What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-08 compared with 2022-03-11 · 350 added, 318 removed, 1591 unchanged (30% of the section changed)

7 unchanged sentences

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Changes in Stockholders’ Equity

2 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors

Stockholders and the Board of Directors

HBT Financial, Inc.

1 unchanged sentence

We have audited the accompanying consolidated balance sheets of HBT Financial, Inc.

and its subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

and its subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

25 unchanged sentences

Debt securities available-for-sale, at fair value

Debt securities held-to-maturity (fair value of $ 336,027 in 2021 and $ 72,441 in 2020)

Debt securities held-to-maturity (fair value of $ 478,801 at 2022 and $ 336,027 at 2021)

Equity securities with readily determinable fair value

18 unchanged sentences

Securities sold under agreements to repurchase

Federal Home Loan Bank advances

Subordinated notes

2 unchanged sentences

Total liabilities

COMMITMENTS AND CONTINGENCIES (Notes 12 and 24)

COMMITMENTS AND CONTINGENCIES (Note 23)

Stockholders' Equity

4 unchanged sentences

125,000,000 shares authorized;

shares issued of 29,276,547 in 2021 and 27,457,306 in 2020;

shares outstanding of 28,986,061 in 2021 and 27,457,306 in 2020

shares issued of 29,308,491 at 2022 and 29,276,547 at 2021;

shares outstanding of 28,752,626 at 2022 and 28,986,061 at 2021

Retained earnings

Accumulated other comprehensive income

Treasury stock at cost, 290,486 shares in 2021 and none in 2020

Accumulated other comprehensive income (loss)

Treasury stock at cost, 555,865 shares at 2022 and 290,486 at 2021

Total stockholders’ equity

22 unchanged sentences

NONINTEREST INCOME

Service charges on deposit accounts

Wealth management fees

Service charges on deposit accounts

Mortgage servicing

1 unchanged sentence

Gains on sale of mortgage loans

Gains (losses) on securities

Unrealized gains (losses) on equity securities

Gains (losses) on foreclosed assets

1 unchanged sentence

Income on bank owned life insurance

Title insurance activity

Other noninterest income

17 unchanged sentences

WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING

UNAUDITED PRO FORMA C CORP EQUIVALENT INFORMATION (Note 1)

Historical income before income tax expense

Pro forma C Corp equivalent income tax expense

Pro forma C Corp equivalent net income

PRO FORMA C CORP EQUIVALENT EARNINGS PER SHARE - BASIC

PRO FORMA C CORP EQUIVALENT EARNINGS PER SHARE - DILUTED

See accompanying Notes to Consolidated Financial Statements

1 unchanged sentence

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Year Ended December 31,

8 unchanged sentences

Total other comprehensive (loss) income

TOTAL COMPREHENSIVE INCOME

TOTAL COMPREHENSIVE (LOSS) INCOME

See accompanying Notes to Consolidated Financial Statements

8 unchanged sentences

Other comprehensive income

Reclassification of undistributed S-Corp earnings

Issuance of common stock - voting, net of issuance costs ( 9,429,794 shares)

Conversion of common stock - Series A to common stock - Voting

Cancelation of 124,228 shares of treasury stock

Cash dividends ($ 12.48 per share)

Stock-based compensation

Cash dividends and dividend equivalents ($ 0.60 per share)

Balance, December 31, 2020

Other comprehensive income

Other comprehensive loss

Stock-based compensation

Issuance of common stock upon vesting of restricted stock units

Issuance of common stock in NXT acquisition

Repurchase of common stock

Cash dividends and dividend equivalents ($ 0.60 per share)

2 unchanged sentences

Stock-based compensation

Issuance of common stock - voting upon vesting of restricted stock units ( 20,225 shares)

Issuance of common stock - voting in NXT acquisition ( 1,799,016 shares)

Repurchase of common stock - voting ( 290,486 shares)

Issuance of common stock upon vesting of restricted stock units, net of tax withholdings

Repurchase of common stock

Cash dividends and dividend equivalents ($ 0.64 per share)

12 unchanged sentences

Amortization of unrealized gain on dedesignated cash flow hedge

Deferred income tax expense

Deferred income tax (benefit) expense

Stock-based compensation

Net accretion of discount and deferred loan fees on loans

Net unrealized gain (loss) on equity securities

Net loss (gain) on disposals of bank premises and equipment

Net unrealized loss (gain) on equity securities

Net (gain) loss on disposals of bank premises and equipment

Net gain on sales of bank premises held for sale

6 unchanged sentences

Amortization of premium on Federal Home Loan Bank borrowings

Amortization of premium on interest-bearing time deposits with banks

Amortization of premium on time deposits

Mortgage loans originated for sale

2 unchanged sentences

Increase in cash surrender value of bank owned life insurance

Gain on sale of First Community Title Services, Inc.

Decrease (increase) in accrued interest receivable

Decrease (increase) in other assets

Decrease (increase) in other liabilities

(Increase) decrease in accrued interest receivable

(Increase) decrease in other assets

Increase (decrease) in other liabilities

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Net change in interest-bearing time deposits with banks

Proceeds from maturities of interest-bearing time deposits with banks

Proceeds from paydowns, maturities, and calls of debt securities

9 unchanged sentences

Net cash paid for acquisition of NXT Bancorporation, Inc.

Cash received from sale of First Community Title Services, Inc.

Net cash (used in) provided by investing activities

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Net increase (decrease) in deposits

Net increase (decrease) in repurchase agreements

Repayment of Federal Home Loan Bank borrowings

Net (decrease) increase in deposits

Net (decrease) increase in repurchase agreements

Net increase (decrease) in Federal Home Loan Bank advances

Issuance of subordinated notes, net of issuance costs

Issuance of common stock, net of issuance costs

Taxes paid related to the vesting of restricted stock units

Repurchase of common stock

Cash dividends and dividend equivalents paid

Net cash provided by (used in) financing activities

NET INCREASE IN CASH AND CASH EQUIVALENTS

Net cash (used in) provided by financing activities

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

22 unchanged sentences

Additionally, the Company is subject to the regulations of certain federal and state agencies and undergoes periodic examinations by those regulatory agencies.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and reporting practices applicable to the banking industry.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Significant accounting policies are summarized below.

On September 13, 2019, the Company effected a twenty -for-one stock split of its issued and outstanding shares of common stock and its issued and outstanding shares of Series A nonvoting common stock.

Accordingly, all share and per share amounts for all periods presented in these financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the stock split.

On October 10, 2019, each share of Series A nonvoting common stock was reclassified and converted into one share of common stock.

Additionally, the Company increased the authorized shares to 150,000,000 , of which 125,000,000 shares, par value of $ 0.01 per share, are designated as common stock and 25,000,000 shares, par value of $ 0.01 per share, are designated as preferred stock.

The Company qualifies as an "emerging growth company"

as defined by the Jumpstart Our Business Startups Act (“JOBS Act”).

The JOBS Act permits emerging growth companies an extended transition period for complying with new or revised accounting standards affecting public companies.

The Company may remain an emerging growth company until the earliest to occur of:

(1) the end of the fiscal year following the fifth anniversary of the completion of our initial public offering, which is December 31, 2024, (2) the last day of the fiscal year in which the Company has $1.235 billion or more in annual revenues, (3) the date on which the Company is deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) or (4) the date on which the Company has, during the previous three year period, issued, publicly or privately, more than $1.0 billion in non-convertible debt securities.

The Company has elected to use the extended transition period until the Company is no longer an emerging growth company or until the Company chooses to affirmatively and irrevocably opt out of the extended transition period.

As a result, the Company’s financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies.

Merger of State Bank of Lincoln into Heartland Bank

1 unchanged sentence

The merger was consummated on December 31, 2020, resulting in Heartland Bank being our sole bank subsidiary, with the branch locations in Lincoln, Illinois operating as “State Bank of Lincoln, a division of Heartland Bank and Trust Company.”

Initial Public Offering

On September 13, 2019, the Company filed a Registration Statement on Form S-1 with the Securities and Exchange Commission (“SEC”).

The Registration Statement was declared effective by the SEC on October 10, 2019.

The Company issued and sold 9,429,794 shares of common stock at a price of $ 16 per share pursuant to that Registration Statement.

Total proceeds received by the Company, net of offering costs, were $ 138,493,000 .

The proceeds were used to fund a $ 169,000,000 special dividend, or $ 9.43 per share, to stockholders of record prior to the IPO.

The Company qualifies as an “emerging growth company” as defined by the Jumpstart Our Business Startups Act (“JOBS Act”).

Under the JOBS Act, emerging growth companies may also elect to delay adoption of new or revised accounting standards until such time as those standards apply to private companies.

The Company has elected to use this extended transition period for complying with new or revised accounting standards and, therefore, the Company will not be subject to the same new or revised accounting standards as other public companies.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Sale of First Community Title Services, Inc.

On February 15, 2019, the Company consummated an agreement to sell substantially all assets and liabilities of First Community Title Services, Inc.

to Illinois Real Estate Title Center, LLC, an Illinois limited liability company, for a combination of cash and an equity interest in Illinois Real Estate Title Center, LLC representing total consideration of approximately $ 498,000 .

Basis of Consolidation

The consolidated financial statements of HBT Financial, Inc.

include the accounts of the Company and its wholly owned bank subsidiary, Heartland Bank.

The consolidated financial statements of HBT Financial include the accounts of the Company and its wholly owned bank subsidiary, Heartland Bank.

The Company also has five wholly owned subsidiaries, Heartland Bancorp, Inc.

3 unchanged sentences

Significant intercompany transactions and accounts have been eliminated in consolidation.

Unaudited Pro Forma Income Statement Information

Effective October 11, 2019, the Company revoked its S Corporation status and became a taxable entity (C Corporation).

As such, any periods prior to October 11, 2019 will only reflect state replacement taxes.

The unaudited pro forma C Corp equivalent income tax expense information gives effect to the income tax expense had the Company been a C Corporation during the year ended December 31, 2019.

The unaudited pro forma C Corp equivalent net income information, therefore, includes an adjustment for income tax expense as if the Company had been a C Corporation during the year ended December 31, 2019.

The unaudited pro forma basic and diluted earnings per share information is computed using the unaudited pro forma C Corp equivalent net income and weighted average shares of common stock outstanding.

There were no dilutive instruments outstanding during the year ended December 31, 2019;

therefore, the unaudited pro forma C Corp equivalent basic and diluted earnings per share amounts are the same.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Use of Estimates

2 unchanged sentences

Actual results could differ significantly from those estimates.

Material estimates that are particularly susceptible to significant changes in the near term relate to the determination of the allowance for loan losses and fair value of assets acquired and liabilities assumed in business combinations.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Material estimates that are particularly susceptible to significant changes in the near term relate to the determination of the allowance for loan losses.

Business and Significant Concentrations of Credit Risk

3 unchanged sentences

Extension of credit is generally limited to the primary trade areas of the Company.

Primary deposit products of the Bank are noninterest-bearing and interest-bearing demand accounts, savings accounts, money market accounts, and term certificate of deposit accounts.

Primary deposit products of the Bank are noninterest-bearing and interest-bearing demand accounts, savings accounts, money market accounts, and term certificates of deposit.

Cash and Cash Equivalents

13 unchanged sentences

Such amounts are amortized over the period to maturity.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Declines in the fair value of individual securities below their cost that are other-than-temporary result in write-downs of the individual securities to their fair value.

2 unchanged sentences

A decline in value due to a credit event that is considered other-than-temporary is recorded as a loss in noninterest income.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Equity Securities

Equity securities with readily determinable fair values are measured at fair value with changes in fair value recognized in gains (losses) on securities on the statements of income.

Equity securities with readily determinable fair values are measured at fair value with changes in fair value recognized in unrealized gains (losses) on equity securities on the statements of income.

The Company has elected to measure its equity securities with no readily determinable fair values at their cost minus impairment, if any, plus or minus charges resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

12 unchanged sentences

Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and recognized as an adjustment of the related loan yield using the interest method.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accrual of interest on loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection.

5 unchanged sentences

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Allowance for Loan Losses

24 unchanged sentences

When a loan is classified as either substandard or doubtful and in certain other cases, such as troubled debt restructurings, the Company generally measures impairment based on the fair value of the collateral, but also may use the present value of expected future cash flows discounted at the original contractual interest rate, when practical.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Under certain circumstances, the Company will provide borrowers relief through loan restructurings.

6 unchanged sentences

All TDRs are individually evaluated for impairment.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company assigns a risk rating to all loans and periodically performs detailed internal reviews of all such loans that are part of relationships with over $ 750,000 in total exposure to identify credit risks and to assess the overall collectability of the portfolio.

13 unchanged sentences

A Doubtful loan has all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company maintains a separate general valuation allowance for each portfolio segment.

8 unchanged sentences

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.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The credit quality of these loans is significantly influenced by 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 :

6 unchanged sentences

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.

Trends in rental and vacancy rates of commercial properties may impact the credit quality of these loans.

Multi-family :

7 unchanged sentences

The degree of risk in residential mortgage lending depends on the local economy, including the local real estate market and unemployment rates.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Municipal, Consumer and Other :

2 unchanged sentences

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.

Loans to non-depository financial institutions, as well as leases, are also included.

Although management believes the allowance to be adequate, ultimate losses may vary from its estimates.

2 unchanged sentences

In addition, the Company’s regulators review the adequacy of the allowance and may require additions to the allowance based on their judgment about information available at the time of their examinations.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loans Acquired with Deteriorated Credit Quality

16 unchanged sentences

Mortgage servicing rights are carried at fair value on the consolidated balance sheets and changes in fair value are recorded in mortgage servicing rights fair value adjustment on the consolidated statements of income.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Bank Owned Life Insurance

6 unchanged sentences

Depreciation is computed over the estimated useful lives of the individual assets using the straight-line method.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Bank Premises Held for Sale

Bank premises held for sale is carried at the lower of cost or fair value less estimated costs to sell.

The bank premises are not depreciated while classified as held for sale.

Bank premises classified as held for sale are not depreciated.

Impairment of Long-Lived Assets

15 unchanged sentences

Write-downs of foreclosed assets subsequent to foreclosure are charged to current year operations as are gains and losses from sale of foreclosed assets, as well as expenses to maintain and hold foreclosed assets.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill and Other Intangible Assets

3 unchanged sentences

At December 31, 2022 and 2021, the Company’s evaluations of goodwill indicated that goodwill was not impaired.

Additionally, due to the economic weakness resulting from the COVID-19 pandemic, the Company completed a quantitative assessment of goodwill as of March 31, 2020 which indicated that goodwill was not impaired.

Further goodwill impairment evaluations, which may result in goodwill impairment, may be necessary if events or circumstance changes would more likely than not reduce the fair value of a reporting unit below its carrying amount.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other identifiable intangible assets consist of core deposit intangible assets with definite useful lives which are being amortized using an accelerated depreciation method over 10 years .

5 unchanged sentences

The Company sponsors a profit sharing plan under which the Company may contribute, at the discretion of the Board of Directors, a discretionary amount to all participating employees for the plan year.

Participating employees are those employees in service on the valuation date who were employed on the last day of the plan year then ended, were on leave of absence on the last day of the plan year then ended, or any participant whose service was terminated during the plan year then ended due to retirement, disability, or death.

A 401(k) feature also allows the Bank to make discretionary matching contributions in an amount up to 5 % of compensation contributed by employees.

The Company may also make discretionary matching contributions in an amount up to 5 % of compensation contributed by employees.

Stock Based Compensation

6 unchanged sentences

Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest.

3 unchanged sentences

Advertising costs are expensed as incurred.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Through October 10, 2019, the Company, with the consent of its then current stockholders, 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, have been recognized in the accompanying consolidated financial statements prior to October 11, 2019.

No provision has been made for any amounts which may be advanced or paid as dividends to the stockholders to assist them in paying their personal taxes on the income from the Company.

Effective October 11, 2019, the Company voluntarily revoked its S Corporation status and became a taxable entity (C Corporation).

In connection with the conversion of tax status, the Company recognized a deferred tax asset of $ 534,000 and an income tax benefit of $ 534,000 .

Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities.

2 unchanged sentences

With regard to uncertain tax matters, the Company recognizes in the consolidated financial statements the impact of a tax position taken, or expected to be taken, if it is more likely than not that the position will be sustained on audit based on the technical merit of the position.

Management has analyzed the tax positions taken by the Company and concluded as of December 31, 2021 and 2020, there are no uncertain tax positions taken or expected to be taken that require recognition of a liability or disclosure in the consolidated financial statements.

Management has analyzed the tax positions taken by the Company and concluded as of December 31, 2022 and 2021, there are no material uncertain tax positions taken or expected to be taken that require recognition of a liability or disclosure in the consolidated financial statements.

When applicable, the Company recognizes interest accrued related to unrecognized tax benefits and penalties in operating expenses.

The Company files consolidated federal and state income tax returns.

The Company is no longer subject to federal or state income tax examinations for years prior to 2018.

The Company generally is no longer subject to federal or state income tax examinations for years prior to 2019.

Derivative Financial Instruments

As part of the Company’s asset/liability management, the Company uses interest rate swaps to hedge various exposures or to modify interest rate characteristics of various balance sheet accounts.

As part of the Company’s asset/liability management, the Company may use interest rate swaps to hedge various exposures or to modify interest rate characteristics of various balance sheet accounts.

Derivatives that are used as part of the asset/liability management process are linked to specific assets or liabilities, or pools of assets or liabilities, and have high correlation between the contract and the underlying item being hedged, both at inception and throughout the hedge period.

27 unchanged sentences

Level 3 - Inputs that are unobservable inputs that reflect a Company’s own assumptions about the assumptions that market participants would use in pricing as asset or liability.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Subsequent to initial recognition, the Company may re-measure the carrying value of assets and liabilities measured on a nonrecurring basis to fair value.

1 unchanged sentence

Such assets are written down from their carrying amounts to their fair value.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounting standards allow entities the irrevocable option to elect to measure certain financial instruments and other items at fair value for the initial and subsequent measurement on an instrument-by-instrument basis.

25 unchanged sentences

Payment is typically received quarterly or annually.

Title insurance activity:

Consists of fees related to real estate sale closings, title search fees, and title insurance premiums with First Community Title Services, Inc.

acting as an agent.

The Company’s performance obligations were generally satisfied and payment was typically received at the time a real estate transaction was finalized.

In 2019, First Community Title Services, Inc.

was sold, and the Company did not have title insurance activity revenue in subsequent periods.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Segment Reporting

3 unchanged sentences

Certain prior period amounts have been reclassified to conform to the current period presentation without any impact on the reported amounts of net income or stockholders’ equity.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Subsequent Events

In preparing these consolidated financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the consolidated financial statements were issued.

Other than the acquisition of Town and Country Financial Corporation, as disclosed in Note 2 – Acquisitions, and further developments in a pending legal matter, as disclosed in Note 23 – Commitments and Contingencies, there were no significant subsequent events through the issuance of these consolidated financial statements that warranted adjustment or disclosure.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio.

In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

In addition, ASU 2016-13 amends the accounting for credit losses on debt securities available-for-sale and purchased financial assets with credit deterioration.

ASU 2016-13 is effective for years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted for years beginning after December 31, 2018, including interim periods within those years.

The Company has formed an implementation team to assess the impact that ASU 2016-13 will have on the Company’s consolidated financial statements.

For the majority of loans evaluated on a pooled basis, the Company anticipates using a discounted cash flow method which considers instrument-level cash flows adjusted for, among other factors, prepayment speeds, probability of default, and loss given default.

The Company also anticipates using regression analysis of historical internal and peer data to determine which economic variables are best suited to be utilized when modeling lifetime probability of default and loss given default.

The ultimate impact to the Company’s financial condition and results of operations of ASU 2016-13, at both adoption and each subsequent reporting period, is highly dependent on credit quality, macroeconomic forecasts and conditions, the composition of our loan and debt securities portfolios, along with other management judgments.

Management is finalizing macroeconomic conditions and forecast assumptions to be used in the model;

however, upon adoption of ASU 2016-13 on January 1, 2023, we expect the initial allowance for credit losses and the reserve for unfunded commitments together to be approximately 30 % to 50 % above the existing allowance for loan loss levels.

When finalized, this one-time increase will be recorded, net of tax, as an adjustment to beginning retained earnings.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions .

ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value and that contractual sale restrictions cannot be recognized and measured as a separate unit of account.

The amendments in this update are effective for years beginning after December 15, 2023, including interim periods within those years.

This standard is not expected to have a material impact on the Company’s consolidated results of operations or financial position.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures.

ASU 2022-02 eliminates the recognition and measurement guidance for troubled debt restructurings (“TDRs”) by creditors in ASC 310-40.

This Update also enhances disclosure requirements for certain loan restructurings by creditors when a borrower is experiencing financial difficulty.

Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity will apply refinancing and restructuring guidance to determine whether a modification or other form of restructuring results in a new loan or a continuation of an existing loan.

Additionally, the amendments in this ASU require a public business entity to disclosure current-period gross write-offs by year of origination for financing receivables and net investments in leases in the existing vintage disclosures.

The amendments in this update are effective for years beginning after December 15, 2022, including interim periods within those years.

This standard is not expected to have a material impact on the Company’s consolidated results of operations or financial position.

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815):

Fair Value Hedging – Portfolio Layer Method .

ASU 2022-01 replaces the current last-of-layer hedge accounting method with an expanded portfolio layer method that permits multiple hedged layers of a single closed portfolio.

The scope of the portfolio layer method is also expanded to include non-prepayable financial assets.

ASU 2022-01 also provides additional guidance on the accounting for and disclosure of hedge basis adjustments that are applicable to the portfolio layer method, and specifies how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio.

Amendments related to hedge basis adjustments which are included in this standard apply on a modified retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings on the initial application date.

Amendments related to disclosure which are included in this standard may be applied on a prospective basis from the initial application date, or on a retrospective basis to each prior period presented after the date of adoption of the amendments in ASU 2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities .

The amendments in this update are effective for years beginning after December 15, 2023, including interim periods within those years.

Early adoption is permitted.

The Company is currently evaluating the effect that this standard will have on the consolidated results of operations and financial position.

This standard is not expected to have a material impact on the Company’s consolidated results of operations or financial position.

In January 2017, the FASB issued ASU 2017 04, Intangibles – Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment .

This ASU simplifies measurement of goodwill and eliminates Step 2 from the goodwill impairment test.

Under the ASU, a company should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

ASU 2017-04 simplifies measurement of goodwill and eliminates Step 2 from the goodwill impairment test.

Under ASU 2017-04, a company should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.

3 unchanged sentences

This standard is not expected to have a material impact on the Company’s consolidated results of operations or financial position.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

This ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform, if certain criteria are met.

ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform, if certain criteria are met.

In January 2021, the FASB also issued ASU 2021-01, Reference Rate Reform (Topic 848):

Scope, which refined the scope for certain optional expedients and exceptions for contract modifications and hedge accounting to apply to derivative contracts and certain hedging relationships affected by the discounting transition.

Entities may apply the provisions as of the beginning of the reporting period when the election is made and are available until December 31, 2024.

The Company is currently evaluating the effect that this standard will have on the consolidated results of operations and financial position.

NOTE 2 – ACQUISITIONS

Town and Country Financial Corporation

On February 1, 2023, HBT Financial acquired 100 % of the issued and outstanding common stock of Town and Country Financial Corporation (“Town and Country”), the holding company for Town and Country Bank, pursuant to an Agreement and Plan of Merger dated August 23, 2023.

Under the Agreement and Plan of Merger, Town and Country merged with and into HBT Financial, with HBT Financial as the surviving entity, on February 1, 2023, immediately followed by merger of Town and Country Bank with and into Heartland Bank, with Heartland Bank as the surviving entity.

At the effective time of the merger, each share of Town and Country was converted into the right to receive, subject to the election and proration procedures as provided in the Merger Agreement, one of the following:

(i) 1.9010 shares of HBT Financial’s common stock for each share of Town and Country, or (ii) $ 35.66 per share in cash, or (iii) a combination of cash and HBT Financial common stock.

Total consideration consisted of 3,378,600 shares of HBT Financial’s common stock and $ 38.0 million in cash.

In lieu of fractional shares, holders of Town and Country common stock will receive cash.

Based upon the closing price of HBT Financial common stock of $ 21.12 on February 1, 2023, the aggregate transaction value was approximately $ 109.4 million.

This transaction will be accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged was recorded at estimated fair values on the date of acquisition.

Fair value assessments are incomplete as of the filing date of this Form 10-K.

Fair values are subject to refinement for up to one year after the closing date of February 1, 2023.

This acquisition is a subsequent event and the financial results of Town and Country are not recognized in this Form 10-K.

The acquisition of Town and Country further enhanced HBT Financial’s footprint in Central Illinois as well as expanding our footprint into metro-east St.

During the year ended December 31, 2022, HBT Financial incurred $ 1.1 million in pre-tax acquisition expenses related to the planned acquisition of Town and Country, comprised of professional fees and data processing expense.

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – ACQUISITIONS

NXT Bancorporation, Inc.

On October 1, 2021, HBT Financial acquired 100 % of the outstanding common stock of NXT Bancorporation, Inc.

(“NXT”), and its wholly-owned subsidiary NXT Bank, pursuant to an Agreement and Plan of Merger dated June 7, 2021.

On October 1, 2021, HBT Financial acquired 100 % of the issued and outstanding common stock of NXT Bancorporation, Inc.

(“NXT”), the holding company for NXT Bank, pursuant to an Agreement and Plan of Merger dated June 7, 2021.

Under the Agreement and Plan of Merger, NXT merged with and into HBT Financial, with HBT Financial as the surviving entity, on October 1, 2021.

1 unchanged sentence

At the effective time of the merger, each share of NXT was converted into the right to receive 67.6783 shares of HBT Financial common stock, cash in lieu of fractional shares, and $ 400 in cash.

There were 1,799,016 shares of HBT Financial common stock issued at the effective time of the acquisition with a market value of $ 29,270,000 , based on the closing stock price of $ 16.27 on October 1, 2021.

There were 1,799,016 shares of HBT Financial common stock issued at the effective time of the acquisition with an aggregate market value of $ 29.3 million, based on the closing stock price of $ 16.27 on October 1, 2021.

This transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged was recorded at estimated fair values on the date of acquisition.

Goodwill of $ 5,702,000 was recorded in the acquisition, which reflects expected synergies from combining the operations of HBT Financial and NXT, and is nondeductible for tax purposes.

The acquisition of NXT provides an opportunity to utilize Heartland Bank’s existing excess liquidity to replace NXT Bank’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 Bank customer relationships.

During the year ended December 31, 2021, the HBT Financial incurred $ 1,416,000 in pre-tax acquisition expenses related to the acquisition of NXT, comprised primarily of professional fees and data processing expense.

Goodwill of $ 5.7 million was recorded in the acquisition, which reflects expected synergies from combining the operations of HBT Financial and NXT, and is nondeductible for tax purposes.

The acquisition of NXT provided an opportunity to utilize Heartland Bank’s excess liquidity at the time of acquisition to replace NXT Bank’s higher-cost funding.

Additionally, Heartland Bank’s broader range of products and services, as well as a greater ability to meet larger borrowing needs, has provided an opportunity to expand NXT Bank’s customer relationships.

During the year ended December 31, 2021, HBT Financial incurred $ 1.4 million in pre-tax acquisition expenses related to the acquisition of NXT, comprised primarily of professional fees and data processing expense.

These expenses are reflected in noninterest expense on the consolidated statements of income.

There were no acquisition expenses related to the acquisition of NXT during the year ended December 31, 2022.

HBT FINANCIAL, INC.

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Earnings per share - diluted

NOTE 3 – RESTRICTED CASH AND DUE FROM BANKS

There was no reserve requirement by the Federal Reserve Bank as of December 31, 2021 and 2020.

NOTE 4 – SECURITIES

The carrying balances of the securities were as follows:

(dollars in thousands)

Debt securities available-for-sale

Debt securities held-to-maturity

Equity securities with readily determinable fair value

Equity securities with no readily determinable fair value

Total securities

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

There were no sales of securities during the years ended December 31, 2021, 2020, and 2019.

Gains (losses) on securities were as follows during the years ended December 31:

Year Ended December 31,

(dollars in thousands)

Net realized gains (losses) on sales

Net unrealized gains (losses) on equity securities:

Readily determinable fair value

No readily determinable fair value

Gains (losses) on securities

The $ 165,000 unrealized loss on equity securities with no readily determinable fair value during the year ended December 31, 2019 reflects a downward adjustment based on observable price changes of an identical investment.

On June 30, 2021 and March 31, 2021, the Company transferred certain debt securities from the available-for-sale category to the held-to-maturity category in order to better reflect the revised intentions of the Company due to possible market volatility, resulting from a potential rise in interest rates.

The following is a summary of the amortized cost and fair value of securities transferred to the held-to-maturity category:

June 30, 2021

March 31, 2021

(dollars in thousands)

government agency

Mortgage-backed:

Agency residential

Agency commercial

The debt securities were transferred between categories at fair value, with the transfer date fair value becoming the new amortized cost for each security transferred.

The unrealized gain (loss), net of tax, at the date of transfer remains a component of accumulated other comprehensive income, but will be amortized over the remaining life of the debt securities as an adjustment of yield in a manner consistent with amortization of any premium or discount.

As a result, the amortization of an unrealized gain (loss) reported in accumulated other comprehensive income will offset or mitigate the effect on interest income of the amortization of the premium or discount for that held-to-maturity debt security.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SECURITIES

Debt Securities

24 unchanged sentences

Held-to-maturity:

government agency

Mortgage-backed:

6 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2021 and 2020, the Company had securities with a carrying value of $ 353,338,000 and $ 308,064,000 , respectively, which were pledged to secure public and trust deposits, securities sold under agreements to repurchase, and for other purposes required or permitted by law.

The Company has no direct exposure to the State of Illinois, but approximately 46 % of the obligations of local municipalities portfolio consists of securities issued by municipalities located in Illinois as of December 31, 2021.

On March 31, 2022, June 30, 2021 and March 31, 2021, the Company transferred certain debt securities from the available-for-sale category to the held-to-maturity category in order to better reflect the revised intentions of the Company due to possible market volatility, resulting from a potential rise in interest rates.

The following is a summary of the amortized cost and fair value of securities transferred to the held-to-maturity category:

March 31, 2022

June 30, 2021

March 31, 2021

(dollars in thousands)

government agency

Mortgage-backed:

Agency residential

Agency commercial

The debt securities were transferred between categories at fair value, with the transfer date fair value becoming the new amortized cost for each security transferred.

The unrealized gain (loss), net of tax, at the date of transfer remains a component of accumulated other comprehensive income (loss), but will be amortized over the remaining life of the debt securities as an adjustment of yield in a manner consistent with amortization of any premium or discount.

As a result, the amortization of an unrealized gain (loss) reported in accumulated other comprehensive income (loss) will offset or mitigate the effect on interest income of the amortization of the premium or discount for that held-to-maturity debt security.

As of December 31, 2022 and 2021, the Company had securities with a carrying value of $ 332.6 million and $ 353.3 million, respectively, which were pledged to secure public and trust deposits, securities sold under agreements to repurchase, and for other purposes required or permitted by law.

The Company has no direct exposure to the State of Illinois, but approximately 49 % of the municipal portfolio consists of securities issued by municipalities located in Illinois as of December 31, 2022.

Approximately 81 % of such securities were general obligation issues as of December 31, 2022.

45 unchanged sentences

Held-to-maturity:

government agency

Mortgage-backed:

Agency residential

Agency commercial

1 unchanged sentence

Total debt securities

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2022, there were 261 securities in an unrealized loss position for a period of twelve months or more, and 519 securities in an unrealized loss position for a period of less than twelve months.

2 unchanged sentences

Management believes that all declines in value of these securities are deemed to be temporary.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

There were no sales of debt securities during the years ended December 31, 2022, 2021, and 2020.

Equity Securities

Equity securities with readily determinable fair values are measured at fair value with changes in fair value recognized in unrealized gains (losses) on equity securities on the consolidated statements of income.

The Company has elected to measure equity securities with no readily determinable fair value at cost minus impairment, if any, plus or minus changes resulting from observable price changes for identical or similar securities of the same issuer.

2 unchanged sentences

(dollars in thousands)

Cumulative net unrealized gains (losses)

Cumulative net unrealized losses

Carrying value

3 unchanged sentences

Carrying value

As of December 31, 2021 and 2020, the cumulative net unrealized losses on equity securities with no readily determinable fair value reflects downward adjustments based on observable price changes of an identical investment in a prior period.

As of December 31, 2022 and 2021, the cumulative net unrealized losses on equity securities with no readily determinable fair value reflect downward adjustments based on observable price changes of an identical investment.

There have been no impairments or upward adjustments based on observable price changes to equity securities with no readily determinable fair value.

There were no sales of equity securities during the years ended December 31, 2022, 2021, and 2020.

Unrealized gains (losses) on equity securities were as follows during the years ended December 31:

Year Ended December 31,

(dollars in thousands)

Readily determinable fair value

No readily determinable fair value

Unrealized gains (losses) on equity securities

HBT FINANCIAL, INC.

3 unchanged sentences

Major categories of loans as of December 31, 2022 and 2021 are summarized as follows:

December 31, 2022

December 31, 2021

(dollars in thousands)

139 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables present the recorded investment in loans by category based on current payment and accrual status as of December 31:

The following tables present loans by category based on current payment and accrual status as of December 31:

Accruing Interest

40 unchanged sentences

Municipal, consumer, and other

There were no troubled debt restructurings during the year ended December 31, 2021.

The following tables present the financial effect of troubled debt restructurings for the years ended December 31, 2020 and 2019:

Recorded Investment

Year Ended December 31, 2020

Pre-Modification

Post-Modification

(dollars in thousands)

Commercial real estate - owner occupied

There were no troubled debt restructurings during the years ended December 31, 2022 and 2021.

The following table presents the financial effect of troubled debt restructurings for the year ended December 31, 2020:

Recorded Investment

3 unchanged sentences

(dollars in thousands)

Commercial and industrial

Agricultural and farmland

Commercial real estate - owner occupied

One-to-four family residential

During the years ended December 31, 2020 and 2019, all troubled debt restructurings were the result of a payment concession.

During the year ended December 31, 2020, the troubled debt restructuring was the result of a payment concession.

As of December 31, 2022 and 2021, there were no troubled debt restructurings which had subsequent payment defaults within 12 months of the modification.

For purposes of this disclosure, the Company considers “default” to mean 90 days or more past due as to interest or principal or were on nonaccrual status subsequent to restructuring.

As of December 31, 2022 and 2021, the Company had $ 3.0 million and $ 3.5 million of troubled debt restructurings, respectively.

Restructured loans are evaluated for impairment quarterly as part of the Company’s determination of the allowance for loan losses.

There were no material commitments to lend additional funds to debtors owing loans whose terms have been modified in troubled debt restructurings.

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2021 and 2020, the Company had $ 3,512,000 and $ 8,950,000 of troubled debt restructurings, respectively.

Restructured loans are evaluated for impairment quarterly as part of the Company’s determination of the allowance for loan losses.

There were no material commitments to lend additional funds to debtors owing receivables whose terms have been modified in troubled debt restructurings.

The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), along with a joint statement issued by banking regulatory agencies, provided that short-term loan payment modifications to borrowers experiencing financial hardship due to COVID-19 made prior to January 1, 2022 generally do not need to be accounted for as a troubled debt restructuring.

As of December 31, 2021 and 2020, the Company had loans totaling $ 204,000 and $ 27,986,000 that were granted a payment modification due to a COVID-19 related financial hardship and have not returned to regular payments.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), along with a joint statement issued by banking regulatory agencies, provided that short-term loan payment modifications made prior to December 31, 2021 to borrowers experiencing financial hardship due to the COVID-19 pandemic generally do not need to be accounted for as a troubled debt restructuring.

As of December 31, 2022, the Company had no loans that were granted a payment modification due to a COVID-19 related financial hardship which had not returned to regular payments.

As of December 31, 2021, the Company had $ 0.2 million of loans that were granted a payment modification due to a COVID-19 related financial hardship and had not returned to regular payments.

Substantially all modifications were in the form of a three-month interest-only period or a one-month payment deferral.

Some borrowers have received more than one loan payment modification.

Some borrowers received more than one loan payment modification.

Changes in the accretable yield for loans acquired with deteriorated credit quality were as follows for the years ended December 31:

6 unchanged sentences

NOTE 5 – LOAN SERVICING

Mortgage loans serviced for others, not included in the accompanying consolidated balance sheets, amounted to $ 1,040,809,000 and $ 1,090,219,000 as of December 31, 2021 and 2020, respectively.

Mortgage loans serviced for others, not included in the accompanying consolidated balance sheets, amounted to $ 955.8 million and $ 1.04 billion as of December 31, 2022 and 2021, respectively.

Activity in mortgage servicing rights is as follows for years ended December 31:

28 unchanged sentences

During 2021, six branch locations were closed or consolidated as part of a branch rationalization plan.

The related bank premises were transferred to held for sale based on the lower of the carrying value or fair value, less estimated costs to sell.

As of December 31, 2021 and 2020, bank premises held for sale totaled $ 1,452,000 and $ 121,000 , respectively.

During the year ended December 31, 2021, there were impairment losses of $ 661,000 on bank premises held for sale included in gains (losses) on other assets in the consolidated statements of income.

The related bank premises were transferred to held for sale at the lower of the carrying value or fair value, less estimated costs to sell.

As of December 31, 2022 and 2021, bank premises held for sale totaled $ 0.2 million and $ 1.5 million, respectively.

During the years ended December 31, 2022 and 2021, there were impairment losses of $ 0.1 million and $ 0.7 million, respectively, on bank premises held for sale included in gains (losses) on other assets in the consolidated statements of income.

During the year ended December 31, 2020, there were no impairment losses on bank premises held for sale.

During the year ended December 31, 2019, there were impairment losses of $ 37,000 on bank premises held for sale included in gains (losses) on other assets in the consolidated statements of income

NOTE 7 – FORECLOSED ASSETS

7 unchanged sentences

Sales through loan origination

Net gain (loss) on sales

Net gain on sales

Direct write-downs

7 unchanged sentences

Direct write-downs

Net gain (loss) on sales

Net gain on sales

Guarantee reimbursements

Gain on settlement

Gains (losses) on foreclosed assets

The carrying value of foreclosed one-to-four family residential real estate property as of December 31, 2021 and 2020, was $ 169,000 and $ 868,000 , respectively.

As of December 31, 2021, there were 4 one-to-four family residential real estate loans in the process of foreclosure totaling approximately $ 55,000 .

As of December 31, 2020, there were 11 residential real estate loans in the process of foreclosure totaling approximately $ 1,526,000 .

The carrying value of foreclosed one-to-four family residential real estate property as of December 31, 2022 and 2021, was $ 20 thousand and $ 0.2 million, respectively.

As of December 31, 2022, there were 4 one-to-four family residential real estate loans in the process of foreclosure totaling approximately $ 0.2 million.

As of December 31, 2021, there were 4 residential real estate loans in the process of foreclosure totaling approximately $ 0.1 million.

NOTE 8 – GOODWILL AND OTHER INTANGIBLE ASSETS

11 unchanged sentences

NOTE 9 – DEPOSITS

The Company’s deposits are summarized below as December 31:

The Company’s deposits are summarized below as of December 31:

December 31, 2022

6 unchanged sentences

Total deposits

Money market deposits include $ 4,238,000 of brokered deposits as of December 31, 2021.

Money market deposits also include $ 6,895,000 and $ 6,489,000 of reciprocal transaction deposits as of December 31, 2021 and 2020, respectively.

Time deposits include $ 850,000 and $ 3,164,000 of reciprocal time deposits as of December 31, 2021 and 2020, respectively.

The aggregate amounts of time deposits in denominations of $250,000 or more amounted to $ 59,512,000 and $ 26,687,000 as of December 31, 2021 and 2020, respectively.

The aggregate amounts of time deposits in denominations of $100,000 or more amounted to $ 133,067,000 and $ 99,649,000 as of December 31, 2021 and 2020, respectively.

There were no brokered deposits as of December 31, 2022.

Money market deposits include $ 4.2 million of brokered deposits as of December 31, 2021.

Money market deposits also include $ 1.7 million and $ 6.9 million of reciprocal transaction deposits as of December 31, 2022 and 2021, respectively.

Time deposits include $ 1.6 million and $ 0.9 million of reciprocal time deposits as of December 31, 2022 and 2021, respectively.

The aggregate amounts of time deposits in denominations of $250 thousand or more amounted to $ 27.2 million and $ 59.5 million as of December 31, 2022 and 2021, respectively.

The aggregate amounts of time deposits in denominations of $100 thousand or more amounted to $ 92.6 million and $ 133.1 million as of December 31, 2022 and 2021, respectively.

At December 31, 2022, the scheduled maturities of time deposits are as follows (dollars in thousands):

20 unchanged sentences

NOTE 11 – BORROWINGS

There were no Federal Home Loan Bank of Chicago (FHLB) borrowings outstanding as of December 31, 2021 and 2020.

Available borrowings from the FHLB are secured by FHLB stock held by the Company and pledged security in the form of qualifying loans.

The total amount of loans pledged as of December 31, 2021 and 2020 was $ 566,996,000 and $ 493,690,000 , respectively.

As of December 31, 2021 and 2020, loans pledged also served as collateral for credit exposure of approximately $ 355,000 associated with the Bank’s participation in the FHLB’s Mortgage Partnership Finance Program.

As of December 31, 2022, Federal Home Loan Bank of Chicago (“FHLB”) borrowings totaled $ 160.0 million and consisted of short-term borrowings which had a weighted average rate of 4.29 % and mature within 30 days .

There were no FHLB borrowings outstanding as of December 31, 2021.

Borrowings from the FHLB are secured by FHLB stock held by the Company and pledged security in the form of qualifying loans.

The loans pledged as of December 31, 2022 and 2021 totaled $ 892.1 million and $ 567.0 million, respectively.

As of December 31, 2022 and 2021, loans pledged also served as collateral for credit exposure of $ 0.3 million and $ 0.4 million, respectively, associated with the Bank’s participation in the FHLB’s Mortgage Partnership Finance Program.

The Bank also had available borrowings through the discount window of the Federal Reserve Bank of Chicago (“FRB”).

Available borrowings are based on the collateral pledged.

As of December 31, 2021, there was no collateral pledged.

As of December 31, 2020, the carrying value of securities pledged amounted to $ 499,000 .

There was no outstanding balance from the FRB discount window as of December 31, 2021 and 2020.

As of December 31, 2022 and 2021, there was no collateral pledged and there was no outstanding balance.

NOTE 12 – SUBORDINATED NOTES

On September 3, 2020, the Company issued $ 40,000,000 of fixed-to-floating rate subordinated notes that mature on September 15, 2030.

On September 3, 2020, the Company issued $ 40.0 million of fixed-to-floating rate subordinated notes that mature on September 15, 2030.

The subordinated notes, which are unsecured obligations of the Company, bear a fixed interest rate of 4.50 % for the first five years after issuance and thereafter bear interest at a floating rate equal to three-month SOFR, as determined on the Floating Interest Determination Date, plus 4.37 %.

2 unchanged sentences

If the subordinated notes are redeemed before they mature, the redemption price will be the principal amount plus any accrued but unpaid interest.

The transaction resulted in debt issuance costs of $ 789,000 which will be amortized over 10 years .

As of December 31, 2021, 100 % of the subordinated notes qualified as Tier 2 capital.

The transaction resulted in debt issuance costs of $ 0.8 million which will be amortized over 10 years .

As of December 31, 2022 and 2021, 100 % of the subordinated notes qualified as Tier 2 capital.

The face value and carrying value of the subordinated notes are summarized below:

30 unchanged sentences

Total junior subordinated debentures, at carrying value

The interest rates on the subordinated debentures are variable, reset quarterly, and are equal to the three-month LIBOR, as determined on the LIBOR Determination Date immediately preceding the Distribution Payment Date specific to each junior subordinated debenture, plus a fixed percentage.

The interest rates on the junior subordinated debentures are variable, reset quarterly, and are equal to the three-month LIBOR, as determined on the LIBOR Determination Date immediately preceding the Distribution Payment Date specific to each junior subordinated debenture, plus a fixed percentage.

The interest rates and maturities of the junior subordinated debentures are summarized as follows:

27 unchanged sentences

Derivative financial instruments are negotiated contracts entered into by two issuing counterparties containing specific agreement terms, including the underlying instrument, amount, exercise price, and maturities.

The derivatives accounting guidance requires that the Company recognize all derivative financial instruments as either assets or liabilities at fair value in the consolidated balance sheets.

The derivatives accounting guidance requires that the Company to recognize all derivative financial instruments as either assets or liabilities at fair value in the consolidated balance sheets.

The Company may utilize interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position.

9 unchanged sentences

(dollars in thousands)

Fair value recorded in other assets

Fair value recorded in other liabilities

As of December 31, 2022, the interest rate swap agreements designated as cash flow hedges had contractual maturities between 2024 and 2025.

As of December 31, 2021 and 2020, the Company had cash pledged and held on deposit at counterparties of $ 780,000 and $ 1,630,000 , respectively.

During the three months ended March 31, 2019, the Company had an interest rate swap contract with a notional amount of $ 10,000,000 designated as a cash flow hedge on variable-rate loans.

As of December 31, 2022, counterparties had cash pledged and held on deposit by the Company of $ 0.6 million.

As of December 31, 2021, the Company had cash pledged and held on deposit at counterparties of $ 0.8 million.

In 2019, the Company had an interest rate swap contract with a notional amount of $ 10.0 million designated as a cash flow hedge on variable-rate loans.

Beginning April 1, 2019, this hedging relationship was no longer considered highly effective, and the Company discontinued hedge accounting.

5 unchanged sentences

reclassified from accumulated

comprehensive income to income

other comprehensive income

comprehensive income (loss) to income

other comprehensive income (loss)

Year Ended December 31,

8 unchanged sentences

The Company may offer interest rate swap agreements to its commercial borrowers in connection with their risk management needs.

The Company manages the risk associated with these contracts by entering into an equal and offsetting derivative with a third-party financial institution.

While these interest rate swap agreements generally worked together as an economic interest rate hedge, the Company did not designate them for hedge accounting treatment.

The Company manages the interest rate risk associated with these contracts by entering into an equal and offsetting derivative with a third-party financial institution.

While these interest rate swap agreements generally work together as an economic interest rate hedge, the Company did not designate them for hedge accounting treatment.

Consequently, changes in fair value of the corresponding derivative financial asset or liability were recorded as either a charge or credit to current earnings during the period in which the changes occurred.

12 unchanged sentences

As of December 31, 2022, the interest rate swap agreements not designated as hedging instruments had contractual maturities between 2023 and 2042.

As of December 31, 2021 and 2020, the Company had $ 7,483,000 and $ 15,490,000 , respectively, of debt securities pledged and held in safekeeping at the financial institution counterparty.

For the years ended December 31, 2021, 2020 and 2019, the effect of interest rate contracts not designated as hedging instruments recognized in other noninterest income on the consolidated statements of income are summarized as follows:

As of December 31, 2021, the Company had $ 7.5 million of debt securities pledged and held in safekeeping at the financial institution counterparty.

The effect of interest rate contracts not designated as hedging instruments recognized in other noninterest income on the consolidated statements of income are summarized as follows for the years ended December 31:

Year Ended December 31,

16 unchanged sentences

Other comprehensive income (loss), before tax

Income tax (benefit) expense

Income tax expense (benefit)

Other comprehensive income (loss), after tax

Balance, December 31, 2020

Other comprehensive income (loss) before reclassifications

Transfer from available-for-sale to held-to-maturity

Other comprehensive (loss) income before reclassifications

Reclassifications

Other comprehensive income (loss), before tax

Income tax expense (benefit)

Other comprehensive income (loss), after tax

Other comprehensive (loss) income, before tax

Income tax (benefit) expense

Other comprehensive (loss) income, after tax

Balance, December 31, 2021

6 unchanged sentences

Balance, December 31, 2022

The amounts reclassified from accumulated other comprehensive income (loss) for unrealized gains (losses) on debt securities available-for-sale are included in gains (losses) on securities in the accompanying consolidated statements of income.

The amounts reclassified from accumulated other comprehensive income (loss) for unrealized gains on debt securities held-to-maturity are included in securities interest income in the accompanying consolidated statements of income.

The amounts reclassified from accumulated other comprehensive income (loss) for the fair value of derivative instruments represent net interest payments received or made on derivatives designated as cash flow hedges.

Reclassifications from accumulated other comprehensive income (loss) for unrealized gains (losses) on debt securities available-for-sale are included in gains (losses) on sales of securities in the accompanying consolidated statements of income.

Reclassifications from accumulated other comprehensive income (loss) for unrealized gains (losses) on debt securities held-to-maturity are included in securities interest income in the accompanying consolidated statements of income.

Reclassifications from accumulated other comprehensive income (loss) for the fair value of derivative financial instruments represent net interest payments received or made on derivatives designated as cash flow hedges.

See Note 14 for additional information.

3 unchanged sentences

NOTE 16 – INCOME TAXES

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 income tax rate.

In connection with the conversion of tax status, the Company recognized a deferred tax asset of $ 534,000 and an income tax benefit of $ 534,000 .

In recording the impact of the conversion to a C Corporation, the Company recorded a deferred income tax expense of $ 2,741,000 related to the unrealized gains (losses) on debt securities and derivatives, through the income statement in accordance with ASC 740-20-45-8;

therefore, the amount shown in other comprehensive income has not been reduced by the above expense.

This difference will remain in accumulated other comprehensive income until the underlying securities are sold or mature and the underlying cash flow hedging relationships terminate in accordance with the portfolio approach allowed under ASC 740.

Allocation of income tax expense between current and deferred portions for the years ended December 31 is as follows:

2 unchanged sentences

Total current

Change in tax status

Total deferred

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State taxes, net of federal benefit

Change in tax status

Income tax expense

20 unchanged sentences

Prepaid assets

Net unrealized gains on debt securities

Total deferred tax liabilities

Net deferred tax asset (liability)

Net deferred tax asset

NOTE 17 – EARNINGS PER SHARE

3 unchanged sentences

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.

Diluted earnings per share is computed using the treasury stock method and reflects the potential dilution from the Company’s outstanding restricted stock units.

Diluted earnings per share is computed using the treasury stock method and reflects the potential dilution from the Company’s outstanding restricted stock units and performance restricted stock units.

HBT FINANCIAL, INC.

16 unchanged sentences

As of December 31, 2022 and 2021, there was no remaining deferred compensation liability for the SERP.

During the years ended December 31, 2020 and 2019, the Company recognized deferred compensation expense for the SERP of $ 1,660,000 and $ 4,291,000 , respectively.

During the year ended December 31, 2020, the Company recognized deferred compensation expense for the SERP of $ 1.7 million.

NOTE 19 – EMPLOYEE BENEFIT PLANS

Profit Sharing Plan

During the years ended December 31, 2021, 2020, and 2019, the Company’s profit sharing plan contribution expense amounted to $ 1,269,000 , $ 1,118,000 , and $ 1,223,000 , respectively.

During the years ended December 31, 2022, 2021, and 2020, the Company’s profit sharing plan contribution expense amounted to $ 1.3 million, $ 1.3 million, and $ 1.1 million, respectively.

The Company’s contributions vest to employees ratably over a six-year period.

1 unchanged sentence

The Company is partially self-insured for medical claims filed by its employees.

As of December 31, 2021 and 2020, the Company’s maximum aggregate liability under the plan was $ 6,588,000 and $ 6,287,000 , respectively.

During the years ended December 31, 2021, 2020, and 2019, medical benefits expense amounted to $ 4,161,000 , $ 4,840,000 , and $ 3,734,000 , respectively.

As of December 31, 2022 and 2021, the Company’s maximum aggregate liability under the plan was $ 6.4 million and $ 6.6 million, respectively.

During the years ended December 31, 2022, 2021, and 2020, medical benefits expense amounted to $ 4.9 million, $ 4.2 million, and $ 4.8 million, respectively.

HBT FINANCIAL, INC.

2 unchanged sentences

NOTE 20 – STOCK-BASED COMPENSATION PLANS

The Company has adopted the HBT Financial, Inc.

Omnibus Incentive Plan (the “Omnibus Incentive Plan”).

The Company adopted the HBT Financial, Inc.

Omnibus Incentive Plan (the “Omnibus Incentive Plan”) in 2019.

The Omnibus Incentive Plan provides for grants of (i) stock options, (ii) stock appreciation rights, (iii) restricted shares, (iv) restricted stock units, (v) performance awards, (vi) other share-based awards and (vii) other cash-based awards to eligible employees, non-employee directors and consultants of the Company.

8 unchanged sentences

Total stock-based compensation expense

In February 2022, all outstanding restricted stock unit and performance restricted stock unit agreements were modified to address treatment upon retirement.

In the event of retirement, and if the retirement eligibility requirements are met, then 100 % of unvested restricted stock units and performance restricted stock units will continue to vest in accordance with the originally established vesting schedule.

The retirement modification resulted in the acceleration of $ 0.6 million of expense, although total compensation costs related to the modified agreements remained the same.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units

A restricted stock unit grants a participant the right to receive one share of common stock, following the completion of the requisite service period.

A restricted stock unit grants a participant the right to receive one share of the Company’s common stock, following the completion of the requisite service period.

Restricted stock units are classified as equity.

1 unchanged sentence

Dividend equivalents on restricted stock units, which are either accrued until vested or paid at the same time as dividends on common stock, are classified as dividends charged to retained earnings.

During the years ended December 31, 2021 and 2020, the total grant date fair value of the restricted stock units granted was $ 948,000 and $ 1,399,000 , respectively, based on the grant date closing prices.

The total intrinsic value of restricted stock units that vested during the year ended December 31, 2021 was $ 305,000 .

During the years ended December 31, 2022, 2021, and 2020, the total grant date fair value of the restricted stock units granted was $ 1.3 million, $ 0.9 million, and $ 1.4 million, respectively, based on the grant date closing prices.

The total intrinsic value of restricted stock units that vested during the year ended December 31, 2022 and 2021 were $ 0.7 million and $ 0.3 million, respectively.

The following is a summary of outstanding restricted stock unit activity:

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Balance, December 31, 2022

As of December 31, 2022, unrecognized compensation cost related to non-vested restricted stock units was $ 1.2 million.

This cost is expected to be recognized over the weighted average remaining contractual term of 2.0 years.

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2021, unrecognized compensation cost related to non-vested restricted stock units was $ 1,339,000 .

This cost is expected to be recognized over the weighted average remaining contractual term of 2.3 years

Performance Restricted Stock Units

A performance restricted stock unit is similar to a restricted stock unit, except that the number of shares of common stock awarded is based on a performance condition and the completion of the requisite service period.

The number of shares of common stock that may be earned ranges from 0 % to 150 % of the number of performance restricted stock units granted.

A performance restricted stock unit is similar to a restricted stock unit, except that the number of shares of the Company’s common stock awarded is based on a performance condition and the completion of the requisite service period.

The number of shares of the Company’s common stock that may be earned ranges from 0 % to 150 % of the number of performance restricted stock units granted.

Performance restricted stock units are classified as equity.

3 unchanged sentences

Dividend equivalents on performance restricted stock units, which are accrued until vested, are classified as dividends charged to retained earnings.

During the year ended December 31, 2021, the total grant date fair value of the performance restricted stock units granted was $ 603,000 , based on the grant date closing prices.

During the years ended December 31, 2022 and 2021, the total fair value of the performance restricted stock units granted was $ 0.5 million and $ 0.6 million, respectively, based on the grant date closing prices and an assessment of the probable outcome of the performance condition on the grant date.

Performance conditions are based on either the average annual return on average tangible common equity during the performance period or average loan balances for a specified geographic region during the performance period, with downward adjustments if certain credit quality criteria are not maintained.

4 unchanged sentences

Balance, December 31, 2022

As of December 31, 2021, unrecognized compensation cost related to non-vested performance restricted stock units was $ 579,000 , based on the current assessment of the probable outcome of the performance condition.

This cost is expected to be recognized over the weighted average remaining contractual term of 2.5 years.

As of December 31, 2022, unrecognized compensation cost related to non-vested performance restricted stock units was $ 0.3 million, based on the current assessment of the probable outcome of the performance conditions.

This cost is expected to be recognized over the weighted average remaining service period of 1.6 years.

HBT FINANCIAL, INC.

3 unchanged sentences

A stock appreciation right grants a participant the right to receive an amount of cash, the value of which equals the appreciation in the Company’s stock price between the grant date and the exercise date.

Stock appreciation rights units are classified as liabilities.

Prior to becoming a public entity, the liability was based on the intrinsic value of the stock appreciation rights, calculated using the grant date assigned value and an independent appraisal of the Company’s stock price that was subject to approval by the Board of Directors.

Since becoming a public entity on October 11, 2019, the liability was based on an option-pricing model used to estimate the fair value of the stock appreciation rights.

Compensation cost for unvested stock appreciation rights is recognized on a straight line basis over the vesting period of the entire award.

The unvested stock appreciation rights vest in four equal annual installments beginning on the first anniversary of the grant date.

The following is a summary of outstanding stock appreciation rights activity:

Stock appreciation rights are classified as liabilities.

The liability is based on an option-pricing model used to estimate the fair value of the stock appreciation rights.

Compensation cost for non-vested stock appreciation rights is recognized on a straight line basis over the service period of the entire award.

The non-vested stock appreciation rights vest in four equal annual installments beginning on the first anniversary of the grant date.

The following is a summary of stock appreciation rights activity:

Assigned Value

8 unchanged sentences

Contractual Term

As of December 31, 2021, unrecognized compensation cost related to non-vested stock appreciation rights was $ 56,000 .

As of December 31, 2022, unrecognized compensation cost related to non-vested stock appreciation rights was $ 28 thousand.

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2021 and 2020, the liability recorded for outstanding stock appreciation rights was $ 485,000 and $ 272,000 , respectively.

As of December 31, 2022 and 2021, the liability recorded for outstanding stock appreciation rights was $ 0.5 million and $ 0.5 million, respectively.

The Company used an option pricing model to value the stock appreciation rights, using the assumptions in the following table.

6 unchanged sentences

Expected dividend yield

As of December 31, 2021, the liability recorded for previously exercised stock appreciation rights was $ 797,000 , which will be paid in three remaining equal annual installments.

As of December 31, 2020, the liability recorded for previously exercised units was $ 1,087,000 .

As of December 31, 2022, the liability recorded for previously exercised stock appreciation rights was $ 0.5 million, which will be paid in two remaining annual installments in 2023 and 2024.

As of December 31, 2021, the liability recorded for previously exercised stock appreciation rights was $ 0.8 million.

NOTE 21 – REGULATORY CAPITAL

94 unchanged sentences

However, when prices from independent sources vary, cannot be obtained or cannot be corroborated, a security is generally classified as Level 3.

The change in fair value of debt securities available-for-sale is recorded through an adjustment to the consolidated statement of comprehensive income.

The change in fair value of equity securities with readily determinable fair values is recorded through an adjustment to the consolidated statement of income.

The change in fair value of debt securities available-for-sale is recorded through an adjustment to the consolidated statements of comprehensive income (loss).

The change in fair value of equity securities with readily determinable fair values is recorded through an adjustment to the consolidated statements of income.

Derivative Financial Instruments

1 unchanged sentence

Based on the inputs used, the derivative financial instruments subjected to recurring fair value adjustments are classified as Level 2.

For derivative financial instruments designated as a hedging instruments, the change in fair value is recorded through an adjustment to the consolidated statement of comprehensive income.

For derivative financial instruments not designated as a hedging instruments, the change in fair value is recorded through an adjustment to the consolidated statement of income.

For derivative financial instruments designated as hedging instruments, the change in fair value is recorded through an adjustment to the consolidated statements of comprehensive income (loss).

For derivative financial instruments not designated as hedging instruments, the change in fair value is recorded through an adjustment to the consolidated statement of income.

Mortgage Servicing Rights

3 unchanged sentences

Key economic assumptions used in measuring the fair value of mortgage servicing rights include, but are not limited to, prepayment speeds and discount rates.

Due to the nature of the valuation inputs, mortgage servicing rights are classified in Level 3 of the fair value hierarchy.

The change in fair value is recorded through an adjustment to the consolidated statement of income.

Due to the nature of the valuation inputs, mortgage servicing rights are classified as Level 3.

The change in fair value is recorded through an adjustment to the consolidated statements of income.

HBT FINANCIAL, INC.

47 unchanged sentences

Collateral-dependent Impaired Loans

In accordance with the provisions of the loan impairment guidance, impairment was measured for loans which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement.

The fair value of collateral-dependent impaired loans is estimated based on the fair value of the underlying collateral supporting the loan.

Collateral-dependent impaired loans require classification in the fair value hierarchy.

Impaired loans include loans acquired with deteriorated credit quality.

Collateral values are estimated using Level 3 inputs based on customized discounting criteria.

Collateral values are estimated using Level 3 inputs based on appraisals and other valuation estimates of the underlying collateral and customized discounting criteria.

Bank Premises Held for Sale

49 unchanged sentences

The carrying amounts of these financial instruments approximate their fair values.

Interest-bearing Time Deposits with Banks

The carrying values of interest-bearing time deposits with banks approximate their fair values.

Restricted Stock

2 unchanged sentences

Fair values are estimated for portfolios of loans with similar characteristics.

Loans are segregated by type such as commercial and industrial, agricultural and farmland, commercial real estate - owner occupied, commercial real estate - non-owner occupied, multi-family, construction and land development, one-to-four family residential, and municipal, consumer, and other.

The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for similar maturities.

The fair value analysis also includes other assumptions to estimate fair value, intended to approximate those a market participant would use in an orderly transaction, with adjustments for discount rates, interest rates, liquidity, and credit spreads, as appropriate.

Investments in Unconsolidated Subsidiaries

The fair values of the Company’s investments in unconsolidated subsidiaries are presumed to approximate carrying amounts.

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Investments in Unconsolidated Subsidiaries

The fair values of the Company’s investments in unconsolidated subsidiaries are presumed to approximate carrying amounts.

Time Deposits

48 unchanged sentences

Standby letters of credit

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

Commitments generally have fixed expiration dates or other termination

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

clauses and may require payment of a fee.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

12 unchanged sentences

Legal Contingencies

Various legal claims arise from time to time in the normal course of business which, in the opinion of management, will have no material effect on the Company’s consolidated financial statements.

NOTE 25 – RELATED PARTY TRANSACTIONS

As of December 31, 2021 and 2020, loans to directors, executive officers, principal shareholders and their affiliated entities (related parties) amounted to $ 2,633,000 and $ 3,072,000 , respectively.

These loans were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing for comparable loans with persons not related to us.

Deposits of related parties amounted to $ 4,023,000 and $ 2,596,000 as of December 31, 2021 and 2020, respectively.

In the normal course of business, the Company, or its subsidiaries, are involved in various legal proceedings.

In the opinion of management, any liability resulting from pending proceedings would not be expected to have a material adverse effect on the Company's consolidated financial statements.

PLB Investments LLC, John Kuehner, and A.S.

Palmer Investments LLC v.

Heartland Bank and Trust Company and PNC Bank N.A., In the United States District Court for the Northern District of Illinois, Case No.

1:20-cv-1023 (“Class Action”);

Damian, As Receiver of Today’s Growth Consultant, Inc.

(dba The Income Store) v.

Heartland Bank and Trust Company and PNC Bank N.A., In the United States District Court for the Northern District of Illinois, Case No.

1:20-cv-7819 (“Receiver’s Action”)

The Bank was a defendant in the purported Class Action lawsuit that was filed on February 12, 2020, in the U.S.

District Court for the Northern District of Illinois.

The plaintiffs in the Class Action alleged that the Bank negligently enabled and facilitated a fraudulent, Ponzi-like scheme perpetrated by Today’s Growth Consultant, Inc.

(dba The Income Store) (“TGC”).

Additionally, the Receiver for TGC filed the Receiver’s Action on December 30, 2020, in the U.S.

District Court for the Northern District of Illinois, with similar allegations.

On February 20, 2023, the Bank reached an agreement in principle to settle both the Class Action and Receiver’s Action in which the Bank would make one-time cash payments totaling $ 13.0 million, without admitting fault, to release the Bank from further liability and claims in both the Class Action and Receiver’s Action.

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to the agreement in principle, the parties would settle and dismiss the Class Action and Receiver’s Action and seek the entry of bar orders from the U.S.

District Court for the Northern District of Illinois (the “Court”) prohibiting any continued or future claims against the Bank and its related parties relating to the Class Action and the Receiver’s Action, whether asserted to date or not.

If definitive settlement agreements, including the bar orders described in the preceding sentence, are approved by the Court and are not subject to appeal, the Bank will make one-time cash payments totaling $ 13.0 million.

The agreement in principle is subject to the execution and delivery of definitive settlement agreements reflecting the terms of the agreement in principle, notice to TGC’s investor claimants and final, non-appealable approvals by the Court.

While the Bank believes that the proposed settlements are consistent with the terms of similar settlements that have been approved by other courts and were not successfully appealed, it is possible that the Court may decide not to approve the definitive settlement agreements or that the Seventh Circuit Court of Appeals may decide to accept an appeal thereof.

The proposed settlements do not include any admission of liability or wrongdoing by the Bank, and the Bank expressly denies any liability or wrongdoing with respect to any matter alleged in the Class Action and Receiver’s Action.

The Bank has agreed in principle to the settlements to avoid the cost, risks and distraction of continued litigation.

The Company believes the proposed settlements are in the best interests of the Company and its shareholders.

Accordingly, the Bank recorded a $ 13.0 million accrual related to these matters as of December 31, 2022.

The Bank’s insurer has agreed to reimburse $ 7.4 million of the settlement payment which was recorded as an insurance recovery receivable as of December 31, 2022.

During the fourth quarter and year ended December 31, 2022, the estimated net settlement amount of $ 5.6 million was included in other noninterest expense in the consolidated statements of income.

DeBaere, et al v.

Heartland Bank and Trust Company

The Bank is a defendant in a purported class action lawsuit filed in June 2020, in the Circuit Court of Cook County, Illinois.

The plaintiff, a customer of the Bank, alleges that the Bank breached its contract with the plaintiff by (1) charging multiple insufficient funds fees or overdraft fees on a single customer-initiated transaction, and (2) charging overdraft fees for transactions that were authorized on a positive account balance, but when settled, settled into a negative balance.

Miller, et al v.

State Bank of Lincoln and Heartland Bank and Trust Company

The Bank is a defendant in a purported class action lawsuit filed in May 2020, in the Circuit Court of Logan County, Illinois.

The plaintiff, a customer of State Bank of Lincoln, which previously merged with the Bank, alleges that the Bank breached its contract with the plaintiff by charging multiple insufficient funds fees or overdraft fees on a single customer-initiated transaction.

The Bank intends to vigorously defend in both the DeBaere and Miller cases.

However, the Company believes an unfavorable outcome in each case is probable at this time, as that term is used in assessing loss contingencies.

Accordingly, consistent with the authoritative guidance in the evaluation of contingencies, an accrual has been recorded related to these matters of $ 2.6 million in the aggregate during the fourth quarter and year ended December 31, 2022.

While the amount recorded reflects management’s best estimate as of December 31, 2022, the Company cannot yet offer an opinion on the estimated range of possible loss.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 24 – RELATED PARTY TRANSACTIONS

As of December 31, 2022 and 2021, loans to directors, executive officers, principal shareholders and their affiliated entities (“related parties”) amounted to $ 2.2 million and $ 2.6 million, respectively.

Deposits of related parties amounted to $ 22.0 million and $ 4.0 million as of December 31, 2022 and 2021, respectively.

NOTE 25 – CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS

Following are the condensed financial statements of HBT Financial, Inc.

(Parent only).

Following are the condensed parent company only financial statements of HBT Financial.

Condensed Parent Company Only Balance Sheets

10 unchanged sentences

Total liabilities and stockholders' equity

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Condensed Parent Company Only Statements of Income

26 unchanged sentences

Purchase of securities

Purchase of foreclosed assets from Heartland Bank

Proceeds from sale of foreclosed assets

4 unchanged sentences

Issuance of common stock

Taxes paid related to the vesting of restricted stock units

Repurchase of common stock

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data