- Key insight: HBT Financial is bolstering its presence in Illinois by acquiring another in-state rival.
- What's at stake: If completed, the pending deal would be HBT's 12th since 2007. As part of the transaction, the seller's mortgage banking business would be sold or would cease operations prior to the deal closing.
- Forward look: The acquisition is expected to be finalized during the first quarter of 2027.
HBT Financial, a serial acquirer in Illinois, has inked its second deal in 10 months — a move that would further bolster its presence in its home state, provide access to a stable deposit base and launch the bank toward the $10 billion-asset threshold.
The parent of Heartland Bank and Trust Company agreed to buy Tri-County Financial Group in a cash-and-stock transaction valued at roughly $204.6 million, the companies said Monday. The deal, which is expected to close during the first quarter of next year, would push HBT's total assets up by nearly one-quarter to approximately $8.3 billion.
If it's approved by regulators and Tri-County shareholders, the acquisition would be HBT's 12th since 2007. In March, it
The $6.7 billion-asset HBT is based in Bloomington, Illinois. Tri-County Financial Group is headquartered about 80 miles north in Mendota, Illinois. Its banking arm, First State Bank, has 19 branches in the central and northern part of the state, along with $1.6 billion of assets, $1.3 billion of loans and $1.3 billion of deposits, the banks said.
"First State Bank is a fine addition to Heartland Bank," Fred Drake, executive chairman of HBT since 2023, said in a press release. "I have followed their bank for many years, and as we serve several of the same markets, I know their communities are very similar to ours."
Bank merger-and-acquisition activity was poised to accelerate this year, but slowed down after the start of the U.S.-Iran war. Through July, 102 U.S. bank M&A deals had been announced, according to a note from Laurie Havener Hunsicker, an analyst at Seaport Research Partners. That compared with around 105 during the same period last year.
Even prior to the Tri-County deal, HBT Financial had been working its way toward the $10 billion-asset threshold, which triggers new regulatory challenges, including the cap on debit interchange fees. In 2021, HBT
The merger between HBT and Tri-County has been approved by the boards of directors of each company. As part of the deal, Tri-County shareholders will receive either 2.4589 shares of HBT stock for each share of Tri-County stock, $71.01 per share in cash or a combination of cash and stock.
At closing, Tri-County shareholders will own about 9% of HBT's outstanding common stock.
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First State's mortgage operations will be sold or will cease operations prior to closing the deal, HBT said in a presentation. Tri-County's chairman, Tom Prescott, is set to join HBT's board of directors.
Kirk Ross, Tri-County CEO, will join Heartland Bank and Trust as a senior management officer.
Brendan Nosal, an analyst at Hovde Group, reacted positively Monday to HBT's pending acquisition, including the plan for First State Mortgage Services to be divested. In a research note, he said he takes "no issue" with HBT's plan to scrap Tri-County's "large, money-losing mortgage banking operation," as it will eliminate gain-on-sale exposure.
Still, Nosal wrote that with the bank's pro-forma assets at $8.3 billion, questions regarding the $10 billion-asset threshold "are now a valid part of the conversation."
The deal assumes an anticipated cost savings of 34% of Tri-County's noninterest expenses, excluding its mortgage operations. Eighty percent of the cost savings will be phased in during 2027, with the rest to be achieved "thereafter," the companies said in the press release.
HBT expects to record an estimated $19 million in pretax expenses related to the transaction, it said.
There is some branch overlap, including five First State Bank branches that are located within two miles of an existing Heartland Bank and Trust office, according to the presentation.
Those markets "are being evaluated, and we will consolidate branches in close proximity where it's logical to do so," HBT Chief Financial Officer Peter Chapman told American Banker.
