HBT Financial, Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Unless the context requires otherwise, references in this report to the “Company,” “we,” “us” and “our” refer to HBT Financial, Inc. and its consolidated subsidiaries. Management’s discussion and analysis should be read in conjunction with the following parts of this Annual Report on Form 10-K: Part I, Item 1 “Business”, Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”, and Part II, Item 8 “Financial Statements and Supplementary Data”. Detailed discussion and analysis of the financial condition and results of operation for 2021 as compared to 2020 can be found below. OVERVIEW HBT Financial, Inc., headquartered in Bloomington, Illinois, is the holding company for Heartland Bank and Trust Company, and has banking roots that can be traced back to 1920. HBT provides a comprehensive suite of business, commercial, wealth management, and retail banking products and services to businesses, families, and local governments throughout Central and Northeastern Illinois and Eastern Iowa. As of December 31, 2021, the Company had total assets of $4.3 billion, loans held for investment of $2.5 billion, and total deposits of $3.7 billion. Market Area We currently operate 61 branch locations in Central and Northeastern Illinois and Eastern Iowa. We hold a leading deposit share in many of our markets in Central Illinois, which we define as a top three deposit share rank, providing the foundation for our strong deposit base. The stability provided by this low-cost funding is a key driver of our strong track record of financial performance. Below is a summary of the loan and deposit balances by geographic region. ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 December 31, 2020 ​ ​ (dollars in thousands) Total loans ​ ​ ​ ​ ​ ​ Illinois by metropolitan and micropolitan statistical areas ​ ​ ​ ​ ​ ​ Bloomington-Normal ​ $ 527,161 ​ $ 523,418 Champaign-Urbana ​ ​ 191,646 ​ ​ 214,646 Chicago ​ ​ 1,196,605 ​ ​ 1,132,893 Lincoln ​ ​ 87,153 ​ ​ 103,614 Ottawa-Peru ​ ​ 101,117 ​ ​ 107,098 Peoria ​ ​ 123,143 ​ ​ 165,337 Total Illinois ​ ​ 2,226,825 ​ ​ 2,247,006 Iowa ​ ​ 272,864 ​ ​ — Total loans ​ $ 2,499,689 ​ $ 2,247,006 ​ ​ ​ ​ ​ ​ ​ Total deposits ​ ​ ​ ​ ​ ​ Illinois by metropolitan and micropolitan statistical areas ​ ​ ​ ​ ​ ​ Bloomington-Normal ​ $ 887,587 ​ $ 774,082 Champaign-Urbana ​ ​ 203,899 ​ ​ 174,653 Chicago ​ ​ 1,237,486 ​ ​ 1,077,691 Lincoln ​ ​ 203,098 ​ ​ 201,012 Ottawa-Peru ​ ​ 407,156 ​ ​ 347,211 Peoria ​ ​ 610,155 ​ ​ 555,885 Total Illinois ​ ​ 3,549,381 ​ ​ 3,130,534 Iowa ​ ​ 188,804 ​ ​ — Total deposits ​ $ 3,738,185 ​ $ 3,130,534 ​ ​ 50 Table of Contents NXT Bancorporation, Inc. Acquisition On October 1, 2021, the Company completed its acquisition of NXT, the holding company for NXT Bank, which was previously announced on June 7, 2021. The acquisition expands the Company’s footprint into Eastern Iowa with four locations that began operating as branches of Heartland Bank following the merger and system conversion of NXT Bank into Heartland Bank in December 2021. After considering business combination accounting adjustments, NXT added total assets of $234 million, total loans of $195 million, and total deposits of $182 million. Cash consideration of approximately $10.6 million and stock consideration of approximately 1.8 million shares of HBT common stock resulted in aggregate consideration of $39.9 million. Goodwill of $5.7 million was recorded in the acquisition. The acquisition of NXT provides an opportunity to utilize the Company’s existing excess liquidity to replace NXT’s higher cost funding. Additionally, Heartland Bank’s broader range of products and services and greater ability to meet larger borrowing needs provides an opportunity to expand NXT customer relationships. The Company incurred the following pre-tax acquisition expenses related to the acquisition of NXT during the year ended December 31, 2021 (dollars in thousands): ​ ​ ​ ​ Salaries ​ $ 65 Furniture and equipment ​ ​ 18 Data processing ​ ​ 355 Marketing and customer relations ​ ​ 12 Loan collection and servicing ​ ​ 11 Legal fees and other noninterest expense ​ ​ 955 Total NXT acquisition-related expenses ​ $ 1,416 ​ Branch Rationalization Plan In April 2021, the Company made plans to close or consolidate six branches. One branch was consolidated during the second quarter of 2021, and the remaining five branches were closed during the third quarter of 2021. The Company estimates annual pre-tax cost savings, net of associated revenue impacts, related to the branch rationalization plan to be approximately $1.1 million. The Company incurred the following pre-tax branch closure costs during the year ended December 31, 2021 (dollars in thousands): ​ ​ ​ ​ NONINTEREST INCOME ​ ​ ​ Gains (losses) on other assets ​ $ (682) ​ ​ ​ ​ NONINTEREST EXPENSE ​ ​ ​ Salaries ​ ​ 53 Marketing and customer relations ​ ​ 6 Legal fees and other noninterest expense ​ ​ 7 Total noninterest expense ​ ​ 66 Total branch closure costs ​ $ 748 51 Table of Contents COVID-19 Response and Impact Overview The Company has taken a number of steps to support our employees and customers while prioritizing the health and safety of all involved, including, but not limited to: ● Continued to place the health of customers and employees first by maintaining enhanced cleaning protocols and other safety measures at all locations; ● Enabling work from home for many employees and social distancing for employees who need to report to the office; ● Maintaining regular business hours at our branches and call center to continue serving our customers throughout the pandemic; ● Participating in both rounds of the Small Business Administration’s Paycheck Protection Program; and ● Offering loan payment modifications to customers experiencing financial hardship due to COVID-19. Paycheck Protection Program Loans In December 2020, the Paycheck Protection Program (PPP) was extended and allowed eligible borrowers to receive a second PPP loan. During 2021, we funded $104.7 million of PPP loans as part of the second round of the program. We continue to process forgiveness applications for PPP loans, with $185.3 million of PPP loans originated in round 1 and $75.8 million of PPP loans originated in round 2 receiving full or partial forgiveness by December 31, 2021. The following table summarizes outstanding PPP loans as of December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Round 1 Round 2 Total ​ (dollars in thousands) PPP loan balance, before net deferred origination fees $ 54 ​ ​ 30,926 $ 30,980 Net deferred origination fees ​ (1) ​ ​ (1,491) ​ (1,492) PPP loan balance ​ $ 53 ​ ​ 29,435 ​ $ 29,488 ​ During the year ended December 31, 2021 and 2020, the deferred origination fees on PPP loans were reduced by direct origination costs of $0.5 million and $0.5 million, respectively, consisting primarily of salaries and benefits costs. Net deferred origination fees on PPP loans of $9.2 million and $3.0 million during the years ended December 31, 2021 and 2020, respectively, were recognized as taxable loan interest income. Recognition of net deferred origination fees is accelerated upon loan forgiveness or repayment prior to contractual maturity. ​ 52 Table of Contents Payment Modifications Related to COVID-19 Loan payment modifications were made for borrowers experiencing financial hardship due to COVID-19, with substantially all modifications in the form of a three-month interest-only period or a one-month payment deferral. Consistent with the applicable accounting and regulatory guidance, short-term loan payment modifications such as these are generally not considered to be a troubled debt restructuring. The volume of loan modification requests related to a COVID-19 financial hardship have declined significantly from its height during the second quarter of 2020. As of December 31, 2021 and 2020, the total outstanding balance of loans with an existing payment modification related to a COVID-19 financial hardship were $0.2 million and $28.0 million, respectively. Industries Adversely Impacted by COVID-19 While many industries have been and may continue to be adversely impacted by the COVID-19 pandemic, the restaurant and hotel industries have been particularly susceptible to significant adverse impacts. While many areas of consumer and business spending have rebounded in recent months, there is uncertainty about the longer lasting impact on the restaurant and hotel industries resulting from the COVID-19 pandemic. Adverse impacts in these and other industries may result in a deterioration of the loan portfolio’s credit quality or an increase in loan losses. The below table summarizes loan balances within the restaurant and hotel industries, along with risk rating information, as of December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Carrying Balance ​ Substandard ​ Non-PPP Loans PPP Loans Total Risk Rating ​ (dollars in thousands) Restaurants ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 3,335 $ 6,263 ​ $ 9,598 $ 4 Commercial real estate - owner occupied ​ ​ 17,372 ​ ​ — ​ ​ 17,372 ​ 1,723 Commercial real estate - non-owner occupied ​ ​ 11,254 ​ ​ — ​ ​ 11,254 ​ — Construction and land development ​ ​ 737 ​ ​ — ​ ​ 737 ​ ​ — Total ​ $ 32,698 $ 6,263 ​ $ 38,961 $ 1,727 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Hotels ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 75 $ 680 ​ $ 755 $ — Commercial real estate - non-owner occupied ​ ​ 56,710 ​ ​ — ​ ​ 56,710 ​ 4,143 Construction and land development ​ ​ 11,246 ​ ​ — ​ ​ 11,246 ​ ​ — Total ​ $ 68,031 $ 680 ​ $ 68,711 $ 4,143 ​ As of December 31, 2021, there were no loans within the restaurant and hotel industries that were granted a loan payment modification related to a COVID-19 financial hardship that had not returned to regular payments. ​ 53 Table of Contents FACTORS AFFECTING OUR RESULTS OF OPERATIONS Economic Conditions The Company’s business and financial performance are affected by economic conditions generally in the United States and more directly in the Illinois and Iowa markets where we primarily operate. The significant economic factors that are most relevant to our business and our financial performance include the general economic conditions in the U.S. and in the Company’s markets, unemployment rates, real estate markets, and interest rates. COVID-19 Pandemic Although the Company has had continuous business operations since the beginning of the COVID-19 pandemic, the pandemic has caused significant economic disruption throughout the United States and the communities that we serve. While the economic outlook generally improved in 2021 compared to 2020, uncertainty surrounding potential surges in COVID-19 infections with new virus variants and the longer lasting impact on specific industries remains. As a result, the businesses we serve may continue to be adversely impacted and the ability of our customers to maintain historic deposit levels or to fulfill their contractual obligations to us may deteriorate. This could adversely affect our asset valuations, financial condition, liquidity and results of operations, and the impacts may be material. During 2020, we experienced the following adverse impacts of the COVID-19 pandemic: ● Decrease in net interest income and net interest margin, as a result of the lower interest rate environment; ● Increase in provision for loan losses due to deterioration in the loan portfolio’s credit quality, as a result of the economic slow-down caused by the COVID-19 pandemic; ● Decrease in debit and credit card interchange income, as a result of a lower level of consumer activity and lower associated volume of debit and credit card transactions; ● Decrease in service charge income on deposit accounts, such as overdraft fees, as a result of federal economic stimulus payments received by customers; ● Decrease in demand for loans, excluding PPP loans, as a result of the economic slow-down caused by the COVID-19 pandemic. While some of these trends reversed in 2021, and have continued such reversal in the beginning of 2022, sustained improvements are highly dependent upon strengthening economic conditions. The COVID-19 pandemic continues to cause economic uncertainties which may again result in these and other adverse impacts to our financial condition and results of operations. The Company’s executive management continues to closely monitor the COVID-19 pandemic. As of the date of this filing, we anticipate we will continue to take actions to support our customers in a manner consistent with the current guidance provided by federal banking regulatory authorities. Interest Rates Net interest income is our primary source of revenue. Net interest income is equal to the excess of interest income earned on interest earning assets (including discount accretion on purchased loans plus certain loan fees) over interest expense incurred on interest-bearing liabilities. The level of interest rates as well as the volume of interest-earning assets and interest-bearing liabilities both impact net interest income. Net interest income is also influenced by both the pricing and mix of interest-earning assets and interest-bearing liabilities which, in turn, are impacted by external factors such as local economic conditions, competition for loans and deposits, the monetary policy of the Federal Reserve Board and market interest rates. 54 Table of Contents The cost of our deposits and short-term wholesale borrowings is largely based on short-term interest rates, which are primarily driven by the Federal Reserve Board’s actions. The yields generated by our loans and securities are typically driven by short-term and long-term interest rates, which are set by the market and, to some degree, by the Federal Reserve Board’s actions. The level of net interest income is therefore influenced by movements in such interest rates and the pace at which such movements occur. Growth in deposit balances and the forgiveness of PPP loans has resulted in significant cash inflows and excess liquidity. While some excess liquidity was invested into debt securities during 2021, the yields available were lower than existing portfolio yields. Decreases in interest rates, as well as the ongoing economic uncertainty, may decrease our net interest income and net interest margin in future periods, while increases in interest rates are expected to increase our net interest income and net interest margin in future periods. Credit Trends We focus on originating loans with appropriate risk / reward profiles. We have a detailed loan policy that guides our overall loan origination philosophy and a well-established loan approval process that requires experienced credit officers to approve larger loan relationships. Although we believe our loan approval process and credit review process are strengths that allow us to maintain a high quality loan portfolio, we recognize that credit trends in the markets in which we operate and in our loan portfolio can materially impact our financial condition and performance and that these trends are primarily driven by the economic conditions and the impact of COVID-19 in our markets. Competition Our profitability and growth are affected by the highly competitive nature of the financial services industry. We compete with community banks in all our markets and, to a lesser extent, with money center banks, primarily in the Chicago MSA. Additionally, we compete with non-bank financial services companies and other financial institutions operating within the areas we serve. We compete by emphasizing personalized service and efficient decision-making tailored to individual needs. We do not rely on any individual, group, or entity for a material portion of our loans or our deposits. We continue to see increased competitive pressures on loan rates and terms which may affect our financial results in the future. Digital Banking Throughout the banking industry, in-person branch traffic is expected to continue to decline as more customers turn to digital banking for routine banking transactions. The COVID-19 pandemic has accelerated this transition, and in-person branch traffic is not expected to return to pre-pandemic levels. We plan to continue investing in our digital banking platforms, while maintaining an appropriately sized branch network. An inability to meet evolving customer expectations, with the appropriate level of security, for both digital and in-person banking may adversely affect our financial results in the future. Regulatory Environment and Trends We are subject to federal and state regulation and supervision, which continue to evolve as the legal and regulatory framework governing our operations continues to change. The current operating environment includes extensive regulation and supervision in areas such as consumer compliance, the BSA and anti-money laundering compliance, risk management and internal audit. We anticipate that this environment of extensive regulation and supervision will continue for the industry. As a result, changes in the regulatory environment may result in additional costs for additional compliance, risk management and audit personnel or professional fees associated with advisors and consultants. 55 Table of Contents FACTORS AFFECTING COMPARABILITY OF FINANCIAL RESULTS S Corp Status Prior to October 11, 2019, the Company elected to be taxed under sections of federal and state income tax law as an "S Corporation" which provides that, in lieu of Company income taxes, except for state replacement taxes, the stockholders separately account for their pro rata shares of the Company’s items of income, deductions, losses and credits. As a result of this election, no income taxes, other than state replacement taxes, had been recognized in the accompanying consolidated financial statements prior to October 11, 2019. Effective October 11, 2019, the Company voluntarily revoked its S Corporation status and became a taxable entity (“C Corporation”). As such, any periods prior to October 11, 2019 will only reflect an effective state replacement tax rate. In connection with the conversion of tax status, the Company recognized a deferred tax asset, and the associated income tax benefit, of $0.5 million. The following table illustrates the impact of being taxed as a C Corporation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 ​ 2020 2019 ​ ​ (dollars in thousands, except per share amounts) ​ As Reported ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income before income tax expense ​ $ 76,562 ​ $ 49,573 ​ $ 72,121 ​ Income tax expense ​ 20,291 ​ 12,728 ​ 5,256 ​ Net income ​ $ 56,271 ​ $ 36,845 ​ $ 66,865 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share - Basic ​ $ 2.02 ​ $ 1.34 ​ $ 3.33 ​ Earnings per share - Diluted ​ $ 2.02 ​ $ 1.34 ​ $ 3.33 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effective tax rate ​ 26.5 % 25.7 % 7.3 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unaudited Pro Forma C Corp Equivalent ​ ​ ​ ​ Historical income before income tax expense ​ ​ N/A ​ ​ N/A ​ $ 72,121 ​ C Corp equivalent income tax expense ​ ​ N/A ​ ​ N/A ​ 18,749 ​ C Corp equivalent net income ​ ​ N/A ​ ​ N/A ​ $ 53,372 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ C Corp equivalent earnings per share - Basic ​ ​ N/A ​ ​ N/A ​ $ 2.66 ​ C Corp equivalent earnings per share - Diluted ​ ​ N/A ​ ​ N/A ​ $ 2.66 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effective tax rate ​ ​ N/A ​ ​ N/A ​ 26.0 % N/A Not applicable. ​ The C Corp equivalent effective rates reflect a federal tax rate of 21% and state income tax rate of 9.5%. Jobs Act Accounting Election We qualify as an “emerging growth company” under the JOBS Act. The JOBS Act permits us an extended transition period for complying with new or revised accounting standards affecting public companies. We have elected to use the extended transition period until we are no longer an emerging growth company or until we choose to affirmatively and irrevocably opt out of the extended transition period. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies. ​ 56 Table of Contents RESULTS OF OPERATIONS Overview of Recent Financial Results The following table presents selected financial results and measures as of and for the year ended December 31. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of or for the Year Ended December 31, ​ ​ 2021 2020 2019 ​ ​ (dollars in thousands, except per share amounts) ​ Consolidated Statement of Income Information ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total interest and dividend income ​ $ 128,223 ​ $ 124,065 ​ $ 143,735 ​ Total interest expense ​ ​ 5,820 ​ ​ 6,460 ​ ​ 9,935 ​ Net interest income ​ ​ 122,403 ​ ​ 117,605 ​ ​ 133,800 ​ Provision for loan losses ​ ​ (8,077) ​ ​ 10,532 ​ ​ 3,404 ​ Net interest income after provision for loan losses ​ ​ 130,480 ​ ​ 107,073 ​ ​ 130,396 ​ Total noninterest income ​ ​ 37,328 ​ ​ 34,456 ​ ​ 32,751 ​ Total noninterest expense ​ ​ 91,246 ​ ​ 91,956 ​ ​ 91,026 ​ Income before income tax expense ​ ​ 76,562 ​ ​ 49,573 ​ ​ 72,121 ​ Income tax expense ​ ​ 20,291 ​ ​ 12,728 ​ ​ 5,256 ​ Net income ​ $ 56,271 ​ $ 36,845 ​ $ 66,865 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ C Corp equivalent net income (1) ​ ​ N/A ​ ​ N/A ​ $ 53,372 ​ Adjusted net income (2) ​ 56,840 ​ 39,734 ​ 57,427 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income (tax-equivalent basis) (2) (3) ​ $ 124,431 ​ $ 119,548 ​ $ 136,109 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share and Per Share Information ​ ​ ​ ​ Earnings per share - Diluted ​ $ 2.02 ​ $ 1.34 ​ $ 3.33 ​ C Corp equivalent earnings per share - Diluted (1) ​ N/A ​ N/A ​ 2.66 ​ Adjusted earnings per share - Diluted (2) ​ 2.04 ​ 1.44 ​ 2.86 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares of common stock outstanding ​ 27,795,806 ​ 27,457,306 ​ 20,090,270 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Summary Ratios ​ ​ ​ ​ Net interest margin ​ 3.18 % 3.54 % 4.31 % Net interest margin (tax-equivalent basis) (2) (3) ​ 3.23 ​ 3.60 ​ 4.38 ​ Yield on loans ​ ​ 4.68 ​ ​ 4.69 ​ ​ 5.51 ​ Yield on interest-earning assets ​ ​ 3.33 ​ ​ 3.74 ​ ​ 4.63 ​ Cost of interest-bearing liabilities ​ ​ 0.23 ​ ​ 0.29 ​ ​ 0.45 ​ Cost of total deposits ​ 0.07 ​ 0.14 ​ 0.29 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Efficiency ratio ​ 56.46 % 59.66 % 53.80 % Efficiency ratio (tax-equivalent basis) (2) (3) ​ 55.76 ​ 58.91 ​ 53.06 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average assets ​ 1.41 % 1.07 % 2.07 % Return on average stockholders' equity ​ 14.81 ​ 10.51 ​ 19.58 ​ Return on average tangible common equity (2) ​ 15.95 ​ 11.38 ​ 21.35 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ C Corp equivalent return on average assets (1) ​ N/A ​ N/A ​ 1.65 % C Corp equivalent return on average stockholders' equity (1) ​ N/A ​ N/A ​ 15.63 ​ C Corp equivalent return on average tangible common equity (1) (2) ​ N/A ​ N/A ​ 17.04 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted return on average assets (2) ​ 1.43 % 1.15 % 1.78 % Adjusted return on average stockholders' equity (2) ​ 14.95 ​ 11.33 ​ 16.81 ​ Adjusted return on average tangible common equity (2) ​ 16.12 ​ 12.28 ​ 18.34 ​ (1) Reflects adjustment to our historical net income for each period to give effect to the C Corp equivalent provision for income tax for such period. (2) See "Non-GAAP Financial Information" for reconciliation of non-GAAP measures to their most comparable GAAP measures. (3) On a tax-equivalent basis assuming a federal tax rate of 21% and state income tax rate of 9.5%. N/A Not applicable. ​ 57 Table of Contents Comparison of the Year Ended December 31, 2021 to the Year Ended December 31, 2020 For the year ended December 31, 2021, net income was $56.3 million increasing by $19.4 million, or 52.7%, when compared to net income for the year ended December 31, 2020. Notable changes include the following: ● A $18.6 million improvement in the provision for loan losses, primarily reflecting the improvements in the economic environment from a year ago. ● A $4.8 million improvement in net interest income, due primarily to a $6.2 million increase in PPP loan fees recognized as loan interest income. ● A $4.3 million improvement in the mortgage servicing rights fair value adjustment, primarily resulting from slower mortgage prepayment speed assumptions. ● A $1.6 million improvement in card income, primarily due to the 2020 results reflecting a lower volume of debit and credit card transactions which coincided with the beginning of the COVID-19 pandemic and the related initial economic slowdown. ● A $1.4 million decrease in employee benefits expense, primarily due to the 2020 results including a $1.5 million charge for the supplemental executive retirement plan (SERP) which was terminated in June 2019 and paid out in June 2020. ● Partially offsetting these improvements was a $7.6 million increase in income tax expense, primarily as a result of higher pre-tax income. Net Interest Income Net interest income equals the excess of interest income (including discount accretion on acquired loans) plus fees earned on interest earning assets over interest expense incurred on interest-bearing liabilities. Interest rate spread and net interest margin are utilized to measure and explain changes in net interest income. Interest rate spread is the difference between the yield on interest-earning assets and the rate paid for interest-bearing liabilities that fund those assets. The net interest margin is expressed as the percentage of net interest income to average interest-earning assets. The net interest margin exceeds the interest rate spread because noninterest-bearing sources of funds, principally noninterest-bearing demand deposits and stockholders’ equity, also support interest-earning assets. ​ 58 Table of Contents The following tables set forth average balances, average yields and costs, and certain other information for the years ended December 31, 2021, 2020, and 2019. Average balances are daily average balances. Nonaccrual loans are included in the computation of average balances but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees and costs, discounts and premiums, and purchase accounting adjustments that are accreted or amortized to interest income or expense. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ December 31, 2021 ​ December 31, 2020 December 31, 2019 ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ ​ ​ Balance ​ Interest Yield/Cost ​ Balance ​ Interest ​ Yield/Cost Balance ​ Interest Yield/Cost ​ ​ (dollars in thousands) ​ ASSETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ 2,271,544 ​ $ 106,284 4.68 % $ 2,245,093 ​ $ 105,196 4.69 % $ 2,178,897 ​ $ 120,142 5.51 % Securities ​ 1,148,900 ​ 21,348 1.86 ​ ​ 789,062 ​ 17,875 2.27 ​ 759,479 ​ 20,582 2.71 ​ Deposits with banks ​ 422,828 ​ 527 0.12 ​ ​ 282,130 ​ 938 0.33 ​ 164,986 ​ 2,951 1.79 ​ Other ​ 3,201 ​ 64 2.01 ​ ​ 2,479 ​ 56 2.28 ​ 2,501 ​ 60 2.41 ​ Total interest-earning assets ​ 3,846,473 ​ $ 128,223 3.33 % ​ 3,318,764 ​ $ 124,065 3.74 % 3,105,863 ​ $ 143,735 4.63 % Allowance for loan losses ​ (27,999) ​ ​ ​ ​ ​ ​ ​ (27,661) ​ ​ ​ ​ ​ ​ (21,704) ​ ​ ​ ​ ​ ​ Noninterest-earning assets ​ 162,064 ​ ​ ​ ​ ​ ​ ​ 156,397 ​ ​ ​ ​ ​ ​ 149,227 ​ ​ ​ ​ ​ ​ Total assets ​ $ 3,980,538 ​ ​ ​ ​ ​ ​ $ 3,447,500 ​ ​ ​ ​ ​ ​ $ 3,233,386 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS' EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand ​ $ 1,024,888 ​ $ 518 0.05 % $ 873,060 ​ $ 647 0.07 % $ 821,480 ​ $ 1,474 0.18 % Money market ​ 521,366 ​ 437 0.08 ​ ​ 474,033 ​ 697 0.15 ​ 463,233 ​ 1,837 0.40 ​ Savings ​ 595,887 ​ 188 0.03 ​ ​ 477,260 ​ 196 0.04 ​ 430,220 ​ 278 0.06 ​ Time ​ 295,788 ​ 1,329 0.45 ​ ​ 317,308 ​ 2,681 0.84 ​ 396,560 ​ 4,343 1.10 ​ Total interest-bearing deposits ​ 2,437,929 ​ 2,472 0.10 ​ ​ 2,141,661 ​ 4,221 0.20 ​ 2,111,493 ​ 7,932 0.38 ​ Securities sold under agreements to repurchase ​ 50,104 ​ 34 0.07 ​ ​ 49,714 ​ 48 0.10 ​ 41,177 ​ 72 0.18 ​ Borrowings ​ 1,653 ​ 9 0.54 ​ ​ 1,080 ​ 2 0.22 ​ 351 ​ 9 2.60 ​ Subordinated notes ​ ​ 39,275 ​ ​ 1,879 ​ 4.78 ​ ​ 12,869 ​ ​ 616 ​ 4.79 ​ ​ — ​ ​ — ​ — ​ Junior subordinated debentures issued to capital trusts ​ 37,680 ​ 1,426 3.79 ​ ​ 37,613 ​ 1,573 4.18 ​ 37,553 ​ 1,922 5.12 ​ Total interest-bearing liabilities ​ 2,566,641 ​ $ 5,820 0.23 % ​ 2,242,937 ​ $ 6,460 0.29 % 2,190,574 ​ $ 9,935 0.45 % Noninterest-bearing deposits ​ 1,004,757 ​ ​ ​ ​ ​ 807,864 ​ ​ ​ ​ 666,055 ​ ​ ​ ​ Noninterest-bearing liabilities ​ 29,060 ​ ​ ​ ​ ​ 45,996 ​ ​ ​ ​ 35,213 ​ ​ ​ ​ Total liabilities ​ 3,600,458 ​ ​ ​ ​ ​ 3,096,797 ​ ​ ​ ​ 2,891,842 ​ ​ ​ ​ Stockholders' Equity ​ 380,080 ​ ​ ​ ​ ​ 350,703 ​ ​ ​ ​ 341,544 ​ ​ ​ ​ Total liabilities and stockholders’ equity ​ $ 3,980,538 ​ ​ ​ ​ $ 3,447,500 ​ ​ ​ ​ $ 3,233,386 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income/Net interest margin (1) ​ ​ ​ ​ $ 122,403 ​ 3.18 % ​ ​ ​ $ 117,605 ​ 3.54 % ​ ​ ​ $ 133,800 ​ 4.31 % Tax-equivalent adjustment (2) ​ ​ ​ ​ 2,028 ​ 0.05 ​ ​ ​ ​ 1,943 ​ 0.06 ​ ​ ​ ​ 2,309 ​ 0.07 ​ Net interest income (tax-equivalent basis)/ Net interest margin (tax-equivalent basis) (2) (3) ​ ​ ​ ​ $ 124,431 ​ 3.23 % ​ ​ ​ $ 119,548 ​ 3.60 % ​ ​ $ 136,109 ​ 4.38 % Net interest rate spread (4) ​ ​ ​ ​ ​ 3.10 % ​ ​ ​ ​ ​ 3.45 % ​ ​ ​ ​ 4.18 % Net interest-earning assets (5) ​ $ 1,279,832 ​ ​ ​ ​ ​ $ 1,075,827 ​ ​ ​ ​ ​ $ 915,289 ​ ​ ​ ​ ​ Ratio of interest-earning assets to interest-bearing liabilities ​ 1.50 ​ ​ ​ ​ ​ 1.48 ​ ​ ​ ​ 1.42 ​ ​ ​ ​ Cost of total deposits ​ ​ ​ ​ ​ 0.07 % ​ ​ ​ ​ ​ 0.14 % ​ ​ ​ ​ 0.29 % (1) See "Non-GAAP Financial Information" for reconciliation of non-GAAP measures to their most comparable GAAP measures. (2) On a tax-equivalent basis assuming a federal tax rate of 21% and state income tax rate of 9.5%. (3) Net interest margin represents net interest income divided by average total interest-earning assets. (4) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. (5) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities. ​ ​ 59 Table of Contents The following table sets forth the components of loan interest income. Loan interest income includes contractual interest on loans, loan fees, accretion of acquired loan discounts and net earnings on cash flow hedges. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 ​ 2020 ​ 2019 ​ ​ ​ ​ ​ ​ Yield ​ ​ ​ ​ Yield ​ ​ ​ ​ Yield ​ ​ ​ Interest ​ Contribution ​ Interest ​ Contribution ​ Interest ​ Contribution ​ ​ ​ (dollars in thousands) ​ Contractual interest ​ $ 92,161 ​ 4.06 % $ 97,529 ​ 4.34 % $ 114,025 ​ 5.23 % Loan fees (excluding PPP loans) ​ ​ 3,840 ​ 0.17 ​ ​ 3,926 ​ 0.19 ​ ​ 3,746 ​ 0.17 ​ PPP loan fees ​ ​ 9,181 ​ 0.40 ​ ​ 2,953 ​ 0.13 ​ ​ — ​ — ​ Accretion of acquired loan discounts ​ ​ 1,102 ​ 0.05 ​ ​ 724 ​ 0.03 ​ ​ 2,255 ​ 0.10 ​ Net cash flow hedge earnings ​ ​ — ​ — ​ ​ 64 ​ — ​ ​ 116 ​ 0.01 ​ Total loan interest income ​ $ 106,284 ​ 4.68 % $ 105,196 ​ 4.69 % $ 120,142 ​ 5.51 % ​ The following table sets forth the components of net interest income. Total interest income consists of contractual interest on loans, contractual interest on securities, contractual interest on interest-bearing deposits in banks, loan fees, accretion of acquired loan discounts, securities amortization, net, and other interest and dividend income. Total interest expense consists of contractual interest on deposits, contractual interest on other interest-bearing liabilities and other interest expense. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 2020 ​ 2019 ​ ​ ​ ​ ​ Net Interest ​ ​ ​ Net Interest ​ ​ ​ Net Interest ​ ​ ​ ​ ​ Margin ​ ​ ​ ​ Margin ​ ​ ​ Margin ​ ​ ​ Interest Contribution ​ Interest ​ Contribution ​ Interest Contribution ​ ​ ​ (dollars in thousands) ​ Interest income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contractual interest on loans ​ $ 92,161 2.39 % $ 97,529 2.94 % $ 114,025 3.67 % Contractual interest on securities ​ 28,426 0.74 ​ ​ 22,920 0.69 ​ 24,032 0.77 ​ Contractual interest on deposits with banks ​ 530 0.01 ​ ​ 938 0.03 ​ 2,951 0.10 ​ Loan fees (excluding PPP loans) ​ 3,840 0.10 ​ ​ 3,926 0.12 ​ 3,746 0.12 ​ PPP loan fees ​ ​ 9,181 ​ 0.24 ​ ​ 2,953 ​ 0.09 ​ ​ — ​ — ​ Accretion of acquired loan discounts ​ 1,102 0.03 ​ ​ 724 0.02 ​ 2,255 0.07 ​ Securities amortization, net ​ (7,066) (0.18) ​ ​ (5,045) (0.15) ​ (3,450) (0.11) ​ Other ​ 49 — ​ ​ 120 — ​ 176 0.01 ​ Total interest income ​ 128,223 3.33 ​ ​ 124,065 3.74 ​ 143,735 4.63 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense: ​ ​ ​ ​ ​ Contractual interest on deposits ​ 2,541 0.07 ​ ​ 4,201 0.13 ​ 7,934 0.26 ​ Contractual interest on other interest-bearing liabilities ​ 2,903 0.07 ​ ​ 1,846 0.06 ​ 1,909 0.06 ​ Other ​ 376 0.01 ​ ​ 413 0.01 ​ 92 — ​ Total interest expense ​ 5,820 0.15 ​ ​ 6,460 0.20 ​ 9,935 0.32 ​ Net interest income ​ 122,403 3.18 ​ ​ 117,605 3.54 ​ 133,800 4.31 ​ Tax equivalent adjustment (1) ​ 2,028 0.05 ​ ​ 1,943 0.06 ​ 2,309 0.07 ​ Net interest income (tax equivalent) (1) (2) ​ $ 124,431 3.23 % $ 119,548 3.60 % $ 136,109 4.38 % (1) On a tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%. (2) See "Non-GAAP Financial Information" for reconciliation of non-GAAP measures to their most comparable GAAP measures. ​ 60 Table of Contents Rate/Volume Analysis The following table sets forth the dollar amount of changes in interest income and interest expense for the major categories of our interest-earning assets and interest-bearing liabilities. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to changes attributable to changes in volume ( i.e. , changes in average balances multiplied by the prior-period average rate), and changes attributable to rate ( i.e. , changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both volume and rate that cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2021 ​ Year Ended December 31, 2020 ​ vs. vs. ​ Year Ended December 31, 2020 Year Ended December 31, 2019 ​ Increase (Decrease) Due to ​ ​ ​ Increase (Decrease) Due to ​ ​ ​ ​ Volume Rate Total Volume Rate Total ​ (dollars in thousands) Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ 1,238 ​ $ (150) ​ $ 1,088 ​ $ 3,558 ​ $ (18,504) ​ $ (14,946) Securities ​ 7,100 ​ (3,627) ​ 3,473 ​ 744 ​ (3,451) ​ (2,707) Deposits with banks ​ 338 ​ (749) ​ (411) ​ 1,308 ​ (3,321) ​ (2,013) Other ​ 15 ​ (7) ​ 8 ​ (1) ​ (3) ​ (4) Total interest-earning assets ​ 8,691 ​ (4,533) ​ 4,158 ​ 5,609 ​ (25,279) ​ (19,670) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ Interest-bearing deposits: ​ ​ ​ ​ ​ ​ Interest-bearing demand ​ 100 ​ (229) ​ (129) ​ 88 ​ (915) ​ (827) Money market ​ 64 ​ (324) ​ (260) ​ 42 ​ (1,182) ​ (1,140) Savings ​ 43 ​ (51) ​ (8) ​ 27 ​ (109) ​ (82) Time ​ (171) ​ (1,181) ​ (1,352) ​ (775) ​ (887) ​ (1,662) Total interest-bearing deposits ​ 36 ​ (1,785) ​ (1,749) ​ (618) ​ (3,093) ​ (3,711) Securities sold under agreements to repurchase ​ — ​ (14) ​ (14) ​ 13 ​ (37) ​ (24) Borrowings ​ 1 ​ 6 ​ 7 ​ 6 ​ (13) ​ (7) Subordinated notes ​ ​ 1,264 ​ ​ (1) ​ ​ 1,263 ​ ​ 616 ​ ​ — ​ ​ 616 Junior subordinated debentures issued to capital trusts ​ 3 ​ (150) ​ (147) ​ 3 ​ (352) ​ (349) Total interest-bearing liabilities ​ 1,304 ​ (1,944) ​ (640) ​ 20 ​ (3,495) ​ (3,475) Change in net interest income ​ $ 7,387 ​ $ (2,589) ​ $ 4,798 ​ $ 5,589 ​ $ (21,784) ​ $ (16,195) ​ Comparison of the Year Ended December 31, 2021 to the Year Ended December 31, 2020 Net interest income for the year ended December 31, 2021 increased $4.8 million, or 4.1%, to $122.4 million from $117.6 million for the year ended December 31, 2020. Declines in benchmark interest rates drove lower yields on interest-earnings assets. These declines were more than offset by an increase in PPP loan fees recognized as loan interest income which totaled $9.2 million and $3.0 million during the years ended December 31, 2021 and 2020, respectively. Additionally, a substantial increase in interest-earning asset balances further supported net interest income, driven by the NXT acquisition, PPP loan originations, and federal economic stimulus payments received by our retail customers. Net interest margin decreased to 3.18% for the year ended December 31, 2021 compared to 3.54% for the year ended December 31, 2020. The decrease was primarily attributable to the decline in the average yield on earning assets and increased balances being held in cash and lower-yielding securities. Additionally, the $40 million of subordinated notes issued during the third quarter of 2020 added downward pressure to net interest income and net interest margin in subsequent periods. However, the proceeds from the issuance provided additional regulatory capital to buffer against higher than estimated credit losses and support organic and acquisitive growth. ​ 61 Table of Contents The quarterly net interest margins were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2020 2019 Three months ended: ​ ​ ​ ​ ​ ​ ​ March 31 3.25 % 4.03 % 4.50 % June 30 3.14 ​ 3.51 ​ 4.37 ​ September 30 3.18 ​ 3.39 ​ 4.27 ​ December 31 3.17 ​ 3.31 ​ 4.09 ​ ​ During 2019, overall market interest rates started to decline. The Federal Open Markets Committee lowered Federal Funds target rates for the first time in 11 years on July 31, 2019 and then again in September 2019 and October 2019, for a combined decrease of 75 basis points during 2019. In March 2020, the Federal Open Markets Committee lowered Federal Funds target rates twice, for a combined decrease of 150 basis points in response to the economic downturn related to the COVID-19 pandemic. These rate cuts, as well as quantitative easing, have resulted in a lower interest rate environment which has put downward pressure on our net interest margin. In general, we believe that potential rate increases will lead to improved net interest margins while rate decreases will result in lower net interest margins. Provision for Loan Losses Provisions for loan losses are charged to operations in order to maintain the allowance for loan losses at a level we consider necessary to absorb probable incurred credit losses in the loan portfolio. In determining the level of the allowance for loan losses, management considers past and current loss experience, evaluations of collateral, current economic conditions, volume and type of lending, adverse situations that may affect a borrower’s ability to repay a loan and the levels of nonperforming and other classified loans. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates as more information becomes available or as events change. We assess the allowance for loan losses on a quarterly basis and make provisions for loan losses in order to maintain the allowance. The provision for loan losses is a function of the allowance for loan loss methodology we use to determine the appropriate level of the allowance for inherent loan losses after accounting for net charge-offs (recoveries). The deterioration of economic conditions related to the COVID-19 pandemic adversely affected the communities that we serve beginning in 2020. As a result, our allowance for loan losses initially increased at the onset of the COVID-19 pandemic, remained elevated during the remainder of 2020, and then gradually returned to near pre-pandemic levels during 2021 as economic conditions improved. Comparison of the Year Ended December 31, 2021 to the Year Ended December 31, 2020 The Company recorded a negative provision for loan losses of $8.1 million during the year ended December 31, 2021, compared to a provision for loan losses of $10.5 million during the year ended December 31, 2020. The negative provision was primarily due to a $4.4 million decrease in specific reserves on loans individually evaluated for impairment. Additionally, changes to qualitative factors resulted in a $2.9 million decrease in required reserve, primarily reflecting the shrinking impact of the COVID-19 pandemic on our borrowers, an improved economic environment, and improved asset quality metrics. 62 Table of Contents Noninterest Income The following table outlines the amount of and changes to the various noninterest income line items as of the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 $ Change 2020 $ Change ​ 2019 ​ ​ (dollars in thousands) Card income ​ $ 9,734 ​ $ 1,647 ​ $ 8,087 ​ $ 322 ​ $ 7,765 Service charges on deposit accounts ​ ​ 6,080 ​ ​ 93 ​ ​ 5,987 ​ (1,883) ​ 7,870 Wealth management fees ​ ​ 8,384 ​ ​ 1,147 ​ ​ 7,237 ​ 410 ​ 6,827 Mortgage servicing ​ ​ 2,825 ​ ​ (153) ​ ​ 2,978 ​ (165) ​ 3,143 Mortgage servicing rights fair value adjustment ​ ​ 1,690 ​ ​ 4,274 ​ ​ (2,584) ​ (184) ​ (2,400) Gains on sale of mortgage loans ​ ​ 5,846 ​ ​ (2,989) ​ ​ 8,835 ​ 5,743 ​ 3,092 Gains (losses) on securities ​ ​ 107 ​ ​ 74 ​ ​ 33 ​ 38 ​ (5) Gains (losses) on foreclosed assets ​ ​ 310 ​ ​ 168 ​ ​ 142 ​ (798) ​ 940 Gains (losses) on other assets ​ ​ (723) ​ ​ (652) ​ ​ (71) ​ (1,315) ​ 1,244 Income on bank owned life insurance ​ ​ 41 ​ ​ 41 ​ ​ — ​ — ​ — Title insurance activity ​ ​ — ​ ​ — ​ ​ — ​ (167) ​ 167 Other noninterest income ​ ​ 3,034 ​ ​ (778) ​ ​ 3,812 ​ (296) ​ 4,108 Total noninterest income ​ $ 37,328 ​ $ 2,872 ​ $ 34,456 ​ $ 1,705 ​ $ 32,751 ​ Comparison of the Year Ended December 31, 2021 to the Year Ended December 31, 2020 Total noninterest income for the year ended December 31, 2021, was $37.3 million, an increase of $2.9 million, or 8.3%, from the year ended December 31, 2020. Notable changes in noninterest income include the following: ● A $4.3 million improvement in the mortgage servicing rights fair value adjustment, primarily resulting from slower mortgage prepayment speed assumptions. ● A $1.6 million increase in card income was primarily due to increased debit and credit card transaction volume. Additionally, the 2020 results were adversely impacted by the initial economic slowdown which coincided with the beginning of the COVID-19 pandemic, while the 2021 results were positively impacted by improved economic conditions and increased consumer demand. ● A $1.1 million increase in wealth management fees as a result of higher values of assets under management during the year ended December 31, 2021 relative to the year ended December 31, 2020. ● Partially offsetting these improvements was a $3.0 million decrease in gains on sale of mortgage loans due to a lower level of mortgage refinancing activity. A lower level of mortgage refinancing activity and margin pressure are anticipated during 2022 and are expected to result in lower gains on sale of mortgage loans relative to 2021. ● Additionally, there were impairment losses of $0.6 million related to branches closed during 2021, pursuant to our branch rationalization plan, not present in the 2020 results. ​ 63 Table of Contents Noninterest Expense The following table outlines the amount of and changes to the various noninterest expense line items as of the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 $ Change 2020 $ Change ​ 2019 ​ ​ (dollars in thousands) Salaries ​ $ 49,437 ​ $ (1,179) ​ $ 50,616 ​ $ 1,613 ​ $ 49,003 Employee benefits ​ ​ 6,694 ​ ​ (1,351) ​ ​ 8,045 ​ (1,838) ​ ​ 9,883 Occupancy of bank premises ​ ​ 6,788 ​ ​ 208 ​ ​ 6,580 ​ (287) ​ ​ 6,867 Furniture and equipment ​ ​ 2,676 ​ ​ 229 ​ ​ 2,447 ​ (366) ​ ​ 2,813 Data processing ​ ​ 7,329 ​ ​ 587 ​ ​ 6,742 ​ 1,172 ​ ​ 5,570 Marketing and customer relations ​ ​ 3,376 ​ ​ (100) ​ ​ 3,476 ​ (397) ​ ​ 3,873 Amortization of intangible assets ​ ​ 1,054 ​ ​ (178) ​ ​ 1,232 ​ (191) ​ ​ 1,423 FDIC insurance ​ ​ 1,043 ​ ​ 336 ​ ​ 707 ​ 509 ​ ​ 198 Loan collection and servicing ​ ​ 1,317 ​ ​ (438) ​ ​ 1,755 ​ (878) ​ ​ 2,633 Foreclosed assets ​ ​ 908 ​ ​ 351 ​ ​ 557 ​ (119) ​ ​ 676 Other noninterest expense ​ ​ 10,624 ​ ​ 825 ​ ​ 9,799 ​ 1,712 ​ ​ 8,087 Total noninterest expense ​ $ 91,246 ​ $ (710) ​ $ 91,956 ​ $ 930 ​ $ 91,026 ​ Comparison of the Year Ended December 31, 2021 to the Year Ended December 31, 2020 Total noninterest expense for the year ended December 31, 2021, was $91.2 million, a decrease of $0.7 million, or 0.8%, from the year ended December 31, 2020. Notable changes in noninterest expense include following: ● A $1.4 million decrease in employee benefits expense, primarily due to the 2020 results including a $1.5 million charge for the supplemental executive retirement plan (SERP) which was terminated in June 2019 and paid out in June 2020. ● A $1.2 million decrease in salaries expense, primarily due to a lower employee count during 2021 relative to 2020. ● A $0.6 million increase in data processing expenses, primarily due to $0.4 million of systems conversion expenses related to the NXT acquisition. ● A $0.8 million increase in other noninterest expenses, primarily due to $1.0 million of investment banker and legal fees related to the NXT acquisition. ​ 64 Table of Contents Income Taxes Prior to October 11, 2019, the Company was taxed under sections of federal and state tax law as an "S corporation" which provides that with the exception of certain state replacement and franchise taxes, current stockholders account separately for their share of the Company’s income, deductions, losses and credits. For additional information, see “Factors Affecting Comparability of Financial Results: S Corp Status ”. Effective October 11, 2019, the Company voluntarily revoked its S Corporation status and became a taxable entity (C Corporation). As such, any periods prior to October 11, 2019 will only reflect an effective state replacement tax rate. In connection with the conversion of tax status, the Company recognized a deferred tax asset, and the associated income tax benefit, of $0.5 million. Comparison of the Year Ended December 31, 2021 to the Year Ended December 31, 2020 We recorded income tax expense of $20.3 million, or 26.5% effective tax rate, during the year ended December 31, 2021 compared to $12.7 million, or 25.7% effective tax rate during the year ended December 31, 2020. The effective income tax rate was lower than the combined federal and state statutory rate of approximately 28.5% primarily due to tax exempt interest income. The effective income tax rate increased primarily due to tax exempt interest income making up a smaller portion of pre-tax net income during the year ended December 31, 2021 compared to the year ended December 31, 2020. Additionally, the non-deductibility of certain acquisition-related contributed to a higher effective tax rate. ​ 65 Table of Contents FINANCIAL CONDITION ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ ​ ​ ​ ​ ​ 2021 2020 $ Change % Change ​ Consolidated Balance Sheet Information ​ (dollars in thousands, except per share data) ​ Cash and cash equivalents ​ $ 409,268 ​ $ 312,451 ​ $ 96,817 ​ 31.0 % Debt securities available-for-sale, at fair value ​ 942,168 ​ 922,869 ​ 19,299 ​ 2.1 ​ Debt securities held-to-maturity ​ 336,185 ​ 68,395 ​ 267,790 ​ 391.5 ​ Loans held for sale ​ ​ 4,942 ​ ​ 14,713 ​ ​ (9,771) ​ (66.4) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans, before allowance for loan losses ​ ​ 2,499,689 ​ ​ 2,247,006 ​ ​ 252,683 ​ 11.2 ​ Less: allowance for loan losses ​ ​ 23,936 ​ ​ 31,838 ​ ​ (7,902) ​ (24.8) ​ Loans, net of allowance for loan losses ​ ​ 2,475,753 ​ ​ 2,215,168 ​ ​ 260,585 ​ 11.8 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Goodwill ​ ​ 29,322 ​ ​ 23,620 ​ ​ 5,702 ​ 24.1 ​ Core deposit intangible assets, net ​ ​ 1,943 ​ ​ 2,798 ​ ​ (855) ​ (30.6) ​ Other assets ​ ​ 114,673 ​ ​ 106,553 ​ ​ 8,120 ​ 7.6 ​ Total assets ​ $ 4,314,254 ​ $ 3,666,567 ​ $ 647,687 ​ 17.7 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total deposits ​ $ 3,738,185 ​ $ 3,130,534 ​ $ 607,651 ​ 19.4 % Securities sold under agreements to repurchase ​ ​ 61,256 ​ ​ 45,736 ​ ​ 15,520 ​ 33.9 ​ Subordinated notes ​ ​ 39,316 ​ ​ 39,238 ​ ​ 78 ​ 0.2 ​ Junior subordinated debentures ​ ​ 37,714 ​ ​ 37,648 ​ ​ 66 ​ 0.2 ​ Other liabilities ​ ​ 25,902 ​ ​ 49,494 ​ ​ (23,592) ​ (47.7) ​ Total liabilities ​ ​ 3,902,373 ​ ​ 3,302,650 ​ ​ 599,723 ​ 18.2 ​ Total stockholders' equity ​ ​ 411,881 ​ ​ 363,917 ​ ​ 47,964 ​ 13.2 ​ Total liabilities and stockholders' equity ​ $ 4,314,254 ​ $ 3,666,567 ​ $ 647,687 ​ 17.7 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tangible assets (1) ​ $ 4,282,989 ​ $ 3,640,149 ​ $ 642,840 ​ 17.7 % Tangible common equity (1) ​ 380,616 ​ 337,499 ​ 43,117 ​ 12.8 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Core deposits (1) ​ $ 3,674,435 ​ $ 3,103,847 ​ $ 570,588 ​ 18.4 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share and Per Share Information ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Book value per share ​ $ 14.21 ​ $ 13.25 ​ ​ ​ ​ ​ ​ Tangible book value per share (1) ​ ​ 13.13 ​ ​ 12.29 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares of common stock outstanding ​ ​ 28,986,061 ​ ​ 27,457,306 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance Sheet Ratios ​ ​ ​ ​ ​ Loan to deposit ratio ​ 66.87 % 71.78 % ​ ​ Core deposits to total deposits (1) ​ 98.29 ​ 99.15 ​ ​ ​ Stockholders' equity to total assets ​ 9.55 ​ 9.93 ​ ​ ​ Tangible common equity to tangible assets (1) ​ 8.89 ​ 9.27 ​ ​ ​ (1) See "Non-GAAP Financial Information" for reconciliation of non-GAAP measures to their most comparable GAAP measures. Total assets were $4.3 billion at December 31, 2021, an increase of $648.7 million, or 17.7%, from December 31, 2020. Significant changes in our balance sheet include the following: ● Total deposits increased $607.7 million, primarily due to funds received by our commercial customers from round 2 PPP loans and federal economic stimulus payments received by retail customers. Additionally, the NXT acquisition added $181.6 million of deposits. ● Cash and cash equivalents increased $96.8 million, primarily as a result of funds received from the forgiveness of PPP loans and federal economic stimulus received by retail customers. ● Excess liquidity was invested in debt securities which increased $287.1 million. ● Loans, before allowance for loan losses, increased $252.7 million, primarily as a result of the $194.6 million of loans acquired in the NXT acquisition. 66 Table of Contents Loan Portfolio The Company focuses on originating loans with appropriate risk / reward profiles. The Company has a detailed loan policy that guides the overall loan origination philosophy and a well-established loan approval process that requires experienced credit officers to approve larger loan relationships. The Company also has an active credit department that underwrites and prepares annual reviews for larger and more complex loan relationships. Management monitors credit quality closely with a series of monthly reports and a quarterly Credit Committee meeting where performance and trends within the loan portfolio are reviewed. Portfolio diversification at the borrower, industry, and product levels is actively managed to mitigate concentration risk. In addition, credit risk management includes an independent loan review process that assesses compliance with loan policy, compliance with loan documentation standards, accuracy of the risk rating and overall credit quality of the loan portfolio. Loans by Category The following table sets forth the composition of the loan portfolio by category, excluding loans held-for-sale. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ December 31, 2020 ​ ​ Balance Percent ​ Balance Percent ​ ​ ​ (dollars in thousands) ​ Commercial and industrial ​ $ 286,946 11.5 % $ 393,312 17.5 % Agricultural and farmland ​ 247,796 9.9 ​ 222,723 9.9 ​ Commercial real estate - owner occupied ​ 234,544 9.4 ​ 222,360 9.9 ​ Commercial real estate - non-owner occupied ​ 684,023 27.4 ​ 520,395 23.2 ​ Multi-family ​ 263,911 10.5 ​ 236,391 10.5 ​ Construction and land development ​ 298,048 11.9 ​ 225,652 10.0 ​ One-to-four family residential ​ 327,837 13.1 ​ 306,775 13.7 ​ Municipal, consumer, and other ​ 156,584 6.3 ​ 119,398 5.3 ​ Loans, before allowance for loan losses ​ 2,499,689 100.0 % 2,247,006 100.0 % Allowance for loan losses ​ (23,936) ​ ​ (31,838) ​ Loans, net of allowance for loan losses ​ $ 2,475,753 ​ ​ ​ $ 2,215,168 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PPP loans (included above) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 28,404 ​ 1.1 % $ 153,860 ​ 6.9 % Agricultural and farmland ​ 913 ​ 0.1 ​ 3,049 ​ 0.1 ​ Municipal, consumer, and other ​ 171 ​ — ​ 6,587 ​ 0.3 ​ Total PPP loans ​ $ 29,488 ​ 1.2 % $ 163,496 ​ 7.3 % ​ Loans, before allowance for loan losses were $2.50 billion at December 31, 2021, an increase of $252.7 million, or 11.2%, from December 31, 2020. Notable changes include the following: ● The NXT acquisition, which closed on October 1, 2021, added $194.6 million of loans and expanded the Company’s footprint into Eastern Iowa. ● PPP loans decreased $134.0 million, with forgiveness far exceeding the $104.7 million of round 2 PPP loans originated during 2021. ● Utilization of revolving lines of credit improved during 2021, increasing from 40% at December 31, 2020 to 44% at December 31, 2021, driving a $56.6 million increase in revolving line of credit balances. ● The higher lending limits of HBT Financial allowed for the repurchase of $22.4 million of participations previously sold by NXT. ● Improved economic conditions, the expiration of certain federal economic stimulus programs, and our expansion into Eastern Iowa, drove increased loan demand across the majority of our loan categories. 67 Table of Contents The principal categories of our loan portfolio are described below: Commercial and Industrial : Consists of loans typically granted for working capital, asset acquisition and other business purposes. These loans are underwritten primarily based on the borrower’s cash flow with most loans secondarily supported by collateral. Most commercial and industrial loans are secured by the assets being financed or other business assets, such as accounts receivable, inventory, and equipment, and are typically supported by personal guarantees of the owners. Cash flows and collateral values may fluctuate based on general economic conditions, specific industry conditions and specific borrower circumstances. Agricultural and Farmland : Consists of loans typically secured by farmland, agricultural operating assets, or a combination of both, and are generally underwritten to existing cash flows of operating agricultural businesses. Debt repayment is provided by business cash flows. Economic trends influenced by unemployment rates and other key economic indicators are not closely correlated to the credit quality of agricultural and farmland loans. The credit quality of these loans is most correlated to changes in prices of corn and soybeans and, to a lesser extent, weather, which has been partially mitigated by federal crop insurance programs. Commercial Real Estate - Owner Occupied : Consists of loans secured by commercial real estate that is both owned and occupied by the same or a related borrower. These loans are primarily underwritten based on the cash flow of the business occupying the property. As with commercial and industrial loans, cash flows and collateral values may fluctuate based on general economic conditions, specific industry conditions, and specific borrower circumstances. Commercial Real Estate - Non-owner Occupied : Consists of loans secured by commercial real estate for which the primary source of repayment is the sale or rental cash flows from the underlying collateral. These loans are underwritten based primarily on the historic or projected cash flow from the underlying collateral. Adverse economic developments or an overbuilt market typically impact commercial real estate projects. Trends in rental and vacancy rates of commercial properties impact the credit quality of these loans. Multi-family : Consists of loans secured by five or more unit apartment buildings. Multi-family loans may be affected by demographic and population trends, unemployment or underemployment, and deteriorating market values of real estate. Construction and Land Development : Consists of loans for speculative and pre-sold construction projects for developers intending to either sell upon completion or hold for long term investment, as well as construction of projects to be owner occupied. In addition, loans in this segment generally possess a higher inherent risk of loss than other portfolio segments due to risk of non-completion, changes in budgeted costs, and changes in market forces during the term of the construction period. One-to-four Family Residential : Consists of loans secured by one-to-four family residences, including both first and junior lien mortgage loans for owner occupied and non-owner occupied properties and home equity lines of credit. The degree of risk in residential mortgage lending depends on the local economy, including the local real estate market and unemployment rates. Municipal, Consumer and Other : Loans to municipalities include obligations of municipal entities and loans sponsored by municipal entities for the benefit of a private entity where that private entity, rather than the municipal entity, is responsible for repayment of the obligation. Consumer loans include loans to individuals for consumer purposes and typically consist of small balance loans. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of the consumer loans. Loans to other financial institutions, as well as leases, are also included. 68 Table of Contents Loan Portfolio Maturities The following table summarizes the scheduled maturities of the loan portfolio as of December 31, 2021. Demand loans (loans having no stated repayment schedule or maturity) and overdraft loans are reported as being due in one year or less. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ After 1 Year After 5 Years ​ ​ ​ ​ ​ 1 Year ​ Through ​ Through ​ After ​ ​ December 31, 2021 ​ or Less ​ 5 Years ​ 15 Years ​ 15 Years ​ Total ​ (dollars in thousands) Commercial and industrial ​ $ 167,300 ​ $ 96,854 ​ $ 22,792 ​ $ — ​ $ 286,946 Agricultural and farmland ​ 106,164 ​ 93,170 ​ 45,550 ​ ​ 2,912 ​ 247,796 Commercial real estate - owner occupied ​ 30,563 ​ 134,012 ​ 66,187 ​ ​ 3,782 ​ 234,544 Commercial real estate - non-owner occupied ​ 88,733 ​ 411,531 ​ 183,203 ​ ​ 556 ​ 684,023 Multi-family ​ 35,712 ​ 159,391 ​ 68,808 ​ ​ — ​ 263,911 Construction and land development ​ 160,665 ​ 122,797 ​ 14,215 ​ ​ 371 ​ 298,048 One-to-four family residential ​ 45,705 ​ 142,491 ​ 82,991 ​ ​ 56,650 ​ 327,837 Municipal, consumer, and other ​ 24,452 ​ 22,088 ​ 81,467 ​ ​ 28,577 ​ 156,584 Total ​ $ 659,294 ​ $ 1,182,334 ​ $ 565,213 ​ $ 92,848 ​ $ 2,499,689 ​ The following table summarizes loans maturing after one year, segregated into variable and fixed interest rates. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Variable Interest Rates ​ ​ ​ ​ ​ Repricing ​ Repricing ​ Total ​ Predetermined ​ ​ ​ ​ 1 Year ​ After ​ Variable ​ (Fixed) ​ ​ December 31, 2021 ​ or Less ​ 1 Year ​ Interest Rates ​ Interest Rates ​ Total ​ (dollars in thousands) Commercial and industrial ​ $ 9,271 ​ $ 308 ​ $ 9,579 ​ $ 110,067 ​ $ 119,646 Agricultural and farmland ​ 10,670 ​ 5,682 ​ 16,352 ​ ​ 125,280 ​ 141,632 Commercial real estate - owner occupied ​ 28,976 ​ 19,188 ​ 48,164 ​ ​ 155,817 ​ 203,981 Commercial real estate - non-owner occupied ​ 56,990 ​ 21,903 ​ 78,893 ​ ​ 516,397 ​ 595,290 Multi-family ​ 30,620 ​ 3,239 ​ 33,859 ​ ​ 194,340 ​ 228,199 Construction and land development ​ 70,759 ​ 84 ​ 70,843 ​ ​ 66,540 ​ 137,383 One-to-four family residential ​ 97,701 ​ 19,639 ​ 117,340 ​ ​ 164,792 ​ 282,132 Municipal, consumer, and other ​ 41,605 ​ 4,498 ​ 46,103 ​ ​ 86,029 ​ 132,132 Total ​ $ 346,592 ​ $ 74,541 ​ $ 421,133 ​ $ 1,419,262 ​ $ 1,840,395 ​ Nonperforming Assets Nonperforming loans consist of all loans past due 90 days or more or on nonaccrual. Nonperforming assets consist of all nonperforming loans and foreclosed assets. Typically, loans are placed on nonaccrual when they reach 90 days past due, or when, in management’s opinion, there is reasonable doubt regarding the collection of the amounts due through the normal means of the borrower. Interest accrued and unpaid at the time a loan is placed on nonaccrual status is reversed from interest income. Interest payments received on nonaccrual loans are recognized in accordance with our significant accounting policies. Once a loan is placed on nonaccrual status, the borrower must generally demonstrate at least six months of payment performance and we believe that all remaining principal and interest is fully collectible, before the loan is eligible to return to accrual status. Management believes the Company’s lending practices and active approach to managing nonperforming assets has resulted in timely resolution of problem assets. ​ 69 Table of Contents Loans acquired with deteriorated credit quality are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. However, these loans are considered performing, even though they may be contractually past due, as any non-payment of contractual principal or interest is considered in the periodic re-estimation of expected cash flows and is included in the resulting recognition of current period loan loss provision or future period yield adjustments. The accrual of interest is discontinued on loans acquired with deteriorated credit quality if management can no longer estimate future cash flows on the loan. Therefore, interest revenue, through accretion of the difference between the carrying value of the loans and the expected cash flows, is being recognized on all loans acquired with deteriorated credit quality, except those management can no longer estimate future cash flows. When it appears likely that we will obtain title to real estate collateral, we develop an exit strategy by assessing overall market conditions, the current use and condition of the asset, and its highest and best use. If determined necessary to maximize value, we complete the necessary improvements or tenant stabilization tasks, with the applicable time value discount and improvement expenses incorporated into our estimates of the expected costs to sell. Substantially all foreclosed real estate is valued on an "as-is" basis. Estimates of the net realizable value of real estate collateral also include a deduction for the expected selling costs. For most real estate collateral and foreclosed real estate, we apply a 7.0% deduction to the value of the asset to account for the expected costs to sell the asset. This estimate includes sales commissions and closing costs. Expenses for real estate taxes are accrued and repairs are expensed when incurred. The following table sets forth information concerning nonperforming loans and nonperforming assets as of each of the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 December 31, 2020 ​ (dollars in thousands) ​ NONPERFORMING ASSETS ​ ​ ​ ​ ​ ​ ​ Nonaccrual ​ $ 2,763 ​ $ 9,939 Past due 90 days or more, still accruing (1) ​ 16 ​ 21 Total nonperforming loans ​ 2,779 ​ 9,960 Foreclosed assets ​ 3,278 ​ 4,168 Total nonperforming assets ​ $ 6,057 ​ $ 14,128 ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses ​ $ 23,936 ​ $ 31,838 ​ Loans, before allowance for loan losses ​ ​ 2,499,689 ​ ​ 2,247,006 ​ ​ ​ ​ ​ ​ ​ ​ ​ CREDIT QUALITY RATIOS ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses to loans, before allowance for loan losses ​ 0.96 % 1.42 % Allowance for loan losses to nonaccrual loans ​ ​ 866.30 ​ ​ 320.33 ​ Allowance for loan losses to nonperforming loans ​ 861.32 ​ 319.66 ​ Nonaccrual loans to loans, before allowance for loan losses ​ ​ 0.11 ​ ​ 0.44 ​ Nonperforming loans to loans, before allowance for loan losses ​ 0.11 ​ 0.44 ​ Nonperforming assets to total assets ​ 0.14 ​ 0.39 ​ Nonperforming assets to loans, before allowance for loan losses and foreclosed assets ​ 0.24 ​ 0.63 ​ (1) Excludes loans acquired with deteriorated credit quality that are past due 90 or more days totaling $32 thousand and $0.6 million as of December 31, 2021 and 2020, respectively. ​ Comparison of December 31, 2021 to December 31, 2020 Total nonperforming assets were $6.1 million as of December 31, 2021, a decrease of $8.1 million, or 57.1%, from December 31, 2020. Our level of nonperforming assets has remained low in recent years, representing only 0.14% of total assets as of December 31, 2021 and 0.39% of total assets as of December 31, 2020. We believe our continuous credit monitoring and collection efforts have resulted in lower levels of nonperforming assets, while also recognizing that favorable economic conditions prior to the COVID-19 pandemic and substantial federal economic stimulus during the pandemic have also contributed to these lower levels. ​ 70 Table of Contents Troubled Debt Restructurings In general, if the Company grants a troubled debt restructuring (TDR) that involves either the absence of principal amortization or a material extension of an existing loan amortization period in excess of our underwriting standards, the loan will be placed on nonaccrual status. However, if a TDR is well secured by an abundance of collateral and the collectability of both interest and principal is probable, the loan may remain on accrual status. A nonaccrual TDR in full compliance with the payment requirements specified in the loan modification for at least six months may return to accrual status, if the collectability of both principal and interest is probable. All TDRs are individually evaluated for impairment. The following table presents TDRs by loan category. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 December 31, 2020 ​ ​ (dollars in thousands) ​ Commercial and industrial ​ $ 203 ​ $ 296 ​ Agricultural and farmland ​ — ​ — ​ Commercial real estate - owner occupied ​ 1,671 ​ 6,491 ​ Commercial real estate - non-owner occupied ​ 1,278 ​ 1,354 ​ Multi-family ​ — ​ — ​ Construction and land development ​ — ​ — ​ One-to-four family residential ​ 360 ​ 454 ​ Municipal, consumer, and other ​ — ​ — ​ Total accrual troubled debt restructurings ​ 3,512 ​ 8,595 ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ — ​ 75 ​ Agricultural and farmland ​ — ​ — ​ Commercial real estate - owner occupied ​ — ​ 141 ​ Commercial real estate - non-owner occupied ​ — ​ — ​ Multi-family ​ — ​ — ​ Construction and land development ​ — ​ — ​ One-to-four family residential ​ — ​ 139 ​ Municipal, consumer, and other ​ — ​ — ​ Total nonaccrual troubled debt restructurings ​ — ​ 355 ​ Total troubled debt restructurings ​ $ 3,512 ​ $ 8,950 ​ ​ TDRs have remained a small portion of our loan portfolio as loan modifications to borrowers with deteriorating financial condition are generally offered only as a part of an overall workout strategy to minimize losses to the Company. The $5.4 million decrease, or 60.8%, from December 31, 2020 was primarily due to the pay down of one relationship by $3.6 million. ​ 71 Table of Contents Risk Classification of Loans Our policies, consistent with regulatory guidelines, provide for the classification of loans and other assets that are considered to be of lesser quality as pass-watch, substandard, doubtful, or loss. A pass-watch loan is still considered a "pass" credit and is not a classified or criticized asset, but is a reflection of a borrower who exhibits credit weaknesses or downward trends warranting close attention and increased monitoring. These potential weaknesses may result in deterioration of the repayment prospects for the loan. No loss of principal or interest is expected, and the borrower does not pose sufficient risk to warrant classification. A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized as probable that the borrower will not pay principal and interest in accordance with the contractual terms. An asset classified as doubtful has all the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets is not warranted; such balances are promptly charged-off as required by applicable federal regulations. As of December 31, 2021 and 2020, our risk classifications of loans were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 December 31, 2020 ​ ​ (dollars in thousands) ​ Pass ​ $ 2,269,228 ​ $ 1,953,912 ​ Pass-watch ​ 148,285 ​ 208,584 ​ Substandard ​ 82,176 ​ 84,510 ​ Doubtful ​ — ​ — ​ Total ​ $ 2,499,689 ​ $ 2,247,006 ​ ​ Pass-watch loans decreased $60.3 million, or 28.9% from December 31, 2020 to December 31, 2021. Additionally, substandard loans decreased $2.3 million, or 2.8%, from December 31, 2020 to December 31, 2021. These improvements were primarily driven by improving economic conditions, which resulted in both risk rating upgrades and paydowns. Additionally, the transfer of one larger loan to foreclosed assets further contributed to the decrease in substandard loans. ​ ​ 72 Table of Contents Net Charge-offs and Recoveries The following table sets forth activity in the allowance for loan losses. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 2020 2019 ​ ​ (dollars in thousands) ​ Balance, beginning of year ​ $ 31,838 ​ $ 22,299 ​ $ 20,509 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Charge-offs: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ (668) ​ (1,784) ​ (886) ​ Agricultural and farmland ​ — ​ (27) ​ (30) ​ Commercial real estate - owner occupied ​ (30) ​ (39) ​ (407) ​ Commercial real estate - non-owner occupied ​ — ​ (349) ​ (111) ​ Multi-family ​ — ​ — ​ (41) ​ Construction and land development ​ — ​ (27) ​ (9) ​ One-to-four family residential ​ (267) ​ (155) ​ (1,105) ​ Municipal, consumer, and other ​ (449) ​ (587) ​ (684) ​ Total charge-offs ​ (1,414) ​ (2,968) ​ (3,273) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Recoveries: ​ ​ ​ ​ Commercial and industrial ​ 653 ​ 595 ​ 440 ​ Agricultural and farmland ​ — ​ — ​ — ​ Commercial real estate - owner occupied ​ 9 ​ 440 ​ 56 ​ Commercial real estate - non-owner occupied ​ 24 ​ 75 ​ 20 ​ Multi-family ​ — ​ — ​ — ​ Construction and land development ​ 342 ​ 250 ​ 450 ​ One-to-four family residential ​ 249 ​ 310 ​ 350 ​ Municipal, consumer, and other ​ 312 ​ 305 ​ 343 ​ Total recoveries ​ 1,589 ​ 1,975 ​ 1,659 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net recoveries (charge-offs) ​ 175 ​ (993) ​ (1,614) ​ Provision for loan losses ​ (8,077) ​ 10,532 ​ 3,404 ​ Balance, end of year ​ $ 23,936 ​ $ 31,838 ​ $ 22,299 ​ ​ ​ 73 Table of Contents The following table summarizes net charge-offs (recoveries) to average loans, before allowance for loan losses by loan category. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 2020 2019 ​ ​ (dollars in thousands) ​ Net charge-offs (recoveries) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 15 ​ $ 1,189 ​ $ 446 ​ Agricultural and farmland ​ — ​ 27 ​ ​ 30 ​ Commercial real estate - owner occupied ​ 21 ​ (401) ​ ​ 351 ​ Commercial real estate - non-owner occupied ​ (24) ​ 274 ​ ​ 91 ​ Multi-family ​ — ​ — ​ ​ 41 ​ Construction and land development ​ (342) ​ (223) ​ ​ (441) ​ One-to-four family residential ​ 18 ​ (155) ​ ​ 755 ​ Municipal, consumer, and other ​ 137 ​ 282 ​ ​ 341 ​ Total ​ $ (175) ​ $ 993 ​ $ 1,614 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average loans, before allowance for loan losses ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 347,547 ​ $ 372,927 ​ $ 346,540 ​ Agricultural and farmland ​ 230,364 ​ 223,381 ​ ​ 206,490 ​ Commercial real estate - owner occupied ​ 204,148 ​ 222,593 ​ ​ 243,572 ​ Commercial real estate - non-owner occupied ​ 583,084 ​ 543,227 ​ ​ 553,683 ​ Multi-family ​ 227,736 ​ 196,632 ​ ​ 170,878 ​ Construction and land development ​ 226,035 ​ 242,800 ​ ​ 225,506 ​ One-to-four family residential ​ 314,871 ​ 324,645 ​ ​ 324,039 ​ Municipal, consumer, and other ​ 137,759 ​ 118,888 ​ ​ 108,189 ​ Total ​ $ 2,271,544 ​ $ 2,245,093 ​ $ 2,178,897 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs (recoveries) to average loans, before allowance for loan losses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ ​ — % ​ 0.32 % ​ 0.13 % Agricultural and farmland ​ ​ — ​ ​ 0.01 ​ ​ 0.01 ​ Commercial real estate - owner occupied ​ ​ 0.01 ​ ​ (0.18) ​ ​ 0.14 ​ Commercial real estate - non-owner occupied ​ ​ — ​ ​ 0.05 ​ ​ 0.02 ​ Multi-family ​ ​ — ​ ​ — ​ ​ 0.02 ​ Construction and land development ​ ​ (0.15) ​ ​ (0.09) ​ ​ (0.20) ​ One-to-four family residential ​ ​ 0.01 ​ ​ (0.05) ​ ​ 0.23 ​ Municipal, consumer, and other ​ ​ 0.10 ​ ​ 0.24 ​ ​ 0.32 ​ Total ​ ​ (0.01) % ​ 0.04 % ​ 0.07 % ​ Comparison of the Year Ended December 31, 2021 to the Year Ended December 31, 2020 Net charge-offs (recoveries) to average total loans before allowance for loan losses have remained low for several years, including each of the years ended December 31, 2021 and 2020. We believe our continuous credit monitoring and collection efforts have resulted in lower levels of loan losses, while also recognizing that favorable economic conditions prior to the COVID-19 pandemic and substantial federal economic stimulus during the pandemic have also contributed to reduced loan losses. ​ Securities The Company’s investment policy emphasizes safety of the principal, liquidity needs, expected returns, cash flow targets and consistency with our interest rate risk management strategy. The composition and maturities of the debt securities portfolio as of December 31, 2021 is summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. Security yields have not been adjusted to a tax-equivalent basis. ​ 74 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ Available-for-Sale Held-to-Maturity Total ​ ​ ​ ​ Weighted ​ ​ Weighted ​ ​ Weighted ​ Amortized Average Amortized Average Amortized Average ​ Cost Yield Cost Yield Cost Yield ​ ​ (dollars in thousands) ​ Due in 1 year or less ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. Treasury ​ $ — ​ — % $ — ​ — % $ — ​ — % U.S. government agency ​ ​ 3,067 0.17 ​ ​ — — ​ ​ 3,067 0.17 ​ Municipal ​ 9,789 2.59 ​ 2,394 3.51 ​ 12,183 2.77 ​ Mortgage-backed: ​ ​ ​ ​ Agency residential ​ 337 1.57 ​ — — ​ 337 1.57 ​ Agency commercial ​ 6,248 2.55 ​ — — ​ 6,248 2.55 ​ Corporate ​ 20,459 2.85 ​ — — ​ 20,459 2.85 ​ Total ​ $ 39,900 2.53 % $ 2,394 3.51 % $ 42,294 2.58 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after 1 year through 5 years ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. Treasury ​ $ 39,585 ​ 0.97 % $ — ​ — % $ 39,585 ​ 0.97 % U.S. government agency ​ ​ 11,016 1.81 ​ ​ 5,000 1.10 ​ ​ 16,016 1.59 ​ Municipal ​ 52,651 2.15 ​ 10,887 3.71 ​ 63,538 2.42 ​ Mortgage-backed: ​ ​ ​ ​ ​ ​ Agency residential ​ 11,478 2.08 ​ — — ​ 11,478 2.08 ​ Agency commercial ​ 20,070 2.93 ​ 4,614 2.25 ​ 24,684 2.80 ​ Corporate ​ 7,723 3.61 ​ — — ​ 7,723 3.61 ​ Total ​ $ 142,523 1.98 % $ 20,501 2.74 % $ 163,024 2.08 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after 5 years through 10 years ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. Treasury ​ $ 69,417 ​ 1.41 % $ — ​ — % $ 69,417 ​ 1.41 % U.S. government agency ​ ​ 85,765 1.69 ​ ​ 7,349 1.63 ​ ​ 93,114 1.68 ​ Municipal ​ 144,424 1.76 ​ 1,994 3.36 ​ 146,418 1.78 ​ Mortgage-backed: ​ ​ ​ ​ ​ ​ ​ Agency residential ​ 41,228 2.15 ​ 8,463 1.62 ​ 49,691 2.06 ​ Agency commercial ​ 93,076 1.47 ​ 201,116 1.73 ​ 294,192 1.65 ​ Corporate ​ 32,959 3.89 ​ — — ​ 32,959 3.89 ​ Total ​ $ 466,869 1.82 % $ 218,922 1.73 % $ 685,791 1.79 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after 10 years ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. Treasury ​ $ — ​ — % $ — ​ — % $ — ​ — % U.S. government agency ​ ​ 29,421 1.39 ​ ​ — — ​ ​ 29,421 1.39 ​ Municipal ​ 86,973 1.89 ​ 391 4.26 ​ 87,364 1.90 ​ Mortgage-backed: ​ ​ ​ ​ ​ ​ Agency residential ​ 125,193 1.43 ​ 12,092 2.12 ​ 137,285 1.49 ​ Agency commercial ​ 45,481 1.67 ​ 81,885 1.94 ​ 127,366 1.84 ​ Corporate ​ 2,000 ​ 4.50 ​ — — ​ 2,000 4.50 ​ Total ​ $ 289,068 1.63 % $ 94,368 1.97 % $ 383,436 1.71 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. Treasury ​ $ 109,002 1.25 % $ — — % $ 109,002 1.25 % U.S. government agency ​ ​ 129,269 1.59 ​ ​ 12,349 1.42 ​ ​ 141,618 1.58 ​ Municipal ​ 293,837 1.90 ​ 15,666 3.65 ​ 309,503 1.98 ​ Mortgage-backed: ​ ​ ​ ​ ​ Agency residential ​ 178,236 1.64 ​ 20,555 1.92 ​ 198,791 1.67 ​ Agency commercial ​ 164,875 1.74 ​ 287,615 1.80 ​ 452,490 1.78 ​ Corporate ​ 63,141 3.54 ​ — — ​ 63,141 3.54 ​ Total ​ $ 938,360 1.81 % $ 336,185 1.87 % $ 1,274,545 1.83 % ​ ​ 75 Table of Contents SOURCES OF FUNDS Deposits Management continues to focus on growing non-maturity deposits, through the Company’s relationship driven banking philosophy and community-focused marketing programs, and to deemphasize higher cost deposit categories, such as time deposits. Additionally, the Bank continues to add and improve ancillary convenience services tied to deposit accounts, such as mobile, remote deposits and peer-to-peer payments, to solidify deposit relationships. The following tables set forth the distribution of average deposits, by account type. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percent ​ ​ ​ Year Ended December 31, 2021 Change in ​ ​ ​ Average Percent of Weighted Average Balance ​ ​ ​ Balance Total Deposits Average Cost 2021 vs. 2020 ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ Noninterest-bearing ​ $ 1,004,757 29.2 % — % ​ 24.4 % Interest-bearing demand ​ 1,024,888 29.8 ​ 0.05 ​ ​ 17.4 ​ Money market ​ 521,366 15.1 ​ 0.08 ​ ​ 10.0 ​ Savings ​ 595,887 17.3 ​ 0.03 ​ ​ 24.9 ​ Total non-maturity deposits ​ 3,146,898 91.4 ​ 0.04 ​ ​ 19.6 ​ Time ​ 295,788 8.6 ​ 0.45 ​ ​ (6.8) ​ Total deposits ​ $ 3,442,686 100.0 % 0.07 % ​ 16.7 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percent ​ ​ ​ Year Ended December 31, 2020 Change in ​ ​ ​ Average Percent of Weighted Average Balance ​ ​ ​ Balance Total Deposits Average Cost 2020 vs. 2019 ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ Noninterest-bearing ​ $ 807,864 27.4 % — % ​ 21.3 % Interest-bearing demand ​ 873,060 29.6 ​ 0.07 ​ ​ 6.3 ​ Money market ​ 474,033 16.1 ​ 0.15 ​ ​ 2.3 ​ Savings ​ 477,260 16.2 ​ 0.04 ​ ​ 10.9 ​ Total non-maturity deposits ​ 2,632,217 89.3 ​ 0.06 ​ ​ 10.6 ​ Time ​ 317,308 10.7 ​ 0.84 ​ ​ (20.0) ​ Total deposits ​ $ 2,949,525 100.0 % 0.14 % ​ 6.2 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2019 ​ ​ ​ ​ ​ Average Percent of Weighted ​ ​ ​ ​ ​ Balance Total Deposits Average Cost ​ ​ ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ Noninterest-bearing ​ $ 666,055 24.0 % — % ​ ​ ​ Interest-bearing demand ​ 821,480 29.5 ​ 0.18 ​ ​ ​ ​ Money market ​ 463,233 16.7 ​ 0.40 ​ ​ ​ ​ Savings ​ 430,220 15.5 ​ 0.06 ​ ​ ​ ​ Total non-maturity deposits ​ 2,380,988 85.7 ​ 0.15 ​ ​ ​ ​ Time ​ 396,560 14.3 ​ 1.10 ​ ​ ​ ​ Total deposits ​ $ 2,777,548 100.0 % 0.29 % ​ ​ ​ ​ Comparison of the Year Ended December 31 , 2021 to the Year Ended December 31 , 2020 The average balances of non-maturity deposits increased 19.6% from the year ended December 31, 2020 to the year ended December 31, 2021, with the increase primarily attributable to PPP loan proceeds received by commercial customers, federal economic stimulus received by retail customers, and $139.4 million of non-maturity deposits added through the NXT acquisition on October 1, 2021. Partially offsetting the increase in non-maturity deposits was a 6.8% decline in the average balances of time deposits, which resulted in a 16.7% increase in average balances of total deposits from the year ended December 31, 2020 to the year ended December 31, 2021. 76 Table of Contents The following table sets forth time deposits by remaining maturity as of December 31, 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3 Months or Over 3 through Over 6 through Over ​ ​ ​ Less 6 Months 12 Months ​ 12 Months ​ Total ​ (dollars in thousands) Time deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amounts less than $100,000 ​ $ 41,565 ​ $ 40,847 ​ $ 55,886 ​ $ 56,843 ​ $ 195,141 Amounts of $100,000 but less than $250,000 ​ 16,312 ​ 15,092 ​ 20,126 ​ 22,025 ​ 73,555 Amounts of $250,000 or more ​ 12,924 ​ 5,182 ​ 27,166 ​ 14,240 ​ 59,512 Total time deposits ​ $ 70,801 ​ $ 61,121 ​ $ 103,178 ​ $ 93,108 ​ $ 328,208 ​ As of December 31, 2021 and 2020, the Bank’s uninsured deposits, including related accrued interest, were estimated to be $845.7 million and $573.8 million, respectively. Securities Sold Under Agreements to Repurchase All securities sold under agreements to repurchase are sweep instruments, maturing daily. The securities underlying the agreements are held under our control in safekeeping at third-party financial institutions, and include debt securities. The following table sets forth information concerning balances and interest rates on our securities sold under agreements to repurchase. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of or for the Years Ended December 31, ​ 2021 2020 2019 ​ ​ (dollars in thousands) Balance at end of year ​ $ 61,256 ​ $ 45,736 ​ $ 44,433 ​ Average balance during year ​ 50,104 ​ 49,714 ​ 41,177 ​ Maximum outstanding at any month end ​ 61,256 ​ 58,839 ​ 52,085 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average interest rate at end of year ​ 0.07 % 0.06 % 0.20 % Average interest rate during year ​ 0.07 ​ 0.10 ​ 0.18 ​ ​ LIQUIDITY Bank Liquidity The overall objective of bank liquidity management is to ensure the availability of sufficient cash funds to meet all financial commitments and to take advantage of investment opportunities. The Bank manages liquidity in order to meet deposit withdrawals on demand or at contractual maturity, to repay borrowings as they mature, and to fund new loans and investments as opportunities arise. The Bank continuously monitors its liquidity position to ensure that assets and liabilities are managed in a manner that will meet all of our short-term and long-term cash requirements. The Bank manages its liquidity position to meet the daily cash flow needs of clients, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives. The Bank also monitors liquidity requirements in light of interest rate trends, changes in the economy and the scheduled maturity and interest rate sensitivity of the investment and loan portfolios and deposits, and regulatory capital requirements. As part of the Bank’s liquidity management strategy, the Bank is also focused on minimizing costs of liquidity and attempts to decrease these costs by promoting noninterest bearing and low-cost deposits and replacing higher cost funding including time deposits and borrowed funds. While the Bank does not control the types of deposit instruments our clients choose, those choices can be influenced with the rates and the deposit specials offered. 77 Table of Contents Additional sources of liquidity include unpledged securities, federal funds purchased, and borrowings from the Federal Home Loan Bank of Chicago (FHLB). Unpledged securities may be sold or pledged as collateral for borrowings to meet liquidity needs. Interest is charged at the prevailing market rate on federal funds purchased and FHLB borrowings. Funds obtained from federal funds purchased and FHLB borrowings are used primarily to meet daily liquidity needs. The total amount of the remaining credit available to the Bank from the FHLB at December 31, 2021 was $316.7 million. As of December 31, 2021, management believed adequate liquidity existed to meet all projected cash flow obligations of the Bank. As of December 31, 2021, the Bank had no material commitments for capital expenditures. Holding Company Liquidity The Company is a corporation separate and apart from the Bank and, therefore, it must provide for its own liquidity. As of December 31, 2021, HBT Financial, Inc. had cash and cash equivalents of $25.8 million. The Company’s main source of funding is dividends declared and paid to it by the Bank. Due to state banking laws, the Bank may not declare dividends in any calendar year in an amount that would exceed accumulated retained earnings, after giving effect to any unrecognized losses and bad debts, without the prior approval of the IDFPR. In addition, dividends paid by the Bank to the Company would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements. Management believes that these limitations will not impact the Company’s ability to meet its ongoing short-term cash obligations. During the years ended December 31, 2021, 2020, and 2019, the Bank paid $20.0 million, $17.6 million, and $110.0 million, in dividends to the Company, respectively. The liquidity needs of the Company on an unconsolidated basis consist primarily of interest payments on the subordinated notes and junior subordinated debentures, operating expenses, and dividends to stockholders. During the years ended December 31, 2021, 2020, and 2019, holding company operating expenses consisted of interest expense of $3.3 million, $2.2 million, and $1.9 million, respectively; other operating expenses of $3.7 million, $2.5 million, and $1.0 million, respectively; and dividends to stockholders of $16.8 million, $16.5 million, and $225.0 million, respectively. As of December 31, 2021, management was not aware of any known trends, events or uncertainties that had or were reasonably likely to have a material impact on the Company’s liquidity. As of December 31, 2021, management believed adequate liquidity existed to meet all projected cash flow obligations of the Company. As of December 31, 2021, the Company had no material commitments for capital expenditures. CAPITAL RESOURCES The overall objectives of capital management are to ensure the availability of sufficient capital to support loan, deposit and other asset and liability growth opportunities and to maintain capital to absorb unforeseen losses or write-downs that are inherent in the business risks associated with the banking industry. The Company seeks to balance the need for higher capital levels to address such unforeseen risks and the goal to achieve an adequate return on the capital invested by our stockholders. Regulatory Capital Requirements The Company and Bank are each subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the financial statements of the Company and the Bank. ​ 78 Table of Contents In addition to meeting minimum capital requirements, the Company and the Bank must also maintain a “capital conservation buffer” to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. As of December 31, 2021 and 2020, the capital conservation buffer requirement was 2.5% of risk-weighted assets. As of December 31, 2021 and 2020, the Company and the Bank met all capital adequacy requirements to which they were subject. As of those dates, the Bank was “well capitalized” under the regulatory prompt corrective action provisions. The following table sets forth actual capital ratios of the Company and the Bank for the dates indicated, the minimum ratios for capital adequacy purposes with the capital conservation buffer, and the minimum ratios to be well capitalized under regulatory prompt corrective action provisions. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For Capital ​ To Be Well ​ ​ ​ ​ ​ ​ ​ Adequacy Purposes ​ Capitalized Under ​ ​ December 31, ​ December 31, ​ With Capital ​ Prompt Corrective ​ 2021 2020 Conversation Buffer (1) Action Provisions (2) Total Capital (to Risk Weighted Assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated HBT Financial, Inc. ​ 16.88 % ​ 17.40 % ​ 10.50 % ​ N/A ​ Heartland Bank and Trust Company ​ 15.94 ​ ​ 15.63 ​ ​ 10.50 ​ ​ 10.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tier 1 Capital (to Risk Weighted Assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated HBT Financial, Inc. ​ 14.66 % ​ 14.55 % ​ 8.50 % ​ N/A ​ Heartland Bank and Trust Company ​ 15.09 ​ ​ 14.38 ​ ​ 8.50 ​ ​ 8.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Equity Tier 1 Capital (to Risk Weighted Assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated HBT Financial, Inc. ​ 13.37 % ​ 13.06 % ​ 7.00 % ​ N/A ​ Heartland Bank and Trust Company ​ 15.09 ​ ​ 14.38 ​ ​ 7.00 ​ ​ 6.50 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tier 1 Capital (to Average Assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated HBT Financial, Inc. ​ 9.84 % ​ 9.94 % ​ 4.00 ​ ​ N/A ​ Heartland Bank and Trust Company ​ 10.13 ​ ​ 9.82 ​ ​ 4.00 ​ ​ 5.00 % (1) The Tier 1 capital to average assets ratio (known as the “leverage ratio”) is not impacted by the capital conservation buffer. (2) The prompt corrective action provisions are not applicable to bank holding companies. N/A Not applicable. ​ Cash Dividends During the 2021 and 2020, the Company paid quarterly cash dividend of $0.15 per share. On January 25, 2022, the Company’s board of directors declared a quarterly cash dividend of $0.16 per share. ​ During 2019, the Company paid a $170.0 million dividend to shareholders of record prior to the Company’s IPO. The dividend was paid using net proceeds from the IPO and the proceeds of dividends received from Heartland Bank and State Bank of Lincoln. ​ Stock Repurchase Program The Company repurchased 290,486 shares of its common stock at a weighted average price of $16.89 during the year ended December 31, 2021 under the Company’s stock repurchase program which expired on December 31, 2021. Repurchases were conducted in compliance with Rule 10b-18 and in compliance with Regulation M under the Securities Exchange Act of 1934, as amended. On December 14, 2021, the Company’s Board of Directors approved a new stock repurchase program which authorizes the Company to repurchase up to $15.0 million of its common stock. The new stock repurchase program took effect upon the expiration of the prior stock repurchase program and expires on January 1, 2023. ​ 79 Table of Contents OFF-BALANCE SHEET ARRANGEMENTS As a financial services provider, the Bank is routinely a party to various financial instruments with off-balance sheet risks, such as commitments to extend credit, standby letters of credit, unused lines of credit and commitments to sell loans. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process afforded to loans originated by the Bank. Although commitments to extend credit are considered while evaluating our allowance for loan losses, at December 31, 2021 and 2020, there were no reserves for unfunded commitments. For additional information, see “Note 24 – Commitments and Contingencies” to the consolidated financial statements. CRITICAL ACCOUNTING ESTIMATES Critical accounting estimates are those that are critical to the portrayal and understanding of the Company’s financial condition and results of operations and require management to make assumptions that are difficult, subjective or complex. These estimates involve judgments, assumptions and uncertainties that are susceptible to change. In the event that different assumptions or conditions were to prevail, and depending on the severity of such changes, the possibility of a materially different financial condition or materially different results of operations is a reasonable likelihood. Further, changes in accounting standards could impact the Company’s critical accounting estimates. The following accounting estimates could be deemed critical: Allowance for Loan losses The allowance for loan losses (allowance) is an estimate of loan losses inherent in the Company’s loan portfolio. The allowance for loan losses represents amounts that have been established to recognize incurred credit losses in the loan portfolio that are both probable and reasonably estimable at the date of the consolidated financial statements. The allowance is established through a provision for loan losses which is charged to expense. Additions to the allowance are expected to maintain the adequacy of the total allowance. Loan losses are charged off against the allowance when the Company determines the loan balance to be uncollectible. Cash received on previously charged off amounts is recorded as a recovery to the allowance. The allowance consists of two primary components, general reserves and specific reserves related to impaired loans. General reserves cover non-impaired loans, or loans collectively evaluated for impairment, and are based on historical losses adjusted for qualitative factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the most recent 16-quarter period. Qualitative factor adjustments primarily consider current economic metrics, such as national and regional unemployment rates, and current credit quality metrics of each portfolio segment, such as past due and risk rating percentages, relative to historical levels. These qualitative factor adjustments are inherently subjective. Specific reserves cover impaired loans, or loans individually evaluated for impairment, and are primarily measured based on the fair value of collateral. Adjustments to the fair value of collateral are made for anticipated selling costs. A specific reserve may be zero if the fair value of collateral on the measurement date is greater than the carrying balance of the impaired loan. Additionally, the present value of expected future cash flows discounted at the original contractual interest rate may also be used, when practical. While the Company uses the best information available to make evaluations, future adjustments to the allowance for loan losses may become necessary if conditions change substantially from the conditions used in previous evaluations. Determinations as to the risk classification of loans and the amount of the allowance for loan losses are subject to review by regulatory agencies, which can require that the Company establish additional loss allowances. ​ 80 Table of Contents Fair Value of Assets Acquired and Liabilities Assumed in Business Combinations Business combinations are accounted for using the acquisition method of accounting. Under the acquisition method of accounting, assets acquired and liabilities assumed are recorded at their estimated fair value on the acquisition date. Estimating such fair values may require highly subjective assumptions or the use of a valuation specialist. In the NXT acquisition, the fair value for loans was most significant estimate and relatively small changes in assumptions used in this estimate could result in a materially different conclusion. The fair value for loans was based on a discounted cash flow methodology that considered credit loss and prepayment expectations, market interest rates and other market factors, such as liquidity, from the perspective of a market participant. Loan cash flows were generated on an individual loan basis. The probability of default, loss given default, exposure at default, and prepayment assumptions are key factors in this analysis. ​ 81 Table of Contents NON-GAAP FINANCIAL MEASURES This Annual Report on Form 10-K contains certain financial information determined by methods other than in accordance with GAAP. Management believes that it is a standard practice in the banking industry to present these non-GAAP financial measures, and accordingly believes that providing these measures may be useful for peer comparison purposes. These disclosures should not be viewed as substitutes for the results determined to be in accordance with GAAP; nor are they necessarily comparable to non-GAAP financial measures that may be presented by other companies. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures below. Non-GAAP Financial Measure Definition How the Measure Provides Useful Information to Investors Adjusted Net Income ● Net income, with the following adjustments: - adds additional C Corp equivalent tax expense for periods prior to October 11, 2019, - excludes acquisition expenses, - excludes branch closure expenses, - excludes charges related to termination of certain employee benefit plans, - excludes net earnings (losses) from closed or sold operations, - excludes realized gains (losses) on sales of securities, - excludes mortgage servicing rights fair value adjustment, and - the income tax effect of these pre-tax adjustments. ● Enhances comparisons to prior periods and, accordingly, facilitates the development of future projections and earnings growth prospects. ● We also sometimes refer to ratios that include Adjusted Net Income, such as: - Adjusted Return on Average Assets, which is Adjusted Net Income divided by average assets. - Adjusted Return on Average Equity, which is Adjusted Net Income divided by average equity. - Adjusted Earnings Per Share - Basic, which is Adjusted Net Income allocated to common shares divided by weighted average common shares outstanding. - Adjusted Earnings Per Share – Diluted, which is Adjusted Net Income allocated to common shares divided by weighted average common shares outstanding, including all dilutive potential shares. Net Interest Income (Tax Equivalent Basis) ● Net interest income adjusted for the tax-favored status of tax-exempt loans and securities. (1) ​ ● We believe the tax equivalent basis is the preferred industry measurement of net interest income. ● Enhances comparability of net interest income arising from taxable and tax-exempt sources. ● We also sometimes refer to Net Interest Margin (Tax Equivalent Basis), which is Net Interest Income (Tax Equivalent Basis) divided by average interest-earning assets. Efficiency Ratio (Tax Equivalent Basis) ● Noninterest expense less amortization of intangible assets divided by the sum of net interest income (tax equivalent basis) and noninterest income. (1) ● Provides a measure of productivity in the banking industry. ● Calculated to measure the cost of generating one dollar of revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. (1) Tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%. ​ 82 Table of Contents Non-GAAP Financial Measure Definition How the Measure Provides Useful Information to Investors Tangible Common Equity to Tangible Assets ● Tangible Common Equity is total stockholders’ equity less goodwill and other intangible assets. ● Tangible Assets is total assets less goodwill and other intangible assets. ● Generally used by investors, our management, and banking regulators to evaluate capital adequacy. ● Facilitates comparison of our earnings with the earnings of other banking organization with significant amounts of goodwill or intangible assets. ● We also sometimes refer to ratios that include Tangible Common Equity, such as: - Tangible Book Value Per Share, which is Tangible Common Equity divided by shares of common stock outstanding. - Return on Average Tangible Common Equity, which is net income divided by average Tangible Common Equity. - Adjusted Return on Average Tangible Common Equity, which is Adjusted Net Income divided by average Tangible Common Equity. Core Deposits ● Total deposits, excluding: - Time deposits of $250,000 or more, and - Brokered deposits ● Provides investors with information regarding the stability of the Company’s sources of funds. ● We also sometimes refer to the ratio of Core Deposits to total deposits. ​ 83 Table of Contents Reconciliation of Non-GAAP Financial Measure - Adjusted Net Income and Adjusted Return on Average Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 ​ ​ (dollars in thousands) ​ Net income ​ $ 56,271 ​ $ 36,845 ​ $ 66,865 ​ C Corp equivalent adjustment (1) ​ ​ — ​ ​ — ​ ​ (13,493) ​ C Corp equivalent net income (1) ​ ​ 56,271 ​ ​ 36,845 ​ ​ 53,372 ​ Adjustments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Acquisition expenses ​ ​ (1,416) ​ ​ — ​ ​ — ​ Branch closure expenses ​ ​ (748) ​ ​ — ​ ​ — ​ Charges related to termination of certain employee benefit plans ​ — ​ (1,457) ​ (3,796) ​ Net earnings from sold operations, including gains on sale (2) ​ — ​ — ​ 524 ​ Mortgage servicing rights fair value adjustment ​ 1,690 ​ (2,584) ​ (2,400) ​ Total adjustments ​ (474) ​ (4,041) ​ (5,672) ​ Tax effect of adjustments ​ (95) ​ 1,152 ​ 1,617 ​ Less adjustments after tax effect ​ (569) ​ (2,889) ​ (4,055) ​ Adjusted net income ​ $ 56,840 ​ $ 39,734 ​ $ 57,427 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average assets ​ $ 3,980,538 ​ $ 3,447,500 ​ $ 3,233,386 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average assets ​ 1.41 % 1.07 % 2.07 % C Corp equivalent return on average assets (2) ​ N/A ​ N/A ​ 1.65 ​ Adjusted return on average assets ​ 1.43 ​ 1.15 ​ 1.78 ​ (1) Reflects adjustment to our historical net income for each period to give effect to the C Corp equivalent provision for income tax for such year. (2) Sold operations include HBT Insurance and First Community Title Services, Inc. N/A Not applicable. ​ 84 Table of Contents Reconciliation of Non-GAAP Financial Measure - Adjusted Earnings Per Share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 2020 2019 ​ ​ (dollars in thousands, except per share amounts) Numerator: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 56,271 ​ $ 36,845 ​ $ 66,865 Earnings allocated to participating securities (1) ​ ​ (104) ​ ​ (93) ​ ​ — Numerator for earnings per share - basic and diluted ​ $ 56,167 ​ $ 36,752 ​ $ 66,865 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ C Corp equivalent net income (2) ​ ​ N/A ​ ​ N/A ​ $ 53,372 Earnings allocated to unvested restricted stock units (1)(2) ​ ​ N/A ​ ​ N/A ​ ​ — Numerator for C Corp equivalent earnings per share - basic and diluted (2) ​ ​ N/A ​ ​ N/A ​ $ 53,372 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted net income ​ $ 56,840 ​ $ 39,734 ​ $ 57,427 Earnings allocated to participating securities (1) ​ ​ (105) ​ ​ (101) ​ ​ — Numerator for adjusted earnings per share - basic and diluted ​ $ 56,735 ​ $ 39,633 ​ $ 57,427 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Denominator: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common shares outstanding ​ ​ 27,795,806 ​ ​ 27,457,306 ​ ​ 20,090,270 Dilutive effect of outstanding restricted stock units ​ ​ 15,487 ​ ​ — ​ ​ — Weighted average common shares outstanding, including all dilutive potential shares ​ ​ 27,811,293 ​ ​ 27,457,306 ​ ​ 20,090,270 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share - Basic ​ $ 2.02 ​ $ 1.34 ​ $ 3.33 Earnings per share - Diluted ​ $ 2.02 ​ $ 1.34 ​ $ 3.33 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ C Corp equivalent earnings per share - Basic (2) ​ ​ N/A ​ ​ N/A ​ $ 2.66 C Corp equivalent earnings per share - Diluted (2) ​ ​ N/A ​ ​ N/A ​ $ 2.66 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted earnings per share - Basic ​ $ 2.04 ​ $ 1.44 ​ $ 2.86 Adjusted earnings per share - Diluted ​ $ 2.04 ​ $ 1.44 ​ $ 2.86 (1) The Company has granted certain restricted stock units that contain non-forfeitable rights to dividend equivalents. Such restricted stock units are considered participating securities. As such, we have included these restricted stock units in the calculation of basic earnings per share and calculate basic earnings per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. (2) Reflects adjustment to our historical net income for each period to give effect to the C Corp equivalent income tax expense for such period. No such adjustment is necessary for periods subsequent to 2019. N/A Not applicable. Reconciliation of Non-GAAP Financial Measure - Net Interest Margin (Tax Equivalent Basis) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 ​ ​ (dollars in thousands) ​ Net interest income (tax equivalent basis) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ $ 122,403 ​ $ 117,605 ​ $ 133,800 ​ Tax-equivalent adjustment (1) ​ 2,028 ​ 1,943 ​ 2,309 ​ Net interest income (tax equivalent basis) (1) ​ $ 124,431 ​ $ 119,548 ​ $ 136,109 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest margin (tax equivalent basis) ​ ​ ​ ​ Net interest margin ​ 3.18 % 3.54 % 4.31 % Tax-equivalent adjustment (1) ​ 0.05 ​ 0.06 ​ 0.07 ​ Net interest margin (tax equivalent basis) (1) ​ 3.23 % 3.60 % 4.38 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average interest-earning assets ​ $ 3,846,473 ​ $ 3,318,764 ​ $ 3,105,863 ​ (1) On a tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%. 85 Table of Contents Reconciliation of Non-GAAP Financial Measure - Efficiency Ratio (Tax Equivalent Basis) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 ​ ​ (dollars in thousands) ​ Efficiency ratio (tax equivalent basis) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total noninterest expense ​ $ 91,246 ​ $ 91,956 ​ $ 91,026 ​ Less: amortization of intangible assets ​ 1,054 ​ 1,232 ​ 1,423 ​ Adjusted noninterest expense ​ $ 90,192 ​ $ 90,724 ​ $ 89,603 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ $ 122,403 ​ $ 117,605 ​ $ 133,800 ​ Total noninterest income ​ 37,328 ​ 34,456 ​ 32,751 ​ Operating revenue ​ 159,731 ​ 152,061 ​ 166,551 ​ Tax-equivalent adjustment (1) ​ 2,028 ​ 1,943 ​ 2,309 ​ Operating revenue (tax-equivalent basis) (1) ​ $ 161,759 ​ $ 154,004 ​ $ 168,860 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Efficiency ratio ​ 56.46 % 59.66 % 53.80 % Efficiency ratio (tax equivalent basis) (1) ​ 55.76 ​ 58.91 ​ 53.06 ​ (1) On a tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%. Reconciliation of Non-GAAP Financial Measure - Tangible Common Equity to Tangible Assets and Tangible Book Value Per Share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 December 31, 2020 ​ ​ ​ (dollars in thousands, except per share data) ​ Tangible Common Equity ​ ​ ​ ​ ​ ​ ​ Total stockholders' equity ​ $ 411,881 ​ $ 363,917 ​ Less: Goodwill ​ ​ 29,322 ​ ​ 23,620 ​ Less: Core deposit intangible assets, net ​ ​ 1,943 ​ ​ 2,798 ​ Tangible common equity ​ $ 380,616 ​ $ 337,499 ​ ​ ​ ​ ​ ​ ​ ​ ​ Tangible Assets ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 4,314,254 ​ $ 3,666,567 ​ Less: Goodwill ​ ​ 29,322 ​ ​ 23,620 ​ Less: Core deposit intangible assets, net ​ ​ 1,943 ​ ​ 2,798 ​ Tangible assets ​ $ 4,282,989 ​ $ 3,640,149 ​ ​ ​ ​ ​ ​ ​ ​ ​ Total stockholders' equity to total assets ​ ​ 9.55 % ​ 9.93 % Tangible common equity to tangible assets ​ ​ 8.89 ​ ​ 9.27 ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares of common stock outstanding ​ ​ 28,986,061 ​ 27,457,306 ​ ​ ​ ​ ​ ​ ​ ​ ​ Book value per share ​ $ 14.21 ​ $ 13.25 ​ Tangible book value per share ​ ​ 13.13 ​ ​ 12.29 ​ ​ ​ 86 Table of Contents Reconciliation of Non-GAAP Financial Measure – Adjusted Return on Average Stockholders’ Equity and Adjusted Return on Tangible Common Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 2020 2019 ​ ​ ​ (dollars in thousands) ​ Average Tangible Common Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total stockholders' equity ​ $ 380,080 ​ $ 350,703 ​ $ 341,544 ​ Less: Goodwill ​ 25,057 ​ 23,620 ​ 23,620 ​ Less: Core deposit intangible assets, net ​ 2,333 ​ 3,436 ​ 4,748 ​ Average tangible common equity ​ $ 352,690 ​ $ 323,647 ​ $ 313,176 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 56,271 ​ $ 36,845 ​ $ 66,865 ​ C Corp equivalent net income (1) ​ N/A ​ N/A ​ ​ 53,372 ​ Adjusted net income ​ 56,840 ​ 39,734 ​ ​ 57,427 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average stockholders' equity ​ 14.81 % 10.51 % ​ 19.58 % Return on average tangible common equity ​ 15.95 ​ 11.38 ​ ​ 21.35 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ C Corp equivalent return on average stockholders' equity (1) ​ N/A ​ N/A ​ ​ 15.63 % C Corp equivalent return on average tangible common equity (1) ​ N/A ​ N/A ​ ​ 17.04 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted return on average stockholders' equity ​ 14.95 % 11.33 % ​ 16.81 % Adjusted return on average tangible common equity ​ 16.12 ​ 12.28 ​ ​ 18.34 ​ (1) Reflects adjustment to our historical net income for each period to give effect to the C Corp equivalent provision for income tax for such period. Reconciliation of Non-GAAP Financial Measure - Core Deposits ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ December 31, 2020 ​ ​ (dollars in thousands) ​ Core Deposits ​ ​ ​ ​ ​ ​ ​ Total deposits ​ $ 3,738,185 ​ $ 3,130,534 ​ Less: time deposits of $250,000 or more ​ 59,512 ​ ​ 26,687 ​ Less: brokered deposits ​ 4,238 ​ ​ — ​ Core deposits ​ $ 3,674,435 ​ $ 3,103,847 ​ ​ ​ ​ ​ ​ ​ ​ ​ Core deposits to total deposits ​ 98.29 % ​ 99.15 % ​ ​ ​ 87 Table of Contents