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Item 8. Financial Statements and Supplementary Data

2024-03-06 compared with 2023-03-08 · 1128 added, 780 removed, 1161 unchanged (62% of the section changed)

12 unchanged sentences

Report of Independent Registered Public Accounting Firm

Stockholders and the Board of Directors

HBT Financial, Inc.

To the Stockholders and the Board of Directors of HBT Financial, Inc.

Opinion on the Financial Statements

2 unchanged sentences

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Adoption of New Accounting Standard

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for credit losses on financial instruments in 2023 due to the adoption of Accounting Standards Update No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

Basis for Opinion

19 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

(dollars in thousands, except per share data) December 31, 2023 December 31, 2022

Cash and due from banks $ 26,256 $ 18,970

4 unchanged sentences

Debt securities held-to-maturity (fair value of $ 466,496 at 2023 and $ 478,801 at 2022)

521,439 541,600

Equity securities with readily determinable fair value 3,360 3,029

2 unchanged sentences

Loans held for sale 2,318 615

Loans, before allowance for loan losses

Allowance for loan losses

Loans, net of allowance for loan losses

Loans, before allowance for credit losses 3,404,417 2,620,253

Allowance for credit losses ( 40,048 ) ( 25,333 )

Loans, net of allowance for credit losses 3,364,369 2,594,920

Bank owned life insurance 23,905 7,557

2 unchanged sentences

Foreclosed assets 852 3,030

Core deposit intangible assets, net

Goodwill 59,820 29,322

Intangible assets, net 20,682 1,070

Mortgage servicing rights, at fair value 19,001 10,147

1 unchanged sentence

Accrued interest receivable 24,534 19,506

Other assets 55,239 56,444

Total assets $ 5,073,170 $ 4,286,734

LIABILITIES AND STOCKHOLDERS' EQUITY

17 unchanged sentences

shares outstanding of 31,695,828 at 2023 and 28,752,626 at 2022

Surplus 295,877 222,783

Retained earnings 269,051 232,004

1 unchanged sentence

Treasury stock at cost, 1,034,870 shares at 2023 and 555,865 at 2022

( 18,596 ) ( 9,689 )

Total stockholders’ equity 489,496 373,632

5 unchanged sentences

Year Ended December 31,

INTEREST AND DIVIDEND INCOME

(dollars in thousands, except per share data) 2023 2022 2021

INTEREST AND DIVIDEND INCOME

Loans, including fees:

Taxable $ 191,008 $ 120,343 $ 103,900

Federally tax exempt 4,189 3,135 2,384

Taxable 25,962 23,368 16,948

Federally tax exempt 4,225 4,569 4,400

3 unchanged sentences

INTEREST EXPENSE

Deposits 25,135 2,511 2,472

Securities sold under agreements to repurchase 255 36 34

Borrowings 7,128 967 9

Subordinated notes 1,879 1,879 1,879

2 unchanged sentences

Net interest income 191,072 145,874 122,403

PROVISION FOR LOAN LOSSES

Net interest income after provision for loan losses

PROVISION FOR CREDIT LOSSES 7,573 ( 706 ) ( 8,077 )

Net interest income after provision for credit losses 183,499 146,580 130,480

NONINTEREST INCOME

Card income 11,043 10,329 9,734

Wealth management fees 9,883 9,155 8,384

3 unchanged sentences

Gains on sale of mortgage loans 1,526 1,461 5,846

Realized gains (losses) on sales of securities ( 1,820 ) — —

Unrealized gains (losses) on equity securities 160 ( 414 ) 107

5 unchanged sentences

NONINTEREST EXPENSE

Salaries 67,453 51,767 48,972

Employee benefits 10,037 8,325 6,513

11 unchanged sentences

INCOME TAX EXPENSE 22,739 19,734 20,291

NET INCOME $ 65,842 $ 56,456 $ 56,271

EARNINGS PER SHARE - BASIC $ 2.08 $ 1.95 $ 2.02

7 unchanged sentences

(dollars in thousands) 2023 2022 2021

OTHER COMPREHENSIVE (LOSS) INCOME

Unrealized (losses) gains on debt securities available-for-sale

NET INCOME $ 65,842 $ 56,456 $ 56,271

OTHER COMPREHENSIVE INCOME (LOSS)

Unrealized gains (losses) on debt securities available-for-sale 16,949 ( 105,459 ) ( 24,798 )

Reclassification adjustment for losses on sale of debt securities available-for-sale realized in income 1,820 — —

Reclassification adjustment for amortization of net unrealized losses on debt securities transferred to held-to-maturity 1,954 1,723 687

Unrealized gains (losses) on derivative instruments

Unrealized gains on derivative instruments 161 1,183 366

Reclassification adjustment for net settlements on derivative instruments ( 468 ) 126 412

Total other comprehensive (loss) income, before tax

Income tax (benefit) expense

Total other comprehensive (loss) income

TOTAL COMPREHENSIVE (LOSS) INCOME

Total other comprehensive income (loss), before tax 20,416 ( 102,427 ) ( 23,333 )

Income tax expense (benefit) 5,820 ( 29,197 ) ( 6,651 )

Total other comprehensive income (loss) 14,596 ( 73,230 ) ( 16,682 )

TOTAL COMPREHENSIVE INCOME (LOSS) $ 80,438 $ ( 16,774 ) $ 39,589

See accompanying Notes to Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Common Stock Surplus Retained

Earnings Accumulated

Comprehensive

Income (Loss) Treasury

Stockholders’

Income (Loss)

(dollars in thousands, except per share data)

(dollars in thousands, except per share data) Shares

Outstanding Amount

Balance, December 31, 2020 27,457,306 $ 275 $ 190,875 $ 154,614 $ 18,153 $ — $ 363,917

Other comprehensive income

Net income — — — 56,271 — — 56,271

Other comprehensive loss — — — — ( 16,682 ) — ( 16,682 )

Stock-based compensation — — 764 — — — 764

Issuance of common stock upon vesting of restricted stock units, net of tax withholdings 20,225 — — — — — —

Issuance of common stock in NXT acquisition 1,799,016 18 29,252 — — — 29,270

Repurchase of common stock ( 290,486 ) — — — — ( 4,906 ) ( 4,906 )

Cash dividends and dividend equivalents ($ 0.60 per share)

— — — ( 16,753 ) — — ( 16,753 )

Balance, December 31, 2021 28,986,061 293 220,891 194,132 1,471 ( 4,906 ) 411,881

Net income — — — 56,456 — — 56,456

Other comprehensive loss — — — — ( 73,230 ) — ( 73,230 )

Stock-based compensation — — 1,949 — — — 1,949

Issuance of common stock upon vesting of restricted stock units

Issuance of common stock in NXT acquisition

Issuance of common stock upon vesting of restricted stock units, net of tax withholdings 31,944 — ( 57 ) — — — ( 57 )

Repurchase of common stock ( 265,379 ) — — — — ( 4,783 ) ( 4,783 )

Cash dividends and dividend equivalents ($ 0.64 per share)

— — — ( 18,584 ) — — ( 18,584 )

Balance, December 31, 2022 28,752,626 293 222,783 232,004 ( 71,759 ) ( 9,689 ) 373,632

Other comprehensive loss

Cumulative effect of change in accounting principle (ASU 2016-13) — — — ( 6,922 ) — — ( 6,922 )

Net income — — — 65,842 — — 65,842

Other comprehensive income — — — — 14,596 — 14,596

Stock-based compensation — — 1,953 — — — 1,953

Issuance of common stock upon vesting of restricted stock units, net of tax withholdings 43,607 — ( 181 ) — — — ( 181 )

Issuance of common stock in Town and Country acquisition 3,378,600 34 71,322 — — — 71,356

Repurchase of common stock ( 479,005 ) — — — — ( 8,907 ) ( 8,907 )

Cash dividends and dividend equivalents ($ 0.68 per share)

— — — ( 21,873 ) — — ( 21,873 )

Balance, December 31, 2023 31,695,828 $ 327 $ 295,877 $ 269,051 $ ( 57,163 ) $ ( 18,596 ) $ 489,496

6 unchanged sentences

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 65,842 $ 56,456 $ 56,271

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation expense 3,108 3,043 3,074

Provision for loan losses

Provision for credit losses 7,573 ( 706 ) ( 8,077 )

Net amortization of debt securities 5,730 6,959 7,066

Amortization of unrealized gain on dedesignated cash flow hedge

Deferred income tax (benefit) expense

Deferred income tax expense (benefit) 3,817 ( 2,919 ) 2,908

Stock-based compensation 1,953 1,949 764

Net accretion of discount and deferred loan fees on loans ( 7,228 ) ( 5,337 ) ( 12,448 )

Net realized loss on sales of securities 1,820 — —

Net unrealized loss (gain) on equity securities ( 160 ) 414 ( 107 )

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

Net loss (gain) on disposals of bank premises and equipment ( 84 ) ( 9 ) 33

Net gain on sales of bank premises held for sale ( 81 ) ( 187 ) —

3 unchanged sentences

Amortization of intangibles 2,670 873 1,054

(Increase) decrease in mortgage servicing rights

Decrease (increase) in mortgage servicing rights 1,615 ( 2,153 ) ( 1,690 )

Amortization of discount and issuance costs on subordinated notes and debentures 139 145 144

Amortization of premium on Federal Home Loan Bank borrowings

Amortization of discount on Federal Home Loan Bank advances 379 — ( 105 )

Amortization of premium on interest-bearing time deposits with banks — 5 4

4 unchanged sentences

Increase in cash surrender value of bank owned life insurance ( 566 ) ( 164 ) ( 41 )

(Increase) decrease in accrued interest receivable

(Increase) decrease in other assets

Decrease (increase) in accrued interest receivable ( 1,915 ) ( 4,605 ) 240

Decrease (increase) in other assets 2,174 ( 8,007 ) 1,676

Increase (decrease) in other liabilities ( 19,965 ) 22,316 ( 17,784 )

2 unchanged sentences

Proceeds from maturities of interest-bearing time deposits with banks 249 485 245

Purchase of interest-bearing time deposits with banks ( 509 ) — —

Proceeds from sales of securities available-for-sale 185,280 — —

Proceeds from paydowns, maturities, and calls of debt securities 102,625 154,166 213,491

Purchase of securities ( 3,037 ) ( 371,682 ) ( 513,838 )

Purchase of loans ( 61,009 ) — —

Net increase in loans ( 81,641 ) ( 113,665 ) ( 50,089 )

5 unchanged sentences

Proceeds from sales of foreclosed assets 4,093 475 5,805

Capital improvements to foreclosed assets

Net cash paid for acquisition of Town and Country ( 14,454 ) — —

Net cash paid for acquisition of NXT Bancorporation, Inc.

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

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

Taxes paid related to the vesting of restricted stock units

Repurchase of common stock

Cash dividends and dividend equivalents paid

Net cash (used in) provided by financing activities

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS AT END OF PERIOD

— — ( 4,771 )

Net cash provided by (used in) investing activities 132,663 ( 335,123 ) ( 349,613 )

See accompanying Notes to Consolidated Financial Statements

4 unchanged sentences

(dollars in thousands) 2023 2022 2021

CASH FLOWS FROM FINANCING ACTIVITIES

Net increase (decrease) in deposits 94,396 ( 150,973 ) 426,146

Net increase (decrease) in repurchase agreements ( 639 ) ( 18,175 ) 11,440

Net increase (decrease) in Federal Home Loan Bank advances ( 234,195 ) 160,000 ( 12,520 )

Taxes paid related to the vesting of restricted stock units ( 181 ) ( 57 ) —

Repurchase of common stock ( 8,907 ) ( 4,783 ) ( 4,906 )

Cash dividends and dividend equivalents paid ( 21,873 ) ( 18,584 ) ( 16,753 )

Net cash provided by (used in) financing activities ( 171,399 ) ( 32,572 ) 403,407

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 27,093 ( 295,109 ) 96,817

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 114,159 409,268 312,451

CASH AND CASH EQUIVALENTS AT END OF YEAR $ 141,252 $ 114,159 $ 409,268

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

12 unchanged sentences

(“HBT Financial” or the “Company”) is headquartered in Bloomington, Illinois and is the holding company for Heartland Bank and Trust Company (“Heartland Bank” or the “Bank”).

The Bank provides a comprehensive suite of business, commercial, wealth management and retail banking products and services to individuals, businesses, and municipal entities throughout Central and Northeastern Illinois and Eastern Iowa.

The Bank provides a comprehensive suite of financial products and services to individuals, businesses, and municipal entities throughout Illinois and Eastern Iowa.

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

1 unchanged sentence

Significant accounting policies are summarized below.

The Company qualifies as an "emerging growth company"

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

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.

3 unchanged sentences

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

On October 20, 2020, Heartland Bank and State Bank of Lincoln, both wholly-owned bank subsidiaries of the Company on that date, entered into a Bank Merger Agreement providing for the merger of State Bank of Lincoln into Heartland Bank.

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.”

Basis of Consolidation

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.

Capital Trust B, Heartland Bancorp, Inc.

Capital Trust C, Heartland Bancorp, Inc.

Capital Trust D, FFBI Capital Trust I, and National Bancorp Statutory Trust I, which, in accordance with GAAP, are not consolidated as more fully described in Note 13.

Heartland Bank maintains a limited liability company that holds specific assets for risk mitigation purposes and is consolidated into HBT Financial's consolidated financial statements.

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

Capital Trust B;

Heartland Bancorp, Inc.

Capital Trust C;

Heartland Bancorp, Inc.

Capital Trust D;

FFBI Capital Trust I;

National Bancorp Statutory Trust I;

Town and Country Statutory Trust II;

Town and Country Statutory Trust III;

and West Plains Investors Statutory Trust I, which, in accordance with GAAP, are not consolidated as more fully described in Note 13.

Significant intercompany transactions and accounts have been eliminated in consolidation.

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.

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

Business and Significant Concentrations of Credit Risk

1 unchanged sentence

Real estate and commercial loans are principal areas of concentration.

The Company also strives to meet the borrowing needs of the consumers in its market areas.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company also strives to meet the borrowing needs of the consumers in its market areas.

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

10 unchanged sentences

Realized gains and losses on debt securities available-for-sale are included in noninterest income when applicable and reported as a reclassification adjustment in other comprehensive income (loss).

Gains and losses on sales of securities are determined using the specific identification method on the trade date.

The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period to maturity.

Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Interest income includes amortization of purchase premium or discount.

Premiums and discounts on debt securities are amortized on the level-yield method without anticipating prepayments, except for mortgage backed securities where prepayments are anticipated.

Premiums on callable debt securities are amortized to their earliest call date.

Any transfers of debt securities into the held-to-maturity category from the available-for-sale category are made at fair value at the date of transfer.

1 unchanged sentence

Such amounts are amortized over the period to maturity.

Allowance for Credit Losses - Debt Securities Available-for-Sale

For debt securities available-for-sale in an unrealized loss position, the Company first assesses whether it intends to sell, or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement to sell is met, the security amortized cost basis is written down to fair value through earnings.

For debt securities available-for-sale that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.

If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security.

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded, limited by the amount that the fair value is less than the amortized cost basis.

Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income (loss).

Changes in the allowance for credit losses are recorded as provision for credit losses.

Losses are charged against the allowance for credit losses when management believes the uncollectibility of a security is confirmed or when either the criteria regarding intent or requirement to sell is met.

HBT FINANCIAL, INC.

1 unchanged sentence

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.

The Company monitors the investment security portfolio for impairment on an individual security basis and has a process in place to identify securities that could potentially have a credit impairment that is other-than-temporary.

This process involves analyzing the length of time and the extent to which the fair value has been less than the amortized cost basis, the market liquidity for the security, the financial condition and near-term prospects of the issuer, expected cash flows, and the intent of the Company to not sell the security or whether it is more likely than not that the Company will be required to sell the security before its anticipated recovery.

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

Allowance for Credit Losses - Debt Securities Held-to-Maturity

For debt securities held-to-maturity, the Company measures expected credit losses on a collective basis by major security type.

Held-to-maturity securities are evaluated using historical probability of default and loss given default information specific to the investment category.

If this evaluation determines that credit losses exist, an allowance for credit loss is recorded and included in earnings as a component of provision for credit losses.

The Company's U.S.

government agency and agency mortgage-backed securities are explicitly or implicitly guaranteed by the U.S.

government, and as such are excluded from the credit loss evaluation as the expectation of non-payment is zero.

Equity Securities

11 unchanged sentences

Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loans sold.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs and the allowance for loan losses, deferred loan fees or costs on originated loans, and unamortized premiums or discounts on acquired loans.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost net of the allowance for credit losses.

Amortized cost is the unpaid principal balance outstanding, adjusted for charge-offs, net of purchase premiums and discounts, and deferred loan fees and costs.

Interest income is accrued on the unpaid principal balance.

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

Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

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.

1 unchanged sentence

In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income if it was accrued during the current year and charged-off against the allowance for loan losses if accrued in a prior year.

Amortization of related deferred loan fees or costs is also suspended at this time.

The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.

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

Allowance for Loan Losses

The allowance for loan losses (“allowance”) is an estimate of loan losses inherent in the Company’s loan portfolio.

The allowance for loan losses represents amounts that have been established to recognize incurred credit losses in the loan portfolio that are both probable and reasonably estimable at the date of the consolidated financial statements.

The allowance is established through a provision for loan losses which is charged to expense.

Additions to the allowance are expected to maintain the adequacy of the total allowance.

Loan losses are charged off against the allowance when the Company determines the loan balance to be uncollectible.

Cash received on previously charged off amounts is recorded as a recovery to the allowance.

The allowance consists of two primary components, general reserves and specific reserves related to impaired loans.

The general component covers non-impaired loans and is based on historical losses adjusted for qualitative factors.

The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the most recent 16 -quarter period.

This actual loss experience is adjusted for qualitative factors based on the risks present for each portfolio segment.

These qualitative factors include consideration of the following:

levels of and trends in delinquencies and impaired loans;

levels of and trends in charge-offs and recoveries;

trends in volume and terms of loans;

effects of any changes in risk selection and underwriting standards;

other changes in lending policies, procedures, and practices;

experience, ability, and depth of lending management and other relevant staff;

national and local economic trends and conditions;

industry conditions;

and effects of changes in credit concentrations.

These qualitative factors are inherently subjective and are driven by the repayment risk associated with each portfolio segment.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.

The Company reviews the loan portfolio on an ongoing basis to determine whether any loans require classification and impairment testing in accordance with applicable regulations and accounting principles.

Loans determined to be impaired are individually evaluated for impairment.

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.

A restructuring of debt constitutes a troubled debt restructuring (“TDR”) if the Company for economic or legal reasons related to the borrower’s financial difficulties grants a concession to the borrower that it would not otherwise consider.

Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms.

TDR concessions can include reduction of interest rates, extension of maturity dates, forgiveness of principal or interest due, or acceptance of other assets in full or partial satisfaction of the debt.

In general, if the Company grants a TDR that involves either the absence of principal amortization or a material extension of an existing loan amortization period in excess of our underwriting standards, the loan will be placed on nonaccrual status.

However, if a TDR is well secured by an abundance of collateral and the collectability of both interest and principal is probable, the loan may remain on accrual status.

A nonaccrual TDR in full compliance with the payment requirements specified in the loan modification for at least six months may return to accrual status, if the collectability of both principal and interest is probable.

All TDRs are individually evaluated for impairment.

The 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.

These risk ratings are also subject to review by the Company’s regulators, external loan review, and internal loan review.

During the internal reviews, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which the borrowers operate and the fair values of collateral securing the loans.

The risk rating is reviewed annually, at a minimum, and on an as needed basis depending on the specific circumstances of the loan.

These credit quality indicators are used to assign a risk rating to each individual loan.

Risk ratings are grouped into four major categories, defined as follows:

A Pass loan is a credit with no existing or known potential weaknesses deserving of management’s close attention.

A Pass-Watch loan is still considered a Pass credit and not a classified or criticized asset, but is a reflection of a borrower who exhibits credit weaknesses or downward trends warranting close attention and increased monitoring.

These potential weaknesses may result in deterioration of the repayment prospects for the loan.

No loss of principal or interest is expected, and the borrower does not pose sufficient risk to warrant classification.

Substandard :

A Substandard loan is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any.

Loans classified as Substandard have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt.

They are characterized as probable that the borrower will not pay principal and interest in accordance with the contractual terms.

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.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

These portfolio segments include 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, with risk characteristics described as follows:

if accrued in a prior year.

Amortization of related deferred loan fees or costs and any purchase premium or discount is also suspended at this time.

The interest on these loans is accounted for on the cost-recovery method, until qualifying for return to accrual.

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, future payments are reasonably assured, and the borrower must generally demonstrate at least 6 months of payment performance.

Purchased Credit Deteriorated Loans

Purchased credit deteriorated loans (“PCD loans”) are purchased loans, that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by the Company’s assessment.

An allowance for credit losses is determined using the same methodology as other loans held for investment.

The initial allowance for credit losses determined on a collective basis is allocated to individual loans.

The sum of a loan's purchase price and allowance for credit losses becomes its initial amortized cost basis.

The difference between the initial amortized cost basis and the unpaid principal balance of a loan is a non-credit discount or premium which is amortized into interest income over the life of the loan.

Non-Purchased Credit Deteriorated Loans

Non-purchased credit deteriorated loans (“non-PCD loans”) are purchased loans, that, as of the date of acquisition, have not experienced a more-than-insignificant deterioration in credit quality since origination, as determined by the Company’s assessment.

The loan’s purchase price becomes its initial amortized cost basis.

The difference between the initial amortized cost basis and the unpaid principal balance of the loan is a discount or premium, which is comprised of a credit and non-credit component, and is accreted or amortized into interest income over the life of the loan.

An allowance for credit losses is determined using the same methodology as other loans held for investment, but no "Day One" allowance for credit losses is established on the date of acquisition.

Instead, a subsequent "Day Two" allowance for credit losses for non-PCD loans is recorded through the provision for credit losses, which reflects the estimated lifetime credit losses.

Allowance for Credit Losses - Loans

The allowance for credit losses for loans is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans.

The Company’s estimate of the allowance for credit losses for loans reflects losses expected over the remaining contractual life of the loans, considering past events, current conditions, and reasonable and supportable forecasts of future economic conditions.

Loans are charged off against the allowance for credit losses when management believes the uncollectibility of a loan balance is confirmed.

Recoveries are recognized up to the aggregate amount of previously charged-off balances.

The allowance for credit losses is established through provision for credit loss expense charged to income.

The allowance for credit losses is measured on a collective (pooled) basis when similar risk characteristics exist.

The Company has identified the following portfolio segments:

Commercial and Industrial :

3 unchanged sentences

Cash flows and collateral values may fluctuate based on general economic conditions, specific industry conditions and specific borrower circumstances.

Agricultural and Farmland :

Consists of loans typically secured by farmland, agricultural operating assets, or a combination of both, and are generally underwritten to existing cash flows of operating agricultural businesses.

Debt repayment is provided by business cash flows.

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.

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Commercial Real Estate - Owner Occupied :

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

Multi-family :

Consists of loans secured by five or more unit apartment buildings.

Multi-family loans may be affected by demographic and population trends, unemployment or underemployment, and deteriorating market values of real estate.

Construction and Land Development :

1 unchanged sentence

In addition, loans in this segment generally possess a higher inherent risk of loss than other portfolio segments due to risk of non-completion, changes in budgeted costs, and changes in market forces during the term of the construction period.

Multi-family :

Consists of loans secured by five or more unit apartment buildings.

Multi-family loans may be affected by demographic and population trends, unemployment or underemployment, and deteriorating market values of real estate.

One-to-four Family Residential :

1 unchanged sentence

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

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Agricultural and Farmland :

Consists of loans typically secured by farmland, agricultural operating assets, or a combination of both, and are generally underwritten to existing cash flows of operating agricultural businesses.

Debt repayment is provided by business cash flows.

Municipal, Consumer and Other :

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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.

At least quarterly, the Board of Directors reviews the adequacy of the allowance, including consideration of the relevant risks in the portfolio, current economic conditions and other factors.

If the Board of Directors and management determine that changes are warranted based on those reviews, the allowance is adjusted.

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.

Loans Acquired with Deteriorated Credit Quality

Loans acquired that have evidence of deterioration in credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all contractually required payments receivable, are initially recorded at fair value (as determined by the present value of expected future cash flows) with no allowance for loan losses.

Loans are evaluated by management at the time of purchase to determine if there is evidence of deterioration in credit quality since origination.

Loans where there is evidence of deterioration of credit quality since origination may be aggregated and accounted for as a pool of loans if the loans being aggregated have common risk characteristics.

The difference between the undiscounted cash flows expected at acquisition and the investment in the loan, or the “accretable yield,” is recognized as interest income over the life of the loan.

Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “nonaccretable difference,” are not recognized as a yield adjustment.

Subsequent decreases to the expected cash flows will generally result in a provision for loan losses.

Subsequent increases in expected cash flows result in a reversal of the provision for loan losses to the extent of prior charges or a reclassification of the difference from nonaccretable to accretable yield with a positive impact on interest income on a prospective basis.

If the Company does not have the information necessary to reasonably estimate cash flows to be expected, it may use the cost recovery method or cash basis method of income recognition.

Off-Balance Sheet Credit Related Financial Instruments

In the ordinary course of business, the Company has entered into commitments to extend credit, including commitments under credit arrangements, commercial letters of credit, and standby letters of credit.

The Company uses the discounted cash flow method to estimate expected credit losses for all loan segments, except for consumer loans.

Under this method, cash flow projections at the instrument-level are adjusted for estimated prepayments, probability of default, loss given default, and time to recovery.

These cash flow projections are discounted at the instrument-level effective yield to calculate the present value of expected cash flows.

An allowance for credit losses is established for the difference between a pool's total amortized cost basis and present value of expected cash flows.

The Company uses the weighted average remaining maturity method to estimate expected credit losses for consumer loans.

Under this method, an expected loss rate is applied to an estimate of future outstanding balance balances of the pool.

The Company uses regression analysis of historical internal and peer data to determine which variables are best suited to be economic variables utilized when modeling lifetime probability of default in the discounted cash flow models and loss rates in the weighted average remaining maturity model.

The analysis also determines

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how expected probability of default and loss rates will react to forecasted levels of the economic variables.

In addition, qualitative adjustments are made for risk factors that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools.

Management estimates the allowance for credit losses on loans using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

As historical credit loss experience provides the basis for the estimation of expected credit losses for pooled loans, adjustments may be necessary to capture differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions.

Loans that do not share risk characteristics are evaluated on an individual basis.

Loan evaluated individually are not also included in the pooled evaluation.

When management determines that foreclosure is probable, or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for anticipated selling costs as appropriate.

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

At least quarterly, the Allowance for Credit Losses Committee reviews the adequacy of the allowance, including consideration of the relevant risks in the portfolio, current economic conditions and other factors.

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

Unfunded Lending-related Commitments

In the ordinary course of business, the Company has entered into commitments to extend credit, such as lines of credit, commercial letters of credit, and standby letters of credit.

Such financial instruments are recorded when they are funded.

Allowance for Credit Losses - Unfunded Lending-related Commitments

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company.

The allowance for credit losses on unfunded lending-related commitments is adjusted through provision for credit losses.

The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credited losses on commitments expected to be funded over its estimated life.

Loan Servicing

4 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.

Bank Owned Life Insurance

Bank owned life insurance represents life insurance policies on the lives of certain current and former employees and directors for which the Company is the sole owner and beneficiary.

These policies are recorded as an asset in the consolidated balance sheets at their cash surrender value ("CSV") or the current amount that

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Bank Owned Life Insurance

Bank owned life insurance represents life insurance policies on the lives of certain current and former employees and directors for which the Company is the sole owner and beneficiary.

These policies are recorded as an asset in the consolidated balance sheets at their cash surrender value ("CSV") or the current amount that could be realized if settled.

could be realized if settled.

The change in CSV and insurance proceeds received are included as a component of noninterest income in the consolidated statements of income.

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Foreclosed Assets

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less estimated cost to sell at the date of foreclosure, establishing a new cost basis.

Any write-down based on the fair value of the asset at the date of acquisition is charged to the allowance for loan losses.

If the fair value of the asset less estimated cost to sell exceeds the recorded investment in the loan at the date of foreclosure, the increase in value is charged to current year operations unless there has been a prior charge-off, in which case a recovery to the allowance for loan losses is recorded.

When it appears likely that we will obtain title to real estate collateral, we develop an exit strategy by assessing overall market conditions, the current use and condition of the asset, and its highest and best use.

If determined necessary to maximize value, we complete the necessary improvements or tenant stabilization tasks, with the applicable time value discount and improvement expenses incorporated into our estimates of the expected costs to sell.

Substantially all foreclosed real estate is valued on an "as-is" basis.

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less anticipated selling costs at the date of foreclosure, establishing a new cost basis.

For foreclosed real estate, selling costs are generally estimated to be 7.0 % of the fair value.

This estimate includes sales commissions and closing costs.

Any write-down based on the fair value of the asset at the date of acquisition is charged to the allowance for credit losses.

Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less estimated cost to sell.

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.

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

Costs to maintain and hold foreclosed assets are expensed.

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At December 31, 2023 and 2022, the Company’s evaluations of goodwill indicated that goodwill was not impaired.

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 .

The Company will periodically review the status of core deposit intangible assets for any events or circumstances which may change the recoverability of the underlying basis.

Other identifiable intangible assets consist of core deposit intangible and customer relationship intangible assets with definite useful lives which are being amortized over 10 years.

The Company will periodically review the status of core deposit intangible and customer relationship intangible assets for any events or circumstances which may change the recoverability of the underlying basis.

Wealth Management Assets and Fees

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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.

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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.

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

4 unchanged sentences

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

Derivative Financial Instruments

2 unchanged sentences

All derivatives are recognized on the consolidated balance sheet at their fair value.

On the date the derivative contract is entered into, the Company may designate the derivative as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability "cash flow"

Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash-flow hedge are recorded in other comprehensive income (loss), until earnings are affected by the variability of cash flows (e.g., when periodic settlements on a variable-rate asset or liability are recorded in earnings).

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The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedged transactions.

10 unchanged sentences

Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net income.

Although certain changes in assets and liabilities, such as unrealized gains and losses on securities available-for-sale and interest rate swap agreements designated as cash flow hedges, are reported as a separate component of the equity section of the consolidated balance sheets, such items, along with net income, are components of comprehensive income (loss).

Fair Value Measurements

The Company categorizes its assets and liabilities measured at fair value into a three-level hierarchy based on the priority of the inputs to the valuation technique used to determine fair value.

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

If the inputs used in the determination of the fair value measurement fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement.

Assets and liabilities valued at fair value are categorized based on the inputs to the valuation techniques as follows:

Level 1 - Inputs that are quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date.

Level 2 - Inputs that are significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data.

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.

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

Adjustments to fair value usually result when certain assets are impaired.

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

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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.

The Company adopted the policy and has not elected to measure any existing financial instruments at fair value, except for mortgage servicing rights;

however, it may elect to measure newly acquired financial instruments at fair value in the future.

separate component of the equity section of the consolidated balance sheets, such items, along with net income, are components of comprehensive income (loss).

During 2019, in recording the impact of the conversion to a C Corporation, the Company recorded a deferred income tax expense of $ 3.0 million related to the unrealized gains (losses) on debt securities, and a deferred income tax benefit of $ 0.3 million related to derivatives, through the income statement in accordance with ASC 740, Income Taxes .

This difference will remain in accumulated other comprehensive income (loss) until the underlying debt securities are sold or mature or the underlying cash flow hedging relationships terminate in accordance with the portfolio approach.

Fair Value of Financial Instruments

Fair value of financial instruments is estimated using relevant market information and other assumptions, as more fully disclosed in Note 21 - Fair Value of Financial Instruments.

Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items.

Changes in assumptions or in market conditions could significantly affect these estimates.

Revenue from Contracts with Customers

ASC Topic 606, Revenue from Contracts with Customers , requires an entity to recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.

ASC 606, Revenue from Contracts with Customers , requires an entity to recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.

To achieve this, the Company takes the following steps:

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and recognize revenue when (or as) the Company satisfies a performance obligation.

The non-interest revenue streams that are considered to be in the scope of this guidance are discussed below.

The noninterest revenue streams that are considered to be in the scope of this guidance are discussed below.

Consists of debit and credit card interchange fees.

2 unchanged sentences

Payment is typically received daily.

Wealth management fees:

Consists of revenue from the management and advisement of client assets and trust administration.

The Company’s performance obligation is generally satisfied over time, and the fees are recognized monthly.

Payment is typically received quarterly or annually.

Service charges on deposit accounts:

5 unchanged sentences

Payment for other deposit account related fees is primarily received immediately through a direct charge to customers’ accounts.

Wealth management fees:

Consists of revenue from the management and advisement of client assets and trust administration.

The Company’s performance obligation is generally satisfied over time, and the fees are recognized monthly.

Payment is typically received quarterly or annually.

Segment Reporting

1 unchanged sentence

The Company’s chief operating decision maker evaluates the operations of the Company using consolidated information for purposes of allocating resources and assessing performance.

Reclassifications

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.

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Reclassifications

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.

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 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 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.

Impact of Recently Adopted Accounting Standards

On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , as amended, which replaces the incurred loss methodology with an expected loss methodology, commonly referred to as the current expected credit losses (“CECL”) methodology.

The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and debt securities held-to-maturity.

It also applies to off-balance sheet credit exposures not accounted for as insurance, such as loan commitments and letters of credit.

In addition, ASC 326 made changes to the accounting for debt securities available-for-sale.

One such change is to require credit losses be presented as an allowance rather than as a write-down on debt securities available-for-sale management does not intend to sell or believes that it is more likely than not they will be required to sell.

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

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures.

Results for reporting periods beginning after December 31, 2022 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

The Company recorded a net decrease to retained earnings of $ 6.9 million as of January 1, 2023 for the cumulative effect of adopting ASC 326.

The following table illustrates the impact of ASC 326 on the allowance for credit losses:

January 1, 2023

(dollars in thousands) Pre-ASC 326

Adoption Impact of

ASC 326 Adoption As Reported

under ASC 326

Allowance for credit losses on loans

Commercial and industrial $ 3,279 $ ( 822 ) $ 2,457

Commercial real estate - owner occupied 1,193 587 1,780

Commercial real estate - non-owner occupied 6,721 501 7,222

Construction and land development 4,223 1,969 6,192

Multi-family 1,472 85 1,557

One-to-four family residential 1,759 797 2,556

Agricultural and farmland 796 1,567 2,363

Municipal, consumer, and other 5,890 2,299 8,189

Allowance for credit losses on loans $ 25,333 $ 6,983 $ 32,316

Allowance for credit losses on unfunded commitments $ — $ 2,899 $ 2,899

The Company also adopted ASC 326 using the prospective transition approach for purchase credit deteriorated (“PCD”) financial assets that were previously classified as purchased credit impaired (“PCI”) and accounted for under ASC 310-30.

In accordance with ASC 326, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption.

On January 1, 2023, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $ 0.2 million to the allowance for credit losses.

The remaining noncredit discount will be accreted into interest income at the effective interest rate as of January 1, 2023.

On January 1, 2023, the Company also adopted 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.

This ASU 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.

Additionally, the amendments in ASU 2022-02 require a public business entity to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases in the existing vintage disclosures.

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

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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 .

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.

Adoption of this standard did not have a material impact on the Company’s financial position or results of operations.

Recent Accounting Pronouncements

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

4 unchanged sentences

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):

3 unchanged sentences

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 .

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.

The impairment charge is limited to the amount of goodwill allocated to that reporting unit.

The amendments in this update are effective for annual or any interim goodwill impairment tests in years beginning after December 15, 2022, including interim periods within those years.

Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017.

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 .

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.

In March 2023, the FASB issued ASU 2023-02, Investments—Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force) .

ASU 2023-02 permits an election to use the proportional amortization method to account for equity investments made primarily for the purpose of receiving income tax credits and other income tax benefits, regardless of the tax credit program from which the income tax credits are received, provided that certain conditions are met.

The proportional amortization method results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the income statement as a component of income tax expense.

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

ASU 2023-02 must be applied on a retrospective or modified retrospective basis.

Early adoption is permitted.

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

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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 .

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):

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.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

ASU 2023-07 expands disclosure requirements for significant segment expenses under Topic 280.

The amendments require public entities to disclose significant expense categories for each reportable segment, other segment items, the title and position of the chief operating decision-maker, and interim disclosures of certain segment-related information previously required only on an annual basis.

The amendments clarify that entities reporting single segments must disclose both the new and existing segment disclosures under Topic 280, and a public entity is permitted to disclose multiple measures of segment profit or loss if certain criteria are met.

The amendments in this update are effective for years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 31, 2024.

ASU 2023-07 must be applied on a retrospective basis.

Early adoption is permitted.

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

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

ASU 2023-09 expands income tax disclosure requirements.

The amendments require annual disclosure of certain information relating to the rate reconciliation, income taxes paid by jurisdiction, income (loss) from continuing operations before income tax expense (benefit) disaggregated between domestic and foreign, income tax expense (benefit) from continuing operations disaggregated by federal (national), state, and foreign.

The amendments also eliminate certain requirements relating to unrecognized tax benefits and certain deferred tax disclosure relating to subsidiaries and corporate joint ventures.

The amendments in this update are effective for years beginning after December 15, 2024.

ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted.

Early adoption is permitted.

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

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NOTE 2 – ACQUISITIONS

1 unchanged sentence

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, 2022.

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.

Under the Agreement and Plan of Merger, Town and Country merged with and into HBT Financial, with HBT Financial as the surviving entity, immediately followed by the 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.

(i) 1.9010 shares of HBT Financial’s common stock, or (ii) $ 35.66 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.

In lieu of fractional shares, holders of Town and Country common stock received 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.

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

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.

Measurement period adjustments of $ 0.1 million were recorded in the third quarter of 2023 as more information became available regarding Town and Country's tax assets and liabilities.

Goodwill of $ 30.5 million was recorded in the acquisition, which reflects expected synergies from combining the operations of HBT Financial and Town and Country, and is nondeductible for tax purposes.

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

During the years ended December 31, 2023 and 2022, HBT Financial incurred the following expenses related to the acquisition of Town and Country:

(dollars in thousands) December 31, 2023 December 31, 2022

PROVISION FOR CREDIT LOSSES $ 5,924 $ —

NONINTEREST EXPENSE

Salaries 3,584 —

Furniture and equipment 39 —

Data processing 2,031 304

Marketing and customer relations 24 —

Loan collection and servicing 125 —

Legal fees and other noninterest expense 1,964 788

Total noninterest expense 7,767 1,092

Total Town and Country acquisition-related expenses $ 13,691 $ 1,092

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair value of the assets acquired and liabilities assumed from Town and Country on the acquisition date of February 1, 2023 were as follows (dollars in thousands):

Assets acquired:

Cash and cash equivalents $ 23,542

Interest-bearing time deposits with banks 249

Debt securities 167,869

Equity securities 301

Restricted stock 2,822

Loans held for sale 1,612

Loans, before allowance for credit losses 635,376

Allowance for credit losses ( 1,247 )

Loans, net of allowance for credit losses 634,129

Bank owned life insurance 15,782

Bank premises and equipment 14,828

Foreclosed assets 271

Intangible assets 22,282

Mortgage servicing rights 10,469

Investments in unconsolidated subsidiaries 449

Accrued interest receivable 3,113

Other assets 8,940

Total assets acquired 906,658

Liabilities assumed:

Deposits 720,417

FHLB advances 86,439

Junior subordinated debentures 14,949

Other liabilities 5,999

Total liabilities assumed 827,804

Net assets acquired $ 78,854

Consideration paid:

Cash $ 37,996

Common stock 71,356

Total consideration paid $ 109,352

Goodwill $ 30,498

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Of the loans acquired, there were $ 89.8 million which exhibited more-than-insignificant credit deterioration on the acquisition date.

The following table provides a summary of these PCD loans at acquisition (dollars in thousands):

Unpaid principal balance $ 89,822

Allowance for credit losses at acquisition ( 1,247 )

Non-credit discount ( 2,218 )

Purchase price $ 86,357

Additionally, subsequent to the Town and Country acquisition, HBT Financial recognized an allowance for credit losses on non-PCD loans of $ 5.2 million and an allowance for credit losses on unfunded commitments of $ 0.7 million through an increase to the provision for credit losses.

The following table provides the pro forma information for the results of operations for the years ended December 31, 2023 and 2022, as if the acquisition of Town and Country had occurred on January 1, 2022.

The pro forma results combine the historical results of Town and Country into HBT Financial’s consolidated statements of income, including the impact of certain acquisition accounting adjustments, which include loan discount accretion, intangible assets amortization, deposit premium amortization, and borrowing premium amortization.

The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results that would have been obtained had the acquisition actually occurred on January 1, 2022.

No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, provision for credit losses, expense efficiencies or asset dispositions.

The acquisition-related expenses that have been recognized are included in net income in the following table.

Year Ended December 31,

(dollars in thousands, except per share data) 2023 2022

Total revenues (net interest income and noninterest income) $ 230,171 $ 226,229

Net income 66,056 68,417

Earnings per share - basic 2.07 2.12

Earnings per share - diluted 2.06 2.12

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NXT Bancorporation, Inc.

9 unchanged sentences

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.

During the year ended December 31, 2021, HBT Financial incurred the following expenses related to the acquisition of NXT (dollars in thousands):

Salaries $ 65

Furniture and equipment 18

Data processing 355

Marketing and customer relations 12

Loan collection and servicing 11

Legal fees and other noninterest expense 955

Total NXT acquisition-related expenses $ 1,416

HBT FINANCIAL, INC.

8 unchanged sentences

Restricted stock 796

Loans 194,576

Bank owned life insurance 7,352

3 unchanged sentences

Accrued interest receivable 886

Other assets 1,340

Total assets acquired 234,125

Liabilities assumed:

Deposits 181,586

Securities sold under agreements to repurchase 4,080

4 unchanged sentences

Consideration paid:

Cash $ 10,633

Common stock 29,270

Total consideration paid $ 39,903

Goodwill $ 5,702

The following table presents the acquired non-impaired loans as of the acquisition date (dollars in thousands):

Fair Value $ 194,576

Gross contractual amounts receivable 196,104

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides the pro forma information for the results of operations for the years ended December 31, 2021 and 2020, as if the acquisition had occurred on January 1, 2020.

The pro forma results combine the historical results of NXT into HBT Financial’s consolidated statements of income, including the impact of certain acquisition accounting adjustments, which include loan discount accretion, intangible assets amortization, deposit premium amortization, and borrowing premium amortization.

No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, provision for loan losses, expense efficiencies or asset dispositions.

The acquisition-related expenses that have been recognized are included in net income in the following table.

Year Ended December 31,

(dollars in thousands, except per share data)

Total revenues (net interest income and noninterest income)

Earnings per share - basic

Earnings per share - diluted

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SECURITIES

Debt Securities

The amortized cost and fair values of debt securities, with gross unrealized gains and losses, are as follows:

The amortized cost and fair values of debt securities, with gross unrealized gains and losses and allowance for credit losses, are as follows:

December 31, 2023

(dollars in thousands) Amortized Cost Gross

Allowance for Credit Losses Fair Value

Available-for-sale:

(dollars in thousands)

Treasury $ 159,715 $ — $ ( 11,093 ) $ — $ 148,622

government agency 55,359 — ( 3,262 ) — 52,097

Municipal 229,030 26 ( 23,499 ) — 205,557

Mortgage-backed:

1 unchanged sentence

Agency commercial 141,214 3 ( 14,205 ) — 127,012

Corporate 57,665 9 ( 5,485 ) — 52,189

Total available-for-sale $ 831,624 $ 99 $ ( 72,262 ) $ — $ 759,461

December 31, 2023

(dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Allowance for Credit Losses

Held-to-maturity:

government agency $ 88,448 $ — $ ( 8,292 ) $ 80,156 $ —

Municipal 38,442 394 ( 163 ) 38,673 —

Mortgage-backed:

2 unchanged sentences

Total held-to-maturity $ 521,439 $ 394 $ ( 55,337 ) $ 466,496 $ —

Total debt securities

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

(dollars in thousands) Amortized

Available-for-sale:

(dollars in thousands)

Treasury $ 169,860 $ — $ ( 15,345 ) $ 154,515

government agency 59,291 — ( 4,134 ) 55,157

Municipal 275,972 46 ( 32,189 ) 243,829

Mortgage-backed:

1 unchanged sentence

Agency commercial 150,060 — ( 17,172 ) 132,888

Corporate 65,597 55 ( 3,958 ) 61,694

Total available-for-sale $ 934,456 $ 106 $ ( 91,038 ) $ 843,524

December 31, 2022

(dollars in thousands) Amortized

Held-to-maturity:

government agency $ 88,424 $ — $ ( 9,728 ) $ 78,696

Municipal 42,167 195 ( 314 ) 42,048

Mortgage-backed:

2 unchanged sentences

Total held-to-maturity $ 541,600 $ 195 $ ( 62,994 ) $ 478,801

Total debt securities

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

On March 31, 2022, 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 value 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)

(dollars in thousands) Amortized

Cost Fair Value

government agency $ 78,841 $ 71,048

2 unchanged sentences

Agency commercial 27,834 25,432

Total $ 114,850 $ 104,131

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.

1 unchanged sentence

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.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022, the Bank had debt securities with a carrying value of $ 419.4 million and $ 332.6 million, respectively, which were pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes required or permitted by law.

The amortized cost and fair value of debt securities by contractual maturity, as of December 31, 2023, are shown below.

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Available-for-Sale

Held-to-Maturity

(dollars in thousands)

Available-for-Sale Held-to-Maturity

(dollars in thousands) Amortized

Fair Value Amortized

Due in 1 year or less $ 46,534 $ 45,564 $ 2,138 $ 2,141

5 unchanged sentences

Agency commercial 141,214 127,012 298,721 257,408

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables present gross unrealized losses and fair value of investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of December 31:

Investments in a Continuous Unrealized Loss Position

Less than 12 Months

12 Months or More

Total $ 831,624 $ 759,461 $ 521,439 $ 466,496

The following table presents gross unrealized losses and fair value of debt securities available-for-sale that do not have an associated allowance for credit losses as of December 31, 2023, aggregated by category and length of time that individual debt securities have been in a continuous unrealized loss position:

December 31, 2023

Investments in a Continuous Unrealized Loss Position

Less than 12 Months 12 Months or More Total

(dollars in thousands) Unrealized

Fair Value Unrealized

Available-for-sale:

(dollars in thousands)

Treasury $ — $ — $ ( 11,093 ) $ 148,622 $ ( 11,093 ) $ 148,622

government agency ( 2 ) 168 ( 3,260 ) 51,910 ( 3,262 ) 52,078

Municipal ( 26 ) 4,749 ( 23,473 ) 194,287 ( 23,499 ) 199,036

Mortgage-backed:

1 unchanged sentence

Agency commercial ( 26 ) 3,016 ( 14,179 ) 123,404 ( 14,205 ) 126,420

Corporate ( 414 ) 4,361 ( 5,071 ) 45,826 ( 5,485 ) 50,187

Total available-for-sale $ ( 631 ) $ 21,648 $ ( 71,631 ) $ 720,834 $ ( 72,262 ) $ 742,482

Held-to-maturity:

government agency

Mortgage-backed:

Agency residential

Agency commercial

Total held-to-maturity

Total debt securities

Investments in a Continuous Unrealized Loss Position

Less than 12 Months

12 Months or More

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents gross unrealized losses and fair value of debt securities, aggregated by category and length of time that individual debt securities have been in a continuous unrealized loss position, as of December 31, 2022:

December 31, 2022

Investments in a Continuous Unrealized Loss Position

Less than 12 Months 12 Months or More Total

(dollars in thousands) Unrealized

Fair Value Unrealized

Available-for-sale:

(dollars in thousands)

Treasury $ ( 8,401 ) $ 92,445 $ ( 6,944 ) $ 62,070 $ ( 15,345 ) $ 154,515

government agency ( 2,980 ) 47,370 ( 1,154 ) 7,787 ( 4,134 ) 55,157

Municipal ( 10,906 ) 149,261 ( 21,283 ) 87,794 ( 32,189 ) 237,055

Mortgage-backed:

1 unchanged sentence

Agency commercial ( 4,764 ) 62,672 ( 12,408 ) 70,216 ( 17,172 ) 132,888

Corporate ( 2,594 ) 52,190 ( 1,364 ) 5,600 ( 3,958 ) 57,790

Total available-for-sale ( 37,977 ) 531,226 ( 53,061 ) 299,159 ( 91,038 ) 830,385

1 unchanged sentence

government agency ( 1,754 ) 15,751 ( 7,974 ) 62,945 ( 9,728 ) 78,696

Municipal ( 314 ) 23,433 — — ( 314 ) 23,433

Mortgage-backed:

3 unchanged sentences

Total debt securities $ ( 60,800 ) $ 752,160 $ ( 93,232 ) $ 538,411 $ ( 154,032 ) $ 1,290,571

As of December 31, 2023, there were 665 debt securities in an unrealized loss position for a period of twelve months or more, and 116 debt securities in an unrealized loss position for a period of less than twelve months.

Treasury, U.S.

government agency, and agency mortgage-backed securities are considered to have no risk of credit loss as they are either explicitly or implicitly guaranteed by the U.S.

The changes in fair value in these portfolios are considered to be primarily driven by changes in market interest rates and other non-credit risks, such as prepayment and liquidity risks.

Municipal securities include approximately 79 % general obligation bonds as of December 31, 2023, which have a very low historical default rate due to issuers generally having taxing authority to service the debt.

The remainder of the municipal securities are also of high credit quality with ratings of A1/A+ or better.

The Company evaluates credit risk through monitoring credit ratings and reviews of available financial data.

The changes in fair value in these portfolios are considered to be primarily driven by changes in market interest rates and other non-credit risks, such as call and liquidity risks.

The estimated allowance for credit losses for the municipal debt securities held-to-maturity was deemed insignificant.

HBT FINANCIAL, INC.

1 unchanged sentence

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.

These unrealized losses are primarily a result of fluctuations in interest rates in the bond market.

In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports.

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

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

Corporate securities include investment grade corporate and bank subordinated debt securities.

The Company evaluates credit risk through monitoring credit ratings, reviews of available issuer financial data, and sector trends.

The changes in fair value in corporate securities was considered to be primarily driven by changes in market interest rates and other non-credit risks, such as call and liquidity risks.

As of December 31, 2023, the Company did not intend to sell the debt securities that are in an unrealized loss position, and it was more likely than not that the Company would recover the amortized cost prior to being required to sell the debt securities.

Accrued interest on debt securities totaled $ 6.0 million as of December 31, 2023 and is excluded from the estimate of credit losses.

Sales of debt securities were as follows during the year ended December 31:

Year Ended December 31,

(dollars in thousands) 2023 2022 2021

Proceeds from sales $ 185,280 $ — $ —

Gross realized gains — — —

Gross realized losses ( 1,820 ) — —

Subsequent to December 31, 2023, the Company recognized $ 3.4 million of net losses on the sale of $ 66.8 million of municipal securities with the proceeds used to reduce wholesale funding.

Equity Securities

3 unchanged sentences

December 31, 2023

(dollars in thousands)

Cumulative net unrealized losses

(dollars in thousands) Readily

Fair Value No Readily

Initial cost $ 3,143 $ 2,840

Cumulative net unrealized gains (losses) 217 ( 335 )

Carrying value $ 3,360 $ 2,505

December 31, 2022

(dollars in thousands)

(dollars in thousands) Readily

Fair Value No Readily

Initial cost $ 3,142 $ 2,142

Cumulative net unrealized gains (losses) ( 113 ) ( 165 )

Carrying value $ 3,029 $ 1,977

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.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023, the cumulative net unrealized losses on equity securities with no readily determinable fair value reflect impairments of $ 0.2 million and downward adjustments based on observable price changes of an identical investment of $ 0.2 million.

As of December 31, 2022, 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 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, 2023, 2022 and 2021.

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

Unrealized gains (losses) on equity securities were as follows during the years ended December 31, 2023, 2022, and 2021:

Year Ended December 31,

6 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – LOANS AND THE ALLOWANCE FOR LOAN LOSSES

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

December 31, 2022

December 31, 2021

(dollars in thousands)

NOTE 4 – LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES

Major categories of loans are summarized as follows:

(dollars in thousands) December 31, 2023 December 31, 2022

Commercial and industrial $ 427,800 $ 266,757

Agricultural and farmland

Commercial real estate - owner occupied 295,842 218,503

1 unchanged sentence

Construction and land development 363,983 360,824

Multi-family 417,923 287,865

One-to-four family residential 491,508 338,253

Municipal, consumer, and other

Loans, before allowance for loan losses

Allowance for loan losses

Loans, net of allowance for loan losses

Paycheck Protection Program (PPP) loans (included above)

Commercial and industrial

Agricultural and farmland 287,294 237,746

Municipal, consumer, and other 239,386 197,103

Total PPP loans

The following tables detail activity in the allowance for loan losses for the years ended December 31:

(dollars in thousands)

Loans, before allowance for credit losses 3,404,417 2,620,253

Allowance for credit losses ( 40,048 ) ( 25,333 )

Loans, net of allowance for credit losses $ 3,364,369 $ 2,594,920

Allowance for Credit Losses

Management estimates the allowance for credit losses using relevant available information from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

The discounted cash flow method is used to estimate expected credit losses for all loan categories, except for consumer loans where the weighted average remaining maturity method is utilized.

At December 31, 2023, the economic forecast used by management anticipates a mild recession in 2024, with the unemployment rate increasing modestly and GDP growth slowing and then shrinking over the next 4 quarters considered in the forecast period.

After the forecast period, the Company reverts to long-term averages over a 4-quarter reversion period.

Additionally, management has made qualitative adjustments to the loss estimates to reflect other factors that influence credit losses.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables detail activity in the allowance for credit losses:

(dollars in thousands) Commercial

Industrial Commercial

Occupied Commercial

Occupied Construction

Development Multi-Family One-to-four

Residential Agricultural

Farmland Municipal,

Balance, December 31, 2020 $ 3,929 $ 3,141 $ 11,251 $ 4,232 $ 1,957 $ 1,801 $ 793 $ 4,734 $ 31,838

Provision for loan losses ( 1,474 ) ( 1,280 ) ( 3,130 ) 340 ( 694 ) ( 472 ) 52 ( 1,419 ) ( 8,077 )

Charge-offs ( 668 ) ( 30 ) — — — ( 267 ) — ( 449 ) ( 1,414 )

Recoveries 653 9 24 342 — 249 — 312 1,589

Balance, December 31, 2021 $ 2,440 $ 1,840 $ 8,145 $ 4,914 $ 1,263 $ 1,311 $ 845 $ 3,178 $ 23,936

Provision for loan losses 88 ( 1,653 ) ( 1,707 ) ( 692 ) 209 146 ( 49 ) 2,952 ( 706 )

Charge-offs ( 23 ) ( 25 ) — — — ( 67 ) — ( 569 ) ( 684 )

Recoveries 774 1,031 283 1 — 369 — 329 2,787

Balance, December 31, 2022 $ 3,279 $ 1,193 $ 6,721 $ 4,223 $ 1,472 $ 1,759 $ 796 $ 5,890 $ 25,333

Adoption of ASC 326 ( 822 ) 587 501 1,969 85 797 1,567 2,299 6,983

PCD allowance established in acquisition 69 127 239 240 68 492 5 7 1,247

Provision for loan losses 2,823 352 187 ( 487 ) 1,931 2,004 ( 1,399 ) 1,254 6,665

Charge-offs ( 428 ) ( 5 ) ( 202 ) — — ( 34 ) — ( 690 ) ( 1,359 )

Recoveries 59 18 268 53 281 186 6 308 1,179

Balance, December 31, 2023 $ 4,980 $ 2,272 $ 7,714 $ 5,998 $ 3,837 $ 5,204 $ 975 $ 9,068 $ 40,048

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables present the recorded investments in loans and the allowance for loan losses by category as of December 31:

Gross charge-offs, further sorted by origination year, were as follows during the year ended December 31, 2023:

Gross Charge-Offs for the Year Ended December 31, 2023

Term Loans by Origination Year Revolving

Loans Revolving

to Term Total

(dollars in thousands) 2023 2022 2021 2020 2019 Prior

Commercial and industrial $ — $ — $ — $ — $ — $ — $ 428 $ — $ 428

Commercial real estate - owner occupied — 5 — — — — — — 5

Commercial real estate - non-owner occupied — — — — 31 — 171 — 202

Construction and land development — — — — — — — — —

Multi-family — — — — — — — — —

One-to-four family residential — — — — 1 33 — — 34

Agricultural and farmland — — — — — — — — —

Municipal, consumer, and other 309 100 13 17 10 32 209 — 690

Total $ 309 $ 105 $ 13 $ 17 $ 42 $ 65 $ 808 $ — $ 1,359

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables present loans and the related allowance for credit losses by category:

December 31, 2023

(dollars in thousands) Commercial

Industrial Commercial

Occupied Commercial

Occupied Construction

Development Multi-Family One-to-four

Residential Agricultural

Farmland Municipal,

Loan balances:

(dollars in thousands)

Collectively evaluated for impairment $ 427,528 $ 295,672 $ 865,394 $ 363,767 $ 417,608 $ 486,049 $ 287,150 $ 224,345 $ 3,367,513

Individually evaluated for impairment 272 170 15,287 216 315 5,459 144 15,041 36,904

Acquired with deteriorated credit quality

Allowance for loan losses:

Total $ 427,800 $ 295,842 $ 880,681 $ 363,983 $ 417,923 $ 491,508 $ 287,294 $ 239,386 $ 3,404,417

Allowance for credit losses:

Collectively evaluated for impairment $ 4,960 $ 2,272 $ 6,693 $ 5,998 $ 3,837 $ 4,957 $ 975 $ 6,137 $ 35,829

Individually evaluated for impairment 20 — 1,021 — — 247 — 2,931 4,219

Acquired with deteriorated credit quality

Total $ 4,980 $ 2,272 $ 7,714 $ 5,998 $ 3,837 $ 5,204 $ 975 $ 9,068 $ 40,048

December 31, 2022

(dollars in thousands) Commercial

Industrial Commercial

Occupied Commercial

Occupied Construction

Development Multi-Family One-to-four

Residential Agricultural

Farmland Municipal,

Loan balances:

(dollars in thousands)

Collectively evaluated for impairment $ 261,833 $ 203,558 $ 671,663 $ 359,892 $ 287,298 $ 325,621 $ 233,118 $ 184,579 $ 2,527,562

1 unchanged sentence

Acquired with deteriorated credit quality 106 3,579 11,030 850 567 4,233 595 16 20,976

Total $ 266,757 $ 218,503 $ 713,202 $ 360,824 $ 287,865 $ 338,253 $ 237,746 $ 197,103 $ 2,620,253

Allowance for loan losses:

2 unchanged sentences

Acquired with deteriorated credit quality — 17 1 2 2 6 — 1 29

Total $ 3,279 $ 1,193 $ 6,721 $ 4,223 $ 1,472 $ 1,759 $ 796 $ 5,890 $ 25,333

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables present loans individually evaluated for impairment by category of loans as of December 31:

The following table presents collateral dependent loans, by the primary collateral type, which are individually evaluated to determine expected credit losses, and the related allowance for credit losses allocated to these loans:

December 31, 2023

With an allowance recorded:

(dollars in thousands)

Amortized Cost Allowance

Primary Collateral Type

(dollars in thousands) Real Estate Vehicles Other Total

Commercial and industrial $ — $ 37 $ 235 $ 272 $ 20

Commercial real estate - owner occupied 170 — — 170 —

Commercial real estate - non-owner occupied 15,287 — — 15,287 1,021

Construction and land development 216 — — 216 —

Multi-family 315 — — 315 —

One-to-four family residential 5,459 — — 5,459 247

Agricultural and farmland 144 — — 144 —

Municipal, consumer, and other 14,978 39 24 15,041 2,931

Total $ 36,569 $ 76 $ 259 $ 36,904 $ 4,219

Accrued interest on loans totaled $ 18.4 million as of December 31, 2023 and is excluded from the estimate of credit losses.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pre-ASC 326 Adoption Impaired Loan Disclosures

The following table presents loans individually evaluated for impairment by category of loans:

December 31, 2022

(dollars in thousands) Unpaid

Balance Recorded

Investment Related

With an allowance recorded:

Commercial and industrial $ 268 $ 254 $ 158

Commercial real estate - owner occupied 635 610 168

1 unchanged sentence

Construction and land development — — —

Multi-family — — —

One-to-four family residential 569 524 44

Agricultural and farmland — — —

Municipal, consumer, and other 8,152 8,131 3,562

Total $ 23,893 $ 23,780 $ 6,320

With no related allowance:

Commercial and industrial $ 4,564 $ 4,564 $ —

Agricultural and farmland

Commercial real estate - owner occupied 10,912 10,756 —

1 unchanged sentence

Construction and land development 92 82 —

Multi-family — — —

One-to-four family residential 9,181 7,875 —

Agricultural and farmland 4,440 4,033 —

Municipal, consumer, and other 4,410 4,377 —

Total $ 49,926 $ 47,935 $ —

Total loans individually evaluated for impairment:

Commercial and industrial $ 4,832 $ 4,818 $ 158

Agricultural and farmland

Commercial real estate - owner occupied 11,547 11,366 168

1 unchanged sentence

Construction and land development 92 82 —

Multi-family — — —

One-to-four family residential 9,750 8,399 44

Agricultural and farmland 4,440 4,033 —

Municipal, consumer, and other 12,562 12,508 3,562

Total $ 73,819 $ 71,715 $ 6,320

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021

The following tables present the average recorded investment and interest income recognized for loans individually evaluated for impairment by category of loans:

Year Ended December 31,

(dollars in thousands) Average

Investment Interest

Recognized Average

Investment Interest

With an allowance recorded:

(dollars in thousands)

Commercial and industrial $ 204 $ 18 $ 1,593 $ 89

Agricultural and farmland

Commercial real estate - owner occupied 970 63 3,052 177

1 unchanged sentence

Construction and land development — — 554 27

Multi-family — — — —

One-to-four family residential 384 16 1,988 77

Agricultural and farmland — — 83 4

Municipal, consumer, and other 6,259 236 8,681 158

Total $ 18,760 $ 1,073 $ 32,445 $ 1,323

With no related allowance:

Commercial and industrial $ 9,568 $ 453 $ 7,125 $ 330

Agricultural and farmland

Commercial real estate - owner occupied 8,619 525 7,771 344

1 unchanged sentence

Construction and land development 1,505 106 2,107 28

Multi-family — — 434 10

One-to-four family residential 6,238 352 6,248 192

Agricultural and farmland 228 13 290 17

Municipal, consumer, and other 3,361 148 4,666 86

Total $ 42,155 $ 2,875 $ 38,980 $ 1,439

Total loans individually evaluated for impairment:

Commercial and industrial $ 9,772 $ 471 $ 8,718 $ 419

Agricultural and farmland

Commercial real estate - owner occupied 9,589 588 10,823 521

1 unchanged sentence

Construction and land development 1,505 106 2,661 55

Multi-family — — 434 10

One-to-four family residential 6,622 368 8,236 269

Agricultural and farmland 228 13 373 21

Municipal, consumer, and other 9,620 384 13,347 244

Total $ 60,915 $ 3,948 $ 71,425 $ 2,762

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the average recorded investment and interest income recognized for loans individually evaluated for impairment by category of loans during the years ended December 31:

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

Year Ended December 31,

With an allowance recorded:

(dollars in thousands) 2022 2021

Beginning balance $ 413 $ 1,397

Reclassification from non-accretable difference 548 508

Disposals — ( 1,089 )

Accretion income ( 231 ) ( 403 )

Ending balance $ 730 $ 413

Past Due and Nonaccrual Status

Past due status is based on the contractual terms of the loan.

Typically, loans are placed on nonaccrual when they reach 90 days past due, or when, in management’s opinion, there is reasonable doubt regarding the collection of the amounts due through the normal means of the borrower.

Interest accrued and unpaid at the time a loan is placed on nonaccrual status is reversed from interest income.

Interest payments received on nonaccrual loans are recognized in accordance with our significant accounting policies.

Once a loan is placed on nonaccrual status, the borrower must generally demonstrate at least six months of payment performance and we must believe that all remaining principal and interest is fully collectible, before the loan is eligible to return to accrual status.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables present loans by category based on current payment and accrual status:

December 31, 2023

Accruing Interest

(dollars in thousands) Current 30 - 89 Days

Past Due 90+ Days

Past Due Nonaccrual Total

Commercial and industrial $ 427,300 $ 228 $ — $ 272 $ 427,800

Agricultural and farmland

Commercial real estate - owner occupied 295,672 — — 170 295,842

1 unchanged sentence

Construction and land development 363,735 32 — 216 363,983

Multi-family 417,597 11 — 315 417,923

One-to-four family residential 484,969 1,735 — 4,804 491,508

Agricultural and farmland 286,820 330 — 144 287,294

Municipal, consumer, and other 239,033 252 37 64 239,386

With no related allowance:

Total $ 3,393,717 $ 2,843 $ 37 $ 7,820 $ 3,404,417

December 31, 2022

Accruing Interest

(dollars in thousands) Current 30 - 89 Days

Past Due 90+ Days

Past Due Nonaccrual Total

Commercial and industrial $ 266,521 $ 17 $ — $ 219 $ 266,757

Agricultural and farmland

Commercial real estate - owner occupied 218,242 187 — 74 218,503

1 unchanged sentence

Construction and land development 360,763 61 — — 360,824

Multi-family 287,854 11 — — 287,865

One-to-four family residential 335,576 894 145 1,638 338,253

Agricultural and farmland 237,727 19 — — 237,746

Municipal, consumer, and other 196,892 157 1 53 197,103

Total loans individually evaluated for impairment:

Total $ 2,616,606 $ 1,346 $ 146 $ 2,155 $ 2,620,253

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents nonaccrual loans with and without a related allowance for credit losses:

December 31, 2023

(dollars in thousands) Nonaccrual

Allowance for

Credit Losses Nonaccrual

Allowance for

Credit Losses Total

Commercial and industrial $ 120 $ 152 $ 272

Agricultural and farmland

Commercial real estate - owner occupied — 170 170

1 unchanged sentence

Construction and land development 216 — 216

Multi-family — 315 315

One-to-four family residential 14 4,790 4,804

Agricultural and farmland — 144 144

Municipal, consumer, and other — 64 64

Total $ 538 $ 7,282 $ 7,820

Credit Quality Indicators

These risk ratings are also subject to review by the Company’s regulators, external loan review, and internal loan review.

The risk rating is reviewed annually, at a minimum, and on an as needed basis depending on the specific circumstances of the loan.

These credit quality indicators are used to assign a risk rating to each individual loan.

Risk ratings are grouped into four major categories, defined as follows:

Pass – a pass loan is a credit with no existing or known potential weaknesses deserving of management’s close attention.

Pass-Watch – a pass-watch loan is still considered a "pass" credit and is not a classified or criticized asset, but is a reflection of a borrower who exhibits credit weaknesses or downward trends warranting close attention and increased monitoring.

These potential weaknesses may result in deterioration of the repayment prospects for the loan.

No loss of principal or interest is expected, and the borrower does not pose sufficient risk to warrant classification.

Substandard – a substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.

Assets so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt.

They are characterized as probable that the borrower will not pay principal and interest in accordance with the contractual terms.

Doubtful – a doubtful loan has all the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Accruing Interest

The following tables present loans by category based on their assigned risk ratings determined by management:

December 31, 2023

(dollars in thousands)

(dollars in thousands) Pass Pass-Watch Substandard Doubtful Total

Commercial and industrial $ 419,494 $ 7,128 $ 1,178 $ — $ 427,800

Agricultural and farmland

Commercial real estate - owner occupied 275,649 14,072 6,121 — 295,842

1 unchanged sentence

Construction and land development 351,087 12,604 292 — 363,983

Multi-family 397,951 19,656 316 — 417,923

One-to-four family residential 472,355 6,671 12,482 — 491,508

Agricultural and farmland 280,867 3,071 3,356 — 287,294

Municipal, consumer, and other 222,474 1,721 15,191 — 239,386

Accruing Interest

Total $ 3,241,889 $ 98,206 $ 64,322 $ — $ 3,404,417

December 31, 2022

(dollars in thousands)

(dollars in thousands) Pass Pass-Watch Substandard Doubtful Total

Commercial and industrial $ 255,309 $ 6,630 $ 4,818 $ — $ 266,757

Agricultural and farmland

Commercial real estate - owner occupied 198,546 10,105 9,852 — 218,503

1 unchanged sentence

Construction and land development 358,215 2,527 82 — 360,824

Multi-family 283,682 4,183 — — 287,865

One-to-four family residential 323,632 5,907 8,714 — 338,253

Agricultural and farmland 223,114 10,004 4,628 — 237,746

Municipal, consumer, and other 184,299 296 12,508 — 197,103

Total $ 2,479,488 $ 66,934 $ 73,831 $ — $ 2,620,253

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables present total loans by category based on their assigned risk ratings determined by management as of December 31:

December 31, 2022

(dollars in thousands)

Risk ratings of loans, further sorted by origination year, are as follows as of December 31, 2023:

(dollars in thousands) Term Loans by Origination Year Revolving

Loans Revolving

to Term Total

2023 2022 2021 2020 2019 Prior

Commercial and industrial

Agricultural and farmland

Pass $ 90,931 $ 58,364 $ 19,283 $ 26,816 $ 5,269 $ 29,550 $ 187,579 $ 1,702 $ 419,494

Pass-Watch 2,025 1,340 892 144 753 471 956 547 7,128

Substandard 111 73 327 60 — — 323 284 1,178

Total $ 93,067 $ 59,777 $ 20,502 $ 27,020 $ 6,022 $ 30,021 $ 188,858 $ 2,533 $ 427,800

Commercial real estate - owner occupied

Pass $ 27,516 $ 64,229 $ 55,376 $ 53,634 $ 32,469 $ 28,876 $ 13,549 $ — $ 275,649

Pass-Watch 4,061 943 5,210 1,474 1,573 811 — — 14,072

Substandard 2,734 86 1,550 64 164 1,523 — — 6,121

Total $ 34,311 $ 65,258 $ 62,136 $ 55,172 $ 34,206 $ 31,210 $ 13,549 $ — $ 295,842

Commercial real estate - non-owner occupied

Pass $ 121,536 $ 240,323 $ 237,953 $ 88,894 $ 82,094 $ 39,228 $ 10,274 $ 1,710 $ 822,012

Pass-Watch 810 6,893 7,013 353 4,230 154 13,585 245 33,283

Substandard 13,376 124 286 — 2,410 9,190 — — 25,386

Total $ 135,722 $ 247,340 $ 245,252 $ 89,247 $ 88,734 $ 48,572 $ 23,859 $ 1,955 $ 880,681

Construction and land development

Pass $ 153,499 $ 119,005 $ 56,954 $ 5,596 $ 2,662 $ 796 $ 12,050 $ 525 $ 351,087

Pass-Watch 153 10,750 — — — — 163 1,538 12,604

Substandard — 216 — — — 76 — — 292

Total $ 153,652 $ 129,971 $ 56,954 $ 5,596 $ 2,662 $ 872 $ 12,213 $ 2,063 $ 363,983

Pass $ 83,898 $ 81,507 $ 115,402 $ 53,126 $ 34,053 $ 23,570 $ 5,904 $ 491 $ 397,951

Pass-Watch 3,111 7,197 — 8,821 51 468 — 8 19,656

Substandard — — 316 — — — — — 316

Total $ 87,009 $ 88,704 $ 115,718 $ 61,947 $ 34,104 $ 24,038 $ 5,904 $ 499 $ 417,923

One-to-four family residential

Municipal, consumer, and other

December 31, 2021

(dollars in thousands)

Commercial and industrial

Pass $ 105,337 $ 91,636 $ 82,289 $ 64,094 $ 21,986 $ 44,241 $ 57,248 $ 5,524 $ 472,355

Pass-Watch 2,382 286 940 486 212 1,804 203 358 6,671

Substandard 1,507 1,527 623 646 1,037 4,166 64 2,912 12,482

Total $ 109,226 $ 93,449 $ 83,852 $ 65,226 $ 23,235 $ 50,211 $ 57,515 $ 8,794 $ 491,508

Agricultural and farmland

Commercial real estate - owner occupied

Commercial real estate - non-owner occupied

Construction and land development

One-to-four family residential

Pass $ 52,766 $ 37,600 $ 36,604 $ 33,960 $ 8,910 $ 7,756 $ 100,486 $ 2,785 $ 280,867

Pass-Watch 953 361 425 30 71 719 172 340 3,071

Substandard — — 13 3,199 — 144 — — 3,356

Total $ 53,719 $ 37,961 $ 37,042 $ 37,189 $ 8,981 $ 8,619 $ 100,658 $ 3,125 $ 287,294

Municipal, Consumer, and other

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

Year Ended December 31, 2020

Pre-Modification

Post-Modification

(dollars in thousands)

Commercial real estate - owner occupied

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.

Pass $ 43,575 $ 57,404 $ 27,904 $ 14,342 $ 1,016 $ 42,499 $ 35,734 $ — $ 222,474

Pass-Watch 9 6 13 — — 1,693 — — 1,721

Substandard 51 103 2 6 8 15,012 8 1 15,191

Total $ 43,635 $ 57,513 $ 27,919 $ 14,348 $ 1,024 $ 59,204 $ 35,742 $ 1 $ 239,386

Total by Risk Rating

Pass $ 679,058 $ 750,068 $ 631,765 $ 340,462 $ 188,459 $ 216,516 $ 422,824 $ 12,737 $ 3,241,889

Pass-Watch 13,504 27,776 14,493 11,308 6,890 6,120 15,079 3,036 98,206

Substandard 17,779 2,129 3,117 3,975 3,619 30,111 395 3,197 64,322

Total $ 710,341 $ 779,973 $ 649,375 $ 355,745 $ 198,968 $ 252,747 $ 438,298 $ 18,970 $ 3,404,417

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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:

Year Ended December 31,

(dollars in thousands)

Beginning balance

Reclassification from non-accretable difference

Accretion income

Ending balance

Modifications and Troubled Debt Restructurings

There were no loan modifications to borrowers in financial distress during the year ended December 31, 2023.

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

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

NOTE 5 – LOAN SERVICING

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:

Mortgage loans serviced for others, which are not included in the accompanying consolidated balance sheets, amounted to $ 1.66 billion and $ 955.8 million as of December 31, 2023 and December 31, 2022, respectively.

Activity in mortgage servicing rights is as follows:

Year Ended December 31,

1 unchanged sentence

Beginning balance $ 10,147 $ 7,994 $ 5,934

Acquired 10,469 — 370

Capitalized servicing rights 726 530 1,200

Fair value adjustment:

Attributable to payments and principal reductions

Attributable to changes in valuation inputs and assumptions

Total fair value adjustment

Fair value adjustments attributable to payments and principal reductions ( 2,110 ) ( 1,343 ) ( 1,788 )

Fair value adjustments attributable to changes in valuation inputs and assumptions ( 231 ) 2,966 2,278

Ending balance $ 19,001 $ 10,147 $ 7,994

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - BANK PREMISES AND EQUIPMENT

Bank premises and equipment are stated at cost less accumulated depreciation as of December 31 as follows:

December 31, 2022

December 31, 2021

(dollars in thousands)

Bank premises and equipment are stated at cost less accumulated depreciation as follows:

(dollars in thousands) December 31, 2023 December 31, 2022

Land, buildings, and improvements $ 93,955 $ 77,869

3 unchanged sentences

Total bank premises and equipment, net $ 65,150 $ 50,469

Depreciation expense by category for the years ended December 31 is as follows:

Depreciation expense by category is as follows:

Year Ended December 31,

3 unchanged sentences

Total depreciation expense $ 3,108 $ 3,043 $ 3,074

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

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

There was no bank premises held for sale as of December 31, 2023 and $ 0.2 million of bank premises held for sale as of December 31, 2022.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – FORECLOSED ASSETS

Foreclosed assets activity is as follows for the years ended December 31:

Foreclosed assets activity is as follows:

Year Ended December 31,

1 unchanged sentence

Beginning balance $ 3,030 $ 3,278 $ 4,168

Acquired 271 — —

Transfers from loans 1,143 541 4,857

Capitalized improvements

Proceeds from sales ( 4,093 ) ( 475 ) ( 5,805 )

3 unchanged sentences

Ending balance $ 852 $ 3,030 $ 3,278

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Gains (losses) on foreclosed assets includes the following for the years ended December 31:

Gains (losses) on foreclosed assets includes the following:

Year Ended December 31,

2 unchanged sentences

Net gain on sales 764 118 505

Guarantee reimbursements

Gains (losses) on foreclosed assets $ 501 $ ( 314 ) $ 310

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.

The carrying value of foreclosed one-to-four family residential real estate properties held was $ 0.1 million and $ 20 thousand as of December 31, 2023 and 2022, respectively.

As of December 31, 2023, there were 16 one-to-four family residential real estate loans in the process of foreclosure totaling $ 1.2 million.

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

NOTE 8 - GOODWILL AND OTHER INTANGIBLE ASSETS

The following table summarizes the changes in the Company’s goodwill and core deposit intangible assets for the years ended December 31:

The Company recorded goodwill of $ 30.5 million related to the acquisition of Town and Country during the year ended December 31, 2023.

There were no additions to goodwill for the year ended December 31, 2022.

For the year ended December 31, 2021, the Company recorded goodwill of $ 5.7 million related to the acquisition of NXT.

The goodwill recorded in connection with the acquisitions of Town and Country and NXT were allocated to the Company's only reportable segment, Community Banking.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the changes in the Company's intangible assets:

Year Ended December 31,

(dollars in thousands)

2023 2022 2021

(dollars in thousands) Core Deposit

Intangible Customer Relationship Intangible Core Deposit

Intangible Customer Relationship Intangible

Beginning balance $ 1,070 $ — $ 1,943 $ — $ 2,798 $ —

Additions 21,282 1,000 — — 199 —

Amortization ( 2,578 ) ( 92 ) ( 873 ) — ( 1,054 ) —

Ending balance $ 19,774 $ 908 $ 1,070 $ — $ 1,943 $ —

Accumulated amortization $ 23,425 $ 92 $ 20,847 $ — $ 19,974 $ —

Amortization of core deposit intangible assets for the years subsequent to December 31, 2022 is expected to be as follows (dollars in thousands):

Amortization of intangible assets for the years subsequent to December 31, 2023 is expected to be as follows (dollars in thousands):

Year ended December 31,

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Thereafter 8,113

Total $ 20,682

NOTE 9 – DEPOSITS

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

December 31, 2022

December 31, 2021

(dollars in thousands)

The Company’s deposits are summarized below:

(dollars in thousands) December 31, 2023 December 31, 2022

Noninterest-bearing deposits $ 1,072,407 $ 994,954

1 unchanged sentence

Interest-bearing demand 1,145,092 1,139,150

Money market 803,381 555,425

Savings 608,424 634,527

Time 627,253 262,968

Brokered 144,880 —

Total interest-bearing deposits 3,329,030 2,592,070

Total deposits $ 4,401,437 $ 3,587,024

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.

Interest-bearing demand deposits included $ 51.3 million of reciprocal transaction deposits as of December 31, 2023.

Money market deposits included $ 155.1 million and $ 1.7 million of reciprocal transaction deposits as of December 31, 2023 and 2022, respectively.

Time deposits included $ 30.5 million and $ 1.6 million of reciprocal time deposits as of December 31, 2023, and 2022, respectively.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The aggregate amounts of time deposits in denominations of $250 thousand or more amounted to $ 130.2 million and $ 27.2 million as of December 31, 2023 and 2022, respectively.

The aggregate amounts of time deposits in denominations of $100 thousand or more amounted to $ 342.8 million and $ 92.6 million as of December 31, 2023 and 2022, respectively.

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

Year ended December 31,

The components of interest expense on deposits for the years ended December 31 are as follows:

The components of interest expense on deposits are as follows:

Year Ended December 31,

1 unchanged sentence

Interest-bearing demand $ 3,130 $ 607 $ 518

Money market 7,352 813 437

Savings 1,033 208 188

Time 10,784 883 1,329

Brokered 2,836 — —

Total interest expense on deposits $ 25,135 $ 2,511 $ 2,472

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2023, the scheduled maturities of time and brokered time deposits are as follows (dollars in thousands):

Year ended December 31,

2024 $ 676,895

Thereafter 124

Total $ 772,133

NOTE 10 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

1 unchanged sentence

The securities underlying the agreements as of December 31, 2023 and 2022 were under the Company’s control in safekeeping at third-party financial institutions, and included debt securities.

Information pertaining to securities sold under agreements to repurchase as of December 31 is as follows:

December 31, 2022

December 31, 2021

(dollars in thousands)

Information pertaining to securities sold under agreements to repurchase is as follows:

(dollars in thousands) December 31, 2023 December 31, 2022

Balance at end of year $ 42,442 $ 43,081

2 unchanged sentences

Carrying value of securities underlying the agreements $ 52,958 $ 55,850

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - BORROWINGS

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.

FHLB advances totaled $ 12.6 million with a weighted average interest rate of 0.55 % as of December 31, 2023 and totaled $ 160.0 million with a weighted average interest rate of 4.29 % as of December 31, 2022.

The FHLB advances outstanding as of December 31, 2023 mature between 2024 and 2029.

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.

The loans pledged as of December 31, 2023 and 2022 totaled $ 1.20 billion and $ 892.1 million, respectively.

As of December 31, 2023 and 2022, loans pledged also served as collateral for credit exposure of $ 0.4 million and $ 0.3 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”).

The Bank also had available borrowings through the discount window of the Federal Reserve Bank of Chicago.

Available borrowings are based on the collateral pledged.

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

As of December 31, 2023, debt securities with a carrying value of $ 9.8 million were pledged, and there was no outstanding balance.

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

NOTE 12 - SUBORDINATED NOTES

7 unchanged sentences

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

December 31, 2022

December 31, 2021

(dollars in thousands)

(dollars in thousands) December 31, 2023 December 31, 2022

Subordinated notes, at face value $ 40,000 $ 40,000

5 unchanged sentences

NOTE 13 – JUNIOR SUBORDINATED DEBENTURES ISSUED TO CAPITAL TRUSTS

Five subsidiary business trusts of the Company have issued floating rate capital securities (“capital securities”) which are guaranteed by the Company.

The Company owns all of the outstanding stock of the five subsidiary business trusts.

Eight subsidiary business trusts of the Company have issued floating rate capital securities (“capital securities”) which are guaranteed by the Company.

Three of these (Town and Country Statutory Trust II, Town and Country Statutory Trust III, and West Plains Investors Statutory Trust I) were acquired by the Company as part of its acquisition of Town and Country.

The Company owns all of the outstanding stock of the subsidiary business trusts.

The trusts used the proceeds from the issuance of their capital securities to buy floating rate junior subordinated deferrable interest debentures (“junior subordinated debentures”) issued by the Company.

These junior subordinated debentures are the only assets of the trusts and the interest payments from the junior subordinated debentures finance the distributions paid on the capital securities.

The junior subordinated debentures are unsecured and rank junior and subordinate in the right of payment to all senior debt of the Company.

The junior subordinated debentures are unsecured, rank junior and subordinate in the right of payment to all senior debt of the Company, and have an optional redemption in whole or in part on any interest payment date.

In accordance with GAAP, the trusts are not consolidated in the Company’s financial statements.

The carrying value of the junior subordinated debentures are summarized as follows:

December 31, 2022

December 31, 2021

(dollars in thousands)

The face values and carrying values of the junior subordinated debentures are summarized as follows:

Carrying Value

(dollars in thousands) Face Value December 31, 2023 December 31, 2022

Heartland Bancorp, Inc.

6 unchanged sentences

National Bancorp Statutory Trust I 5,773 4,853 4,788

Total junior subordinated debentures, at face value

National Bancorp Statutory Trust I unamortized discount

Total junior subordinated debentures, at carrying value

Town and Country Statutory Trust II 4,124 4,401 —

Town and Country Statutory Trust III 7,732 7,578 —

West Plains Investors Statutory Trust I 3,093 2,965 —

Total $ 53,714 $ 52,789 $ 37,780

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.

Beginning in July 2023, the three-month LIBOR index was replaced by the three-month term SOFR index plus a spread adjustment.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

1 unchanged sentence

Interest Rate

2023 December 31,

2022 Maturity Date

Heartland Bancorp, Inc.

Capital Trust B

April 6, 2034

Capital Trust B SOFR plus 3.01 % 8.41 % 6.83 % April 6, 2034

Heartland Bancorp, Inc.

Capital Trust C

June 15, 2037

Capital Trust C SOFR plus 1.79 7.18 6.30 June 15, 2037

Heartland Bancorp, Inc.

Capital Trust D

September 15, 2037

FFBI Capital Trust I

April 6, 2034

National Bancorp Statutory Trust I

December 15, 2037

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capital Trust D SOFR plus 1.61 7.00 6.12 September 15, 2037

FFBI Capital Trust I SOFR plus 3.06 8.46 6.88 April 6, 2034

National Bancorp Statutory Trust I SOFR plus 3.16 8.55 7.67 December 15, 2037

Town and Country Statutory Trust II SOFR plus 3.05 8.43 N/A March 17, 2034

Town and Country Statutory Trust III SOFR plus 1.94 7.33 N/A March 22, 2037

West Plains Investors Statutory Trust I SOFR plus 1.71 7.10 N/A June 15, 2037

The distribution rate payable on the debentures is cumulative and payable quarterly in arrears.

The Company has the right, subject to events in default, to defer payments of interest on the junior subordinated debentures at any time by extending the interest payment period for a period not exceeding 20 quarterly periods with respect to each deferral period, provided that no extension period may extend beyond the redemption or maturity date of the junior subordinated debentures.

The Company has the right, subject to events of default, to defer payments of interest on the junior subordinated debentures at any time by extending the interest payment period for a period not exceeding 20 quarterly periods with respect to each deferral period, provided that no extension period may extend beyond the redemption or maturity date of the junior subordinated debentures.

The capital securities are subject to mandatory redemption upon payment of the junior subordinated debentures and carry an interest rate identical to that of the related debenture.

4 unchanged sentences

As of December 31, 2023 and 2022, 100 % of the trust preferred securities qualified as Tier 1 capital under the final rule adopted in March 2005.

NOTE 14 – DERIVATIVE FINANCIAL INSTRUMENTS

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 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.

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – DERIVATIVE FINANCIAL INSTRUMENTS

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

Interest Rate Swaps Designated as Cash Flow Hedges

The Company designated certain interest rate swap agreements as cash flow hedges on variable-rate borrowings.

For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on interest rate swaps designated as cash flow hedging instruments are reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings.

For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on interest rate swaps designated as cash flow hedging instruments, net of tax, is reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings.

The interest rate swap agreements designated as cash flow hedges are summarized as follows:

December 31, 2022

December 31, 2021

(dollars in thousands)

December 31, 2023 December 31, 2022

(dollars in thousands) Notional

Value Notional

Fair value recorded in other assets $ 17,000 $ 322 $ 17,000 $ 629

Fair value recorded in other liabilities

As of December 31, 2023, the interest rate swap agreements designated as cash flow hedges had contractual maturities between 2024 and 2025.

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.

In accordance with hedge accounting guidance, the net unrealized gain associated with the discontinued hedging relationship, recorded within accumulated other comprehensive income, was reclassified into earnings through April 7, 2020, the period the hedged forecasted transactions affected earnings.

For the years ended December 31, 2022, 2021, and 2020, the effect of interest rate swap agreements designated as cash flow hedges on the consolidated statements of income are summarized as follows:

As of December 31, 2023 and 2022, counterparties had cash pledged and held on deposit by the Company of $ 0.6 million and $ 0.6 million, respectively.

The effect of interest rate swap agreements designated as cash flow hedges on the consolidated statements of income are summarized as follows:

Location of gross gain (loss) reclassified

Amounts of gross gain (loss)

from accumulated other

comprehensive income (loss) to income Amounts of gross gain (loss)

reclassified from accumulated

comprehensive income (loss) to income

other comprehensive income (loss)

Year Ended December 31,

Designated as cash flow hedges:

(dollars in thousands) 2023 2022 2021

Taxable loan interest income

Designated as cash flow hedges:

Junior subordinated debentures interest expense $ 468 $ ( 126 ) $ ( 412 )

8 unchanged sentences

The interest rate swap agreements not designated as hedging instruments are summarized as follows:

December 31, 2022

December 31, 2021

(dollars in thousands)

December 31, 2023 December 31, 2022

(dollars in thousands) Notional

Value Notional

Fair value recorded in other assets:

7 unchanged sentences

As of December 31, 2023, the interest rate swap agreements not designated as hedging instruments had contractual maturities between 2027 and 2035.

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:

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:

Year Ended December 31, 2023

Not designated as hedging instruments:

(dollars in thousands) 2023 2022 2021

Not designated as hedging instruments:

Gross gains $ 11,198 $ 16,002 $ 13,773

Gross losses ( 11,198 ) ( 16,002 ) ( 13,773 )

Net gains (losses) $ — $ — $ —

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table presents the activity and accumulated balances for components of other comprehensive income (loss) for the years ended December 31:

NOTE 15 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the activity and accumulated balances for components of other comprehensive income (loss):

Unrealized Gains (Losses)

on Debt Securities

Available-for-Sale

Held-to-Maturity

(dollars in thousands)

on Debt Securities Derivatives Total

(dollars in thousands) Available-for-Sale Held-to-Maturity

Balance, December 31, 2020 $ 19,578 $ ( 118 ) $ ( 1,307 ) $ 18,153

Transfer from available-for-sale to held-to-maturity 3,887 ( 3,887 ) — —

Other comprehensive income (loss) before reclassifications ( 24,798 ) — 366 ( 24,432 )

5 unchanged sentences

Transfer from available-for-sale to held-to-maturity 7,664 ( 7,664 ) — —

Other comprehensive (loss) income before reclassifications

Other comprehensive income (loss) before reclassifications ( 105,459 ) — 1,183 ( 104,276 )

Reclassifications — 1,723 126 1,849

Other comprehensive (loss) income, before tax

Income tax (benefit) expense

Other comprehensive (loss) income, after tax

Other comprehensive income (loss), before tax ( 105,459 ) 1,723 1,309 ( 102,427 )

Income tax expense (benefit) ( 30,061 ) 491 373 ( 29,197 )

Other comprehensive income (loss), after tax ( 75,398 ) 1,232 936 ( 73,230 )

Balance, December 31, 2022 ( 61,998 ) ( 9,946 ) 185 ( 71,759 )

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

Other comprehensive (loss) income before reclassifications

Other comprehensive income before reclassifications 16,949 — 161 17,110

Reclassifications 1,820 1,954 ( 468 ) 3,306

Other comprehensive (loss) income, before tax

Income tax (benefit) expense

Other comprehensive (loss) income, after tax

Other comprehensive income (loss), before tax 18,769 1,954 ( 307 ) 20,416

Income tax expense (benefit) 5,350 557 ( 87 ) 5,820

Other comprehensive income (loss), after tax 13,419 1,397 ( 220 ) 14,596

Balance, December 31, 2023 ( 48,579 ) ( 8,549 ) ( 35 ) ( 57,163 )

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.

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

Reclassifications 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.

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

See Note 14 for additional information.

NOTE 16 – INCOME TAXES

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

Allocation of income tax expense between current and deferred portions is as follows:

Year Ended December 31,

(dollars in thousands) 2023 2022 2021

Federal $ 12,538 $ 15,194 $ 11,330

State 6,384 7,459 6,053

Total current 18,922 22,653 17,383

Federal 2,811 ( 2,045 ) 1,945

State 1,006 ( 874 ) 963

Total deferred 3,817 ( 2,919 ) 2,908

Income tax expense $ 22,739 $ 19,734 $ 20,291

Income tax expense differs from the statutory federal rate for the years ended December 31 due to the following:

Income tax expense differs from the statutory federal rate due to the following:

Year Ended December 31,

(dollars in thousands)

2023 2022 2021

(dollars in thousands) Amount Percentage Amount Percentage Amount Percentage

Federal income tax, at statutory rate $ 18,602 21.0 % $ 16,000 21.0 % $ 16,078 21.0 %

2 unchanged sentences

State taxes, net of federal benefit 5,838 6.6 5,285 6.9 5,430 7.1

Other 66 0.1 67 0.1 209 0.3

Income tax expense $ 22,739 25.7 % $ 19,734 25.9 % $ 20,291 26.5 %

3 unchanged sentences

The components of the deferred tax assets and liabilities are as follows:

December 31, 2022

December 31, 2021

(dollars in thousands)

(dollars in thousands) December 31, 2023 December 31, 2022

Deferred tax assets

Allowance for loan losses

Allowance for credit losses $ 12,247 $ 7,151

Compensation related 3,230 2,623

2 unchanged sentences

Foreclosed assets 18 142

Goodwill 74 153

Net operating loss carryforward 144 —

Net unrealized losses on debt securities 23,967 29,874

Other purchase accounting adjustments 5,250 —

Other 575 5,237

Total deferred tax assets 46,777 46,625

5 unchanged sentences

Prepaid assets 816 756

Other 566 2,756

Total deferred tax liabilities 15,316 11,144

Net deferred tax asset $ 31,461 $ 35,481

As of December 31, 2023, the Company had an Illinois net operating loss carryforward of $ 1.9 million which is available to offset future Illinois taxable income.

The Illinois net operating loss carryforward is subject to a $100 thousand limitation through 2023 and will begin to expire in 2044.

Management believes that it is more likely than not that the deferred tax assets included in the balance sheet will be realized, and that a valuation allowance was not required for deferred tax assets as of December 31, 2023 and 2022.

The Company files consolidated federal and state income tax returns.

The Company is generally no longer subject to federal or state income tax examinations for years prior to 2020.

NOTE 17 – EARNINGS PER SHARE

10 unchanged sentences

(dollars in thousands) 2023 2022 2021

Net income $ 65,842 $ 56,456 $ 56,271

Earnings allocated to participating securities ( 36 ) ( 66 ) ( 104 )

5 unchanged sentences

Earnings per share - Diluted $ 2.07 $ 1.95 $ 2.02

NOTE 18 – DEFERRED COMPENSATION

The Company maintained a supplemental executive retirement plan (SERP) for certain key executive officers.

The SERP benefit payments were scheduled to be paid in equal monthly installments over 30 years .

In June 2019, the Company approved the termination of the SERP, and a lump sum payment was made in June 2020 to each participant equal to the present value of any remaining installment payments.

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

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

NOTE 18 - EMPLOYEE BENEFIT PLANS

4 unchanged sentences

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

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, 2023, 2022, and 2021, medical benefits expense amounted to $ 6.2 million, $ 4.9 million, and $ 4.2 million, respectively.

3 unchanged sentences

NOTE 19 – STOCK-BASED COMPENSATION PLANS

The Company adopted the HBT Financial, Inc.

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

The Company has adopted the HBT Financial, Inc.

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

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.

20 unchanged sentences

During the years ended December 31, 2023, 2022, and 2021, the total grant date fair value of the restricted stock units granted was $ 1.0 million, $ 1.3 million, and $ 0.9 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:

Balance, December 31, 2019

Balance, December 31, 2020

Balance, December 31, 2021

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.

The total intrinsic value of restricted stock that vested during the years ended December 31, 2023, 2022, 2021 were $ 1.1 million, $ 0.7 million, and $ 0.3 million, respectively.

The following is a summary of restricted stock unit activity:

Year Ended December 31,

2023 2022 2021

Stock Units Weighted

Fair Value Restricted

Stock Units Weighted

Fair Value Restricted

Stock Units Weighted

Beginning balance 139,986 $ 18.01 109,244 $ 17.27 71,000 $ 18.98

Granted 41,847 22.72 66,995 18.81 59,994 15.81

Vested ( 51,693 ) 17.91 ( 34,925 ) 17.26 ( 20,225 ) 18.86

Forfeited ( 1,981 ) 19.55 ( 1,328 ) 18.35 ( 1,525 ) 18.11

Ending balance 128,159 $ 19.56 139,986 $ 18.01 109,244 $ 17.27

As of December 31, 2023, unrecognized compensation cost related to the non-vested restricted stock units was $ 0.9 million.

This cost is expected to be recognized over the weighted average remaining service period of 1.7 years.

HBT FINANCIAL, INC.

9 unchanged sentences

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

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.

During the years ended December 31, 2023, 2022, and 2021, the total fair value of the performance restricted stock units granted was $ 0.4 million, $ 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.

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

Balance, December 31, 2019

Balance, December 31, 2020

Balance, December 31, 2021

Balance, December 31, 2022

Year Ended December 31,

2023 2022 2021

Stock Units Weighted

Fair Value Performance

Stock Units Weighted

Fair Value Performance

Stock Units Weighted

Beginning balance 62,067 $ 17.02 38,344 $ 15.72 — $ —

Granted 17,030 22.72 23,723 19.14 38,344 15.72

Vested — — — — — —

Forfeited — — — — — —

Ending balance 79,097 $ 18.25 62,067 $ 17.02 38,344 $ 15.72

As of December 31, 2023, 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.

8 unchanged sentences

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:

Year Ended December 31,

2023 2022 2021

Rights Weighted

Assigned Value Stock

Rights Weighted

Assigned Value Stock

Rights Weighted

Assigned Value

Balance, December 31, 2019

Balance, December 31, 2020

Balance, December 31, 2021

Balance, December 31, 2022

A further summary of outstanding stock appreciation rights as of December 31, 2022, is as follows:

Weighted Average

Stock Appreciation Rights

Grant Date Assigned Values

Contractual Term

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

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Beginning balance 73,440 $ 16.32 97,920 $ 16.32 105,570 $ 16.32

Granted — — — — — —

Exercised — — ( 24,480 ) 16.32 ( 6,120 ) 16.32

Expired — — — — ( 1,530 ) 16.32

Forfeited — — — — — —

Ending balance 73,440 $ 16.32 73,440 $ 16.32 97,920 $ 16.32

As of December 31, 2023, all stock appreciation rights were exercisable and have a weighted average remaining term of 5.7 years.

Additionally, a s of December 31, 2023, there was no unrecognized compensation cost for stock appreciation rights.

As of December 31, 2023 and 2022, the liability recorded for outstanding stock appreciation rights was $ 0.6 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.

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

Expected volatility is derived from the historical volatility of the Company’s stock price and a selected peer group of industry-related companies.

December 31, 2022

December 31, 2021

December 31, 2023 December 31, 2022

Risk-free interest rate 3.85 % 3.95 %

2 unchanged sentences

Expected dividend yield 3.22 % 3.27 %

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, 2023, the liability recorded for previously exercised stock appreciation rights was $ 0.2 million, which will be paid in 2024.

As of December 31, 2022, the liability recorded for previously exercised stock appreciation rights was $ 0.5 million.

NOTE 21 – REGULATORY CAPITAL

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20 – REGULATORY MATTERS

The Company (on a consolidated basis) and the Bank are each subject to various regulatory capital requirements administered by the federal and state banking agencies.

2 unchanged sentences

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.

The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

As allowed under the regulations, the Company and the Bank elected to exclude accumulated other comprehensive income, including unrealized gains and losses on securities, in the computation of regulatory capital.

The capital amounts and classification are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.

As allowed under the regulations, the Company and the Bank elected to exclude accumulated other comprehensive income, including unrealized gains and losses on debt securities, in the computation of regulatory capital.

Prompt corrective action provisions are not applicable to bank holding companies.

1 unchanged sentence

As of December 31, 2023 and 2022, the capital conservation buffer was 2.5 % of risk-weighted assets.

As of December 31, 2022, the Company and the Bank meet all capital adequacy requirements to which they are subject.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The actual and required capital amounts and ratios of HBT Financial, Inc.

(consolidated) and the Bank are as follows:

As of December 31, 2023, the Company and the Bank each met all capital adequacy requirements to which they were subject.

The actual and required capital amounts and ratios of the Company (on a consolidated basis) and the Bank are as follows:

December 31, 2023

Actual For Capital

Purposes To Be Well

Capitalized Under

1 unchanged sentence

Action Provisions

December 31, 2022

(dollars in thousands)

Total Capital (to Risk Weighted Assets)

(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio

Consolidated HBT Financial, Inc.

Total Capital (to Risk Weighted Assets) $ 603,234 15.33 % $ 314,814 8.00 % N/A N/A

Tier 1 Capital (to Risk Weighted Assets) 527,964 13.42 236,110 6.00 N/A N/A

Common Equity Tier 1 Capital (to Risk Weighted Assets) 476,789 12.12 177,083 4.50 N/A N/A

Tier 1 Capital (to Average Assets) 527,964 10.49 201,231 4.00 N/A N/A

Heartland Bank and Trust Company

Total Capital (to Risk Weighted Assets) $ 586,604 14.92 % $ 314,496 8.00 % $ 393,119 10.00 %

Tier 1 Capital (to Risk Weighted Assets) 550,808 14.01 235,872 6.00 314,496 8.00

Consolidated HBT Financial, Inc.

Heartland Bank and Trust Company

Common Equity Tier 1 Capital (to Risk Weighted Assets) 550,808 14.01 176,904 4.50 255,528 6.50

Consolidated HBT Financial, Inc.

Heartland Bank and Trust Company

Tier 1 Capital (to Average Assets) 550,808 10.96 201,063 4.00 251,329 5.00

Consolidated HBT Financial, Inc.

Heartland Bank and Trust Company

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

Actual For Capital

Purposes To Be Well

Capitalized Under

1 unchanged sentence

Action Provisions

December 31, 2021

(dollars in thousands)

Total Capital (to Risk Weighted Assets)

(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio

Consolidated HBT Financial, Inc.

Total Capital (to Risk Weighted Assets) $ 516,556 16.27 % $ 254,052 8.00 % N/A N/A

Tier 1 Capital (to Risk Weighted Assets) 451,828 14.23 190,539 6.00 N/A N/A

Common Equity Tier 1 Capital (to Risk Weighted Assets) 415,213 13.07 142,904 4.50 N/A N/A

Tier 1 Capital (to Average Assets) 451,828 10.48 172,427 4.00 N/A N/A

Heartland Bank and Trust Company

Total Capital (to Risk Weighted Assets) $ 489,316 15.43 % $ 253,643 8.00 % $ 317,054 10.00 %

Tier 1 Capital (to Risk Weighted Assets) 463,983 14.63 190,233 6.00 253,643 8.00

Consolidated HBT Financial, Inc.

Heartland Bank and Trust Company

Common Equity Tier 1 Capital (to Risk Weighted Assets) 463,983 14.63 142,674 4.50 206,085 6.50

Consolidated HBT Financial, Inc.

Heartland Bank and Trust Company

Tier 1 Capital (to Average Assets) 463,983 10.78 172,240 4.00 215,300 5.00

Consolidated HBT Financial, Inc.

Heartland Bank and Trust Company

HBT FINANCIAL, INC.

2 unchanged sentences

NOTE 21 – FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

There are three levels of inputs that may be used to measure fair values:

Level 1 - Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date.

Level 2 - Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data.

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

The Company uses fair value to measure certain assets and liabilities on a recurring basis, such as investment securities, mortgage servicing rights, and derivatives.

For assets measured at the lower of cost or fair value, the fair value measurement criteria may or may not be met during a reporting period, and such measurements are therefore considered "nonrecurring" for purposes of disclosing the Company's fair value measurements.

Fair value is used on a nonrecurring basis to adjust carrying values for loans held for sale, collateral-dependent loans, bank premises held for sale, and foreclosed assets.

Recurring Basis

The Company uses fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures.

Additional information on fair value measurements are summarized in Note 1.

There were no transfers between levels during the years ended December 31, 2022 and 2021.

The Company’s policy for determining transfers between levels occurs at the end of the reporting period when circumstances in the underlying valuation criteria change and result in transfer between levels.

The following tables present the balances of the assets measured at fair value on a recurring basis as of December 31:

The following is a description of the methods and significant assumptions used to measure the fair value of assets and liabilities on a recurring basis.

Investment Securities

When available, the Company uses quoted market prices to determine the fair value of securities;

such items are classified in Level 1 of the fair value hierarchy.

For the Company’s securities where quoted prices are not available for identical securities in an active market, the Company determines fair value utilizing vendors who apply matrix pricing for similar bonds where no price is observable or may compile prices from various sources.

These models are primarily industry-standard models that consider various assumptions, including time value, yield curve, volatility factors, prepayment speeds, default rates, loss severity, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures.

Substantially all of these assumptions are observable in the marketplace.

Fair values from these models are verified, where possible, against quoted market prices for recent trading activity of assets with similar characteristics to the security being valued.

Such methods are generally classified as Level 2;

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 (loss).

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

Mortgage Servicing Rights

The Company has elected to record its mortgage servicing rights at fair value.

Mortgage servicing rights do not trade in an active market with readily observable prices.

Accordingly, the Company determines the fair value of mortgage servicing rights by estimating the fair value of the future cash flows associated with the mortgage loans being serviced as calculated by an independent third party.

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 as Level 3.

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

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Derivative Financial Instruments

Interest rate swap agreements are carried at fair value as determined by dealer valuation models.

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 hedging instruments, the change in fair value is recorded through an adjustment to the consolidated statement 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.

The following tables summarize assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 and 2022 by level within the fair value hierarchy:

December 31, 2023

(dollars in thousands)

(dollars in thousands) Level 1

Inputs Level 2

Inputs Level 3

Debt securities available-for-sale:

Treasury $ 148,622 $ — $ — $ 148,622

government agency — 52,097 — 52,097

Municipal — 205,557 — 205,557

Mortgage-backed:

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Agency commercial — 127,012 — 127,012

Corporate — 52,189 — 52,189

Equity securities with readily determinable fair values 3,360 — — 3,360

3 unchanged sentences

December 31, 2022

(dollars in thousands)

(dollars in thousands) Level 1

Inputs Level 2

Inputs Level 3

Debt securities available-for-sale:

Treasury $ 154,515 $ — $ — $ 154,515

government agency — 55,157 — 55,157

Municipal — 243,829 — 243,829

Mortgage-backed:

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Agency commercial — 132,888 — 132,888

Corporate — 61,694 — 61,694

Equity securities with readily determinable fair values 3,029 — — 3,029

2 unchanged sentences

Derivative financial liabilities — 6,981 — 6,981

The following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy.

There were no changes to the valuation techniques from December 31, 2021 to December 31, 2022.

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Investment Securities

When available, the Company uses quoted market prices to determine the fair value of securities;

such items are classified in Level 1 of the fair value hierarchy.

Substantially all of these assumptions are observable in the marketplace.

Fair values from these models are verified, where possible, against quoted market prices for recent trading activity of assets with similar characteristics to the security being valued.

Such methods are generally classified as Level 2.

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 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

Interest rate swap agreements are carried at fair value as determined by dealer valuation models.

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 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

The Company has elected to record its mortgage servicing rights at fair value.

Mortgage servicing rights do not trade in an active market with readily observable prices.

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 as Level 3.

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

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables present additional information about the unobservable inputs used in the fair value measurement of the mortgage servicing rights (dollars in thousands):

December 31, 2022

Valuation Technique

Unobservable Inputs

December 31, 2023 Fair Value Valuation Technique Unobservable Inputs Range

(Weighted Average)

Mortgage servicing rights

Discounted cash flows

Constant pre-payment rates (CPR)

5.3 % to 59.7 % ( 8.2 %)

Discount rate

9.0 % to 11.7 % ( 9.3 %)

December 31, 2021

Valuation Technique

Unobservable Inputs

Mortgage servicing rights $ 19,001 Discounted cash flows Constant pre-payment rates (CPR) 6.2 % to 49.4 % ( 8.4 %)

Discount rate 9.0 % to 37.3 % ( 9.6 %)

December 31, 2022 Fair Value Valuation Technique Unobservable Inputs Range

(Weighted Average)

Mortgage servicing rights

Discounted cash flows

Constant pre-payment rates (CPR)

7.0 % to 88.9 % ( 11.7 %)

Discount rate

9.0 % to 11.0 % ( 9.0 %)

Mortgage servicing rights $ 10,147 Discounted cash flows Constant pre-payment rates (CPR) 5.3 % to 59.7 % ( 8.2 %)

Discount rate 9.0 % to 11.7 % ( 9.3 %)

Nonrecurring Basis

Certain assets are measured at fair value on a nonrecurring basis.

These assets are not measured at fair value on an ongoing basis;

however, they are subject to fair value adjustments in certain circumstances, such as there is evidence of impairment or a change in the amount of previously recognized impairment.

The following tables present the balances of the assets measured at fair value on a nonrecurring basis as of December 31:

December 31, 2022

(dollars in thousands)

Loans held for sale

Collateral-dependent impaired loans

Bank premises held for sale

Foreclosed assets

December 31, 2021

(dollars in thousands)

Loans held for sale

Collateral-dependent impaired loans

Bank premises held for sale

Foreclosed assets

The following is a description of the methods and significant assumptions used to measure the fair value of assets and liabilities on a nonrecurring basis.

Loans Held for Sale

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The Company obtains quotes or bids on these loans directly from purchasing financial institutions.

Typically, these quotes include a premium on the sale and thus these quotes indicate fair value of the held for sale loans is greater than cost.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Collateral-dependent Impaired Loans

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

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

Typically, these quotes include a premium on the sale and thus these quotes generally indicate fair value of the held for sale loans is greater than cost.

Loans held for sale have been classified as Level 2.

Collateral-Dependent Loans

Periodically, a collateral-dependent loan is evaluated individually and is reported at the fair value of the underlying collateral, less estimated costs to sell, if repayment is expected solely from the collateral.

If the collateral value is not sufficient, a specific reserve is recorded.

Collateral values are estimated using recent appraisals and customized discounting criteria.

Due to the significance of unobservable inputs, fair values of collateral-dependent loans have been classified as Level 3.

Bank Premises Held for Sale

Bank premises held for sale are recorded at the lower of cost or fair value, less estimated selling costs, at the date classified as held for sale.

Values are estimated using Level 3 inputs based on appraisals and customized discounting criteria.

The carrying value of bank premises held for sale is not re-measured to fair value on a recurring basis but is subject to fair value adjustments when the carrying value exceeds the fair value, less estimated selling costs.

Values are estimated using recent appraisals and customized discounting criteria.

Due to the significance of unobservable inputs, fair values of collateral-dependent loans have been classified as Level 3.

Foreclosed Assets

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Subsequent to the transfer, foreclosed assets are carried at the lower of cost or fair value, less estimated selling costs.

Values are estimated using Level 3 inputs based on appraisals and customized discounting criteria.

The carrying value of foreclosed assets is not re-measured to fair value on a recurring basis but is subject to fair value adjustments when the carrying value exceeds the fair value, less estimated selling costs.

Collateral-Dependent Impaired Loans, Bank Premises Held for Sale, and Foreclosed Assets

The estimated fair value of collateral-dependent impaired loans, bank premises held for sale, and foreclosed assets is based on the appraised fair value of the collateral, less estimated costs to sell.

Collateral-dependent impaired loans, bank premises held for sale, and foreclosed assets are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal, or a similar evaluation, as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value.

Appraisals or a similar evaluation of the collateral underlying collateral-dependent loans and foreclosed assets are obtained at the time a loan is first considered impaired or a loan is transferred to foreclosed assets.

Appraisals or a similar evaluation of bank premises held for sale are obtained when first classified as held for sale.

Appraisals or similar evaluations are obtained subsequently as deemed necessary by management but at least annually on foreclosed assets and bank premises held for sale.

Appraisals are reviewed for accuracy and consistency by management.

Appraisals are performed by individuals selected from the list of approved appraisers maintained by management.

The appraised values are reduced by discounts to consider lack of marketability and estimated costs to sell.

These discounts and estimates are developed by management by comparison to historical results.

Values are estimated using recent appraisals and customized discounting criteria.

Due to the significance of unobservable inputs, fair values of collateral-dependent loans have been classified as Level 3.

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables present quantitative information about unobservable inputs used in nonrecurring Level 3 fair value measurements (dollars in thousands).

The following tables summarize assets measured at fair value on a nonrecurring basis as of December 31, 2023 and 2022 by level within the fair value hierarchy:

December 31, 2023

Unobservable Inputs

(Weighted Average)

Collateral-dependent impaired loans

Appraisal of collateral

Appraisal adjustments

Not meaningful

Bank premises held for sale

Appraisal adjustments

(dollars in thousands) Level 1

Inputs Level 2

Inputs Level 3

Loans held for sale $ — $ 2,318 $ — $ 2,318

Collateral-dependent loans — — 32,685 32,685

Foreclosed assets — — 852 852

Appraisal adjustments

December 31, 2022

Unobservable Inputs

(Weighted Average)

Collateral-dependent impaired loans

Appraisal of collateral

Appraisal adjustments

Not meaningful

(dollars in thousands) Level 1

Inputs Level 2

Inputs Level 3

Loans held for sale $ — $ 615 $ — $ 615

Collateral-dependent loans — — 17,460 17,460

Bank premises held for sale — — 235 235

Appraisal adjustments

Foreclosed assets — — 3,030 3,030

Appraisal adjustments

The following tables present quantitative information about unobservable inputs used in nonrecurring Level 3 fair value measurements (dollars in thousands):

December 31, 2023 Fair

Value Valuation

Technique Unobservable Inputs Range

(Weighted Average)

Collateral-dependent loans $ 32,685 Appraisal of collateral Appraisal adjustments Not meaningful

Foreclosed assets 852 Appraisal Appraisal adjustments 7 % ( 7 %)

December 31, 2022 Fair Value

Valuation Technique

Unobservable Inputs Range

(Weighted Average)

Collateral-dependent loans $ 17,460 Appraisal of collateral Appraisal adjustments Not meaningful

Bank premises held for sale 235 Appraisal Appraisal adjustments 7 % ( 7 %)

Foreclosed assets 3,030 Appraisal Appraisal adjustments 7 % ( 7 %)

Other Fair Value Methods

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The carrying amount of FHLB stock approximates fair value based on the redemption provisions of the FHLB.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair value estimation process for the loan portfolio uses an exit price concept and reflects discounts the Company believes are consistent with discounts in the marketplace.

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.

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

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Time Deposits

Time and Brokered Time Deposits

Fair values of certificates of deposit with stated maturities have been estimated using the present value of estimated future cash flows discounted at rates currently offered for similar instruments.

3 unchanged sentences

Subordinated Notes

The fair values of subordinated debentures are estimated using discounted cash flow analyses based on rates observed on recent debt issuances by other financial institutions.

The fair values of subordinated notes are estimated using discounted cash flow analyses based on rates observed on recent debt issuances by other financial institutions.

Junior Subordinated Debentures

2 unchanged sentences

The carrying amounts of accrued interest approximate fair value.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides summary information on the carrying amounts and estimated fair values of the Company’s financial instruments:

(dollars in thousands) Fair Value

Level December 31, 2023 December 31, 2022

Amount Estimated

Fair Value Carrying

Amount Estimated

Financial assets:

Cash and cash equivalents Level 1 $ 141,252 $ 141,252 $ 114,159 $ 114,159

Debt securities held-to-maturity Level 2 521,439 466,496 541,600 478,801

Restricted stock Level 3 7,160 7,160 7,965 7,965

Loans, net Level 3 3,364,369 3,349,540 2,594,920 2,566,930

Investments in unconsolidated subsidiaries Level 3 1,614 1,614 1,165 1,165

Accrued interest receivable Level 2 24,534 24,534 19,506 19,506

Financial liabilities:

Time deposits Level 3 627,253 619,682 262,968 253,619

Brokered deposits Level 3 144,880 144,944 — —

Securities sold under agreements to repurchase Level 2 42,442 42,442 43,081 43,081

Subordinated notes Level 3 39,474 36,993 39,395 37,205

Junior subordinated debentures Level 3 52,789 48,529 37,780 37,030

Accrued interest payable Level 2 6,969 6,969 1,363 1,363

The Company estimated the fair value of lending related commitments as described in Note 22 to be immaterial based on limited interest rate exposure due to their variable nature, short-term commitment periods and termination clauses provided in the agreements.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.

6 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides summary information on the carrying amounts and estimated fair values of the Company’s financial instruments as of December 31:

December 31, 2022

December 31, 2021

(dollars in thousands)

Financial assets:

Cash and cash equivalents

Debt securities held-to-maturity

Restricted stock

Investments in unconsolidated subsidiaries

Accrued interest receivable

Financial liabilities:

Time deposits

Securities sold under agreements to repurchase

Subordinated notes

Junior subordinated debentures

Accrued interest payable

The Company estimated the fair value of lending related commitments as described in Note 23 to be immaterial based on limited interest rate exposure due to their variable nature, short-term commitment periods and termination clauses provided in the agreements.

NOTE 22 – COMMITMENTS AND CONTINGENCIES

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The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Such commitments and conditional obligations were as follows as of December 31:

Such commitments and conditional obligations were as follows:

Contractual Amount

December 31, 2022

December 31, 2021

(dollars in thousands)

(dollars in thousands) December 31, 2023 December 31, 2022

Commitments to extend credit $ 869,013 $ 756,885

Standby letters of credit 23,732 17,785

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

8 unchanged sentences

The Bank secures the standby letters of credit with the same collateral used to secure the related loan.

Lease Commitments

The Company leases office space under operating leases.

Certain leases contain renewal options for periods from three to five years at their fair rental value at the time of renewal.

Future minimum lease payments under these leases are as follows (dollars in thousands):

Year ended December 31,

Allowance for Credit Losses on Unfunded Lending-related Commitments

The allowance for credit losses on unfunded commitments is included in other liabilities on the consolidated balance sheets and is adjusted through a charge to provision for credit loss expense on the consolidated statements of income.

The allowance for credit losses on unfunded commitments estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

The allowance for credit losses on unfunded commitments was $ 3.8 million as of December 31, 2023.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Legal Contingencies

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1:20-cv-1023 (“Class Action”);

and Melanie E.

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

9 unchanged sentences

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.

AND SUBSIDIARIES

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.

On August 16, 2023, definitive settlement agreements reflecting the terms of the agreement in principle were approved by the Court, and the Bank made the one-time cash payments totaling $ 13.0 million during the third quarter of 2023.

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

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

Accordingly, the Bank had $ 13.0 million accrued related to these matters as of December 31, 2022.

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

The net settlement amount of $ 5.6 million was included in other noninterest expense in the consolidated statements of income during the fourth quarter of 2022.

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 Bank was 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.

1 unchanged sentence

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 Bank was 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.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On May 15, 2023, the Bank reached an agreement in principle to settle both the DeBaere, et al and Miller, et al cases in which the Bank would make one-time cash payments totaling $ 3.4 million, without admitting fault, to release the Bank from further liability and claims in both the cases.

Definitive settlement agreements reflecting the terms of the agreement in principle were approved by the Court on December 15, 2023 in the DeBaere, et al case and on February 16, 2024 in the Miller, et al case.

The Bank made the one-time cash payments totaling $ 3.4 million during the fourth quarter of 2023.

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

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

Accordingly, the Bank had in the aggregate $ 2.6 million accrued as of December 31, 2022 related to these matters.

An initial $ 2.6 million accrual was recognized in other noninterest expense during the fourth quarter of 2022, reflecting management’s best estimate at that time, and an additional $ 0.8 million accrual was recognized in other noninterest expense during the second quarter of 2023 following the agreement in principle to settle both the DeBaere, et al and Miller, et al cases.

John Pickett v.

Town and Country Bank

The Bank is a defendant in a purported class action lawsuit filed in October 2023, in the Circuit Court of Sangamon County, Illinois.

The plaintiff, a customer of Town and Country Bank, which previously merged with the Bank, alleges that the Bank breached its contract with the plaintiff by charging overdraft fees for transactions that were authorized on a positive account balance, but when settled, settled into a negative balance.

The Bank intends to vigorously defend the lawsuit.

However, the Company believes an unfavorable outcome 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 $ 0.2 million in the aggregate during the fourth quarter and year ended December 31, 2023.

While the amount recorded reflects management’s best estimate as of December 31, 2023, the Company cannot yet offer an opinion on the estimated range of possible loss.

NOTE 23 - 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.

As of December 31, 2023 and 2022, loans to directors, executive officers, principal shareholders and their affiliated entities (“related parties”) totaled $ 1.1 million and $ 2.2 million, 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 $ 22.0 million and $ 4.0 million as of December 31, 2022 and 2021, respectively.

Deposits of related parties totaled $ 4.0 million and $ 22.0 million as of December 31, 2023 and 2022, respectively.

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 24 - CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS

1 unchanged sentence

Condensed Parent Company Only Balance Sheets

December 31, 2022

December 31, 2021

(dollars in thousands)

(dollars in thousands) December 31, 2023 December 31, 2022

Cash and cash equivalents $ 17,214 $ 24,278

Investment in subsidiaries:

Bank 563,513 422,217

Non-bank 1,614 1,165

Other assets 2,347 5,338

Total assets $ 584,688 $ 452,998

Subordinated notes $ 39,474 $ 39,395

4 unchanged sentences

Total liabilities and stockholders' equity $ 584,688 $ 452,998

HBT FINANCIAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Condensed Parent Company Only Statements of Income

Years ended December 31

Year ended December 31,

(dollars in thousands) 2023 2022 2021

Dividends received from subsidiaries:

Undistributed earnings from subsidiaries:

Dividends received from bank subsidiary $ 64,000 $ 28,000 $ 20,000

Undistributed earnings from bank subsidiary 9,199 35,044 41,227

Other income 870 51 454

Total income 74,069 63,095 61,681

Interest expense 5,409 3,666 3,305

2 unchanged sentences

INCOME BEFORE INCOME TAX BENEFIT 63,143 54,137 54,635

INCOME TAX BENEFIT

TAX BENEFIT ( 2,699 ) ( 2,319 ) ( 1,636 )

NET INCOME $ 65,842 $ 56,456 $ 56,271

HBT FINANCIAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Condensed Parent Company Only Statements of Cash Flows

Consolidated Parent Company Only Statements of Cash Flow

Year ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES

(dollars in thousands) 2023 2022 2021

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 65,842 $ 56,456 $ 56,271

Adjustments to reconcile net income to net cash provided by operating activities:

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CASH FLOWS FROM INVESTING ACTIVITIES

Capital contribution to bank subsidiary

Capital contribution to non-bank subsidiary

Purchase of securities — — ( 48 )

2 unchanged sentences

Net cash paid for acquisition of NXT Bancorporation, Inc.

— — ( 10,411 )

Net cash paid for acquisition of Town and Country ( 37,523 ) — —

Net cash used in investing activities ( 34,635 ) ( 2,325 ) ( 10,385 )

CASH FLOWS FROM FINANCING ACTIVITIES

Issuance of subordinated notes, net of issuance costs

Issuance of common stock

Taxes paid related to the vesting of restricted stock units ( 181 ) ( 57 ) —

1 unchanged sentence

Cash dividends and dividend equivalents paid ( 21,873 ) ( 18,584 ) ( 16,753 )

Net cash (used in) provided by financing activities

NET CHANGE IN CASH AND EQUIVALENTS

Net cash used in financing activities ( 30,961 ) ( 23,424 ) ( 21,659 )

NET DECREASE IN CASH AND EQUIVALENTS ( 7,064 ) ( 1,474 ) ( 18,397 )

CASH AND CASH EQUIVALENTS

Beginning of year 24,278 25,752 44,149

End of year $ 17,214 $ 24,278 $ 25,752

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.

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