staying at healthy levels relative to the loan portfolio.
HBT's history reflects disciplined underwriting and risk management. After a higher provision for loan losses of $10.53 million in FY2020, likely in response to the COVID-19 pandemic, the bank saw net provision releases in FY2021 and FY2022, signaling an improvement in credit quality. In FY2023 and FY2024, provisions normalized to low levels of $1.65 million and $3.03 million, respectively. These modest provisions, in the context of a growing multi-billion dollar loan book, suggest that credit losses have been well-contained.
Furthermore, the bank's allowance for loan losses (ACL) as a percentage of gross loans has remained robust. At the end of FY2024, the ACL stood at $42.04 million, or 1.21% of gross loans. This coverage ratio has been stable and is generally considered a healthy reserve level for a community bank, providing a solid cushion against potential future credit issues.
The bank has a strong record of dividend growth with a conservative payout ratio, but this positive is overshadowed by significant shareholder dilution from acquisitions over the last five years.
HBT Financial has consistently increased its dividend, with the dividend per share growing from $0.60 in FY2020 to $0.76 in FY2024. This reflects a commitment to returning capital to shareholders. The dividend payout ratio has remained conservative, typically in the 30-35% range, which suggests the dividend is well-covered by earnings and sustainable. In FY2024, the payout ratio was a healthy 33.69%.
However, the company's track record is seriously flawed by shareholder dilution. Despite repurchasing shares each year since 2021, with buybacks totaling over $18 million in the last three fiscal years, the diluted share count has increased from 27 million in FY2020 to 32 million in FY2024. This increase is likely due to shares issued for acquisitions. For long-term investors, this level of dilution is a major concern as it reduces ownership stake and spreads future earnings over a larger number of shares, undermining the benefits of profit growth.
HBT Financial's future growth outlook is mixed, leaning towards cautious. The bank's primary growth avenues are likely to be disciplined, in-market acquisitions and slow, organic loan growth tied to the stable but low-growth economy of Central Illinois. A major headwind is its heavy reliance on net interest income and an underdeveloped fee income business, making it more vulnerable to interest rate fluctuations than diversified peers. While its niche in agricultural lending provides a stable foundation, its geographic concentration limits its overall growth potential. The investor takeaway is that HBT offers stability but lacks the dynamic growth drivers of larger, more diversified regional banks.
The bank's loan growth outlook is modest and tied directly to the slow-growing economies of its core Illinois markets, with no major catalysts for acceleration.
HBT Financial has not provided explicit loan growth guidance for the upcoming fiscal year, but recent performance and management commentary suggest a conservative outlook. In Q1 2024, total loans grew by a modest 1.3% from the previous quarter. Growth is constrained by the bank's geographic concentration in the mature, slow-growth markets of Central and Northeastern Illinois. While its specialized agricultural portfolio provides stability, the larger commercial and real estate segments are dependent on local economic activity. Without expansion into higher-growth markets or new lending verticals, HBT's organic loan growth is likely to remain in the low single digits, lagging behind peers in more dynamic economic regions.
With a strong capital position, the bank is well-positioned to pursue value-accretive M&A and continue its share buyback program, representing its most credible path to meaningful EPS growth.
HBT Financial has a solid track record of deploying capital through acquisitions and shareholder returns. The bank is well-capitalized, with a Common Equity Tier 1 (CET1) ratio comfortably above regulatory minimums, providing the capacity for future deals. In an industry ripe for consolidation, disciplined M&A focused on in-market or adjacent-market community banks is HBT's most realistic and significant growth driver. Furthermore, the company has an active share repurchase program, with authorization to buy back shares, which provides another avenue to boost earnings per share (EPS). This dual approach to capital deployment—strategic acquisitions supplemented by opportunistic buybacks—is a sound strategy for a mature community bank and represents a clear strength for future value creation.
The bank maintains an efficient physical branch network for its relationship-focused model but lacks a clear, aggressive strategy for digital user growth, posing a long-term risk in an increasingly digital world.
HBT Financial's growth strategy remains centered on its physical footprint of 61 branches, which are effective at gathering low-cost local deposits. However, the company has not articulated a clear or aggressive plan for digital expansion or announced specific targets for digital active user growth. In an industry where digital adoption is a key driver of efficiency and customer acquisition, this lack of a stated digital-first initiative is a notable weakness. While management may be investing in technology behind the scenes, the absence of public targets for cost savings or digital channel shift suggests this is not a primary growth lever. This creates a risk that HBT could lose younger customers and fall behind more tech-savvy competitors over the next 3-5 years.
Management anticipates a stable Net Interest Margin (NIM) due to its strong low-cost deposit base, which should help offset pressures from the broader interest rate environment.
HBT's outlook for its Net Interest Margin (NIM), the key driver of its profitability, is stable. Management has guided that it expects NIM to remain relatively flat, likely in the 3.30% to 3.40% range, supported by the repricing of assets and its strong core deposit franchise. The bank's high proportion of noninterest-bearing deposits (around 31% of total) provides a significant funding advantage, keeping its cost of funds relatively low even as interest rates have risen. While the bank is not positioned for significant NIM expansion, its ability to defend its margin in the current environment is a sign of fundamental strength and provides a stable earnings base for the near future.
The bank has not outlined a convincing strategy to significantly grow its fee income, leaving its earnings highly dependent on net interest income and vulnerable to rate cycles.
HBT's future growth is hampered by its underdeveloped noninterest income streams, which account for only about 15% of total revenue. Management has not provided specific growth targets for key fee-generating areas like wealth management, treasury services, or mortgage banking. This is a significant missed opportunity for diversification. Without a clear plan to build these businesses, HBT's earnings will remain disproportionately exposed to the volatility of net interest margins. Peers are increasingly focused on growing fee income to create more stable, recurring revenue, and HBT's lack of a stated strategy in this area puts it at a competitive disadvantage for future growth.
Based on its current valuation metrics, HBT Financial, Inc. appears to be fairly valued. The company trades at a Price-to-Earnings (P/E) ratio of 10.09, slightly below the regional banking industry average, suggesting a modest discount. Key indicators supporting this valuation include a solid dividend yield of 3.36% and a reasonable Price to Tangible Book Value (P/TBV) of approximately 1.50x. The stock is trading near the top of its 52-week range, reflecting solid performance. The overall takeaway for investors is neutral; while not significantly undervalued, HBT presents a reasonable valuation for a steadily performing regional bank.
HBT trades at a reasonable Price to Tangible Book Value multiple of 1.50x given its strong profitability, as measured by a Return on Equity of 13.4%.
For banks, the Price to Tangible Book Value (P/TBV) is a primary valuation metric. HBT's P/TBV is 1.50x, based on the current price of $25.02 and a tangible book value per share of $16.64. A key test is to compare this multiple to the bank's profitability. HBT's Return on Equity (ROE) is 13.4%, and its Return on Tangible Common Equity (ROTCE) is likely higher, around 15%.
High-quality regional banks delivering ROTCE in the mid-teens often command P/TBV multiples between 1.5x and 2.3x. Since HBT's 1.50x multiple is at the low end of this range for its level of profitability, it suggests the market is not overvaluing its franchise and balance sheet. Therefore, the stock is reasonably priced on an asset basis, warranting a "Pass".
The company's strong Return on Equity of 13.4% appears to justify its Price-to-Book ratio of 1.31, suggesting a fair alignment between profitability and valuation.
A bank's ability to generate profit from its equity base (ROE) should be reflected in its Price-to-Book (P/B) multiple. HBT posted an ROE of 13.4% in the latest quarter, which is a strong level of profitability for a regional bank. In general, banks with higher ROEs can sustain higher P/B multiples. The average P/B for regional banks has been around 1.11x to 1.15x.
HBT's P/B ratio of 1.31 is higher than this average, but this premium is justified by its superior ROE. Banks with ROTCE figures above 13% often trade at P/TBV multiples of 1.5x or higher. Given HBT's solid returns, its valuation multiples (both P/B and P/TBV) are well-aligned with its performance. This indicates the market is appropriately valuing the company's ability to generate profits, leading to a "Pass".
The stock's low P/E ratio, both on a trailing (10.09) and forward (9.38) basis, appears attractive relative to its recent double-digit earnings growth.
HBT's trailing twelve months P/E ratio of 10.09 is below the industry average of 11.74 for regional banks, suggesting it may be undervalued on an earnings basis. The forward P/E of 9.38 is even more compelling, indicating that the market expects earnings to grow.
This valuation is supported by strong recent performance. In the most recent quarter, HBT reported EPS growth of 10.15%. While past growth doesn't guarantee future results, if the company can maintain a high-single-digit or low-double-digit growth rate, its PEG (P/E to Growth) ratio would be around or below 1.0, which is often considered a sign of an undervalued stock. This combination of a low P/E multiple and healthy earnings growth supports a "Pass".
HBT offers a healthy and sustainable dividend yield, supported by a conservative payout ratio and modest share repurchases, indicating a solid commitment to shareholder returns.
The company provides a dividend yield of 3.36%, which is an attractive income source for investors. This is backed by a low payout ratio of 33.87%, meaning just over a third of the company's profit is used to pay dividends. This conservative approach suggests the dividend is safe and has potential to grow in the future, as demonstrated by its 10.53% growth over the last year.
In addition to dividends, the company is returning capital to shareholders through buybacks, with a 0.32% buyback yield. While modest, this contributes positively to total shareholder yield and helps reduce the number of shares outstanding over time. This combination of a solid dividend and consistent, albeit small, buybacks provides a reliable return stream and justifies a "Pass" for this factor.
Compared to its peers, HBT shows a compelling mix of a slightly discounted P/E ratio, a reasonable P/TBV multiple, a solid dividend yield, and lower-than-market volatility.
On a relative basis, HBT appears attractive. Its trailing P/E of 10.09 is below the industry average of approximately 11.7. The P/TBV of 1.50x aligns with its strong profitability and is not excessive. The dividend yield of 3.36% provides a competitive income stream for investors.
Furthermore, the stock's beta of 0.61 is significantly below 1.0, indicating it is less volatile than the broader market. This can be an appealing characteristic for conservative investors. This combination of reasonable valuation multiples, a solid dividend, and low volatility makes HBT stand out favorably against many of its regional banking peers, justifying a "Pass".
The primary macroeconomic risk for HBT Financial is its sensitivity to interest rate policy and the health of the Illinois economy. In a 'higher for longer' interest rate environment, the bank faces intense competition for deposits, forcing it to pay higher rates to retain customers. This pressure can compress its net interest margin (NIM)—the key measure of bank profitability—if the yields on its loans do not rise as quickly. Furthermore, because HBT's operations are almost entirely within Illinois, a localized recession or slowdown in the state's agricultural or commercial sectors would directly impact loan demand and increase the likelihood of defaults, posing a much greater threat than it would to a more geographically diversified bank.
A significant industry-specific risk lies within HBT's loan portfolio, particularly its exposure to Commercial Real Estate (CRE). The CRE market, especially office and retail properties, is undergoing structural changes due to remote work and e-commerce. A downturn in this sector could lead to higher vacancies and falling property values, potentially causing an increase in non-performing loans and write-offs for the bank. While HBT's loan book is diversified across different sectors, its CRE concentration remains a key vulnerability that could strain its financial health if credit conditions deteriorate in the coming years.
Looking forward, HBT must navigate an increasingly competitive and regulated landscape. The bank competes not only with large national institutions that have vast technology and marketing budgets but also with nimble fintech companies that are chipping away at traditional banking services. This forces HBT to continuously invest in its digital offerings, which can be a significant operational expense. In the wake of the 2023 banking failures, regulators have also increased their scrutiny of regional banks' capital levels, liquidity, and risk management practices. This heightened regulatory oversight could lead to higher compliance costs and potentially limit the bank's flexibility in managing its capital, pursuing acquisitions, or returning cash to shareholders.
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