UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-39085

HBT Financial, Inc.

(Exact name of registrant as specified in its charter)


Delaware	37-1117216
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

401 North Hershey Rd Bloomington, Illinois 61704	(888) 897-2276
(Address of principal executive offices, including zip code)	(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	HBT	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☒

Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 27, 2022, there were 28,806,827 shares outstanding of the registrant’s common stock, $0.01 par value.

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TABLE OF CONTENTS
HBT Financial, Inc.

		Page

PART I. FINANCIAL INFORMATION		3
Item 1.	Consolidated Financial Statements	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income (Loss)	5
	Consolidated Statement of Changes in Stockholders’ Equity	6
	Consolidated Statements of Cash Flows	8
	Notes to Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	51
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	84
Item 4.	Controls and Procedures	85
PART II. OTHER INFORMATION		86
Item 1.	Legal Proceedings	86
Item 1A.	Risk Factors	86
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	86
Item 4.	Mine Safety Disclosures	86
Item 5.	Other Information	87
Item 6.	Exhibits	87

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this quarterly report are forward-looking statements. Forward-looking statements may include statements relating to our plans, strategies and expectations, the economic impact of the COVID-19 pandemic and our future financial results, near-term loan growth, net interest margin, mortgage banking profits, wealth management fees, expenses, asset quality, capital levels, continued earnings, and liquidity. Forward-looking statements are generally identifiable by use of the words "believe," "may," "will," "should," "could," "expect," "estimate," "intend," "anticipate," "project," "plan" or similar expressions. Forward-looking statements are frequently based on assumptions that may or may not materialize and are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that could cause actual results to differ materially from the results anticipated or projected and which could materially and adversely affect our operating results, financial condition or prospects include, but are not limited to:

●

the strength of the local, state, national and international economies (including effects of inflationary pressures and supply chain constraints);

●

the economic impact of any future terrorist threats and attacks, widespread disease or pandemics (including the COVID-19 pandemic in the United States), acts of war or other threats thereof, or other adverse external events that could cause economic deterioration or instability in credit markets, and the response of the local, state and national governments to any such adverse external events;

●

our asset quality and any loan charge-offs;

●

the composition of our loan portfolio;

●

time and effort necessary to resolve nonperforming assets and the loans modified or deferred as a result of the impact of the COVID-19 pandemic;

●

the length and severity of the COVID-19 pandemic, and the effects of the COVID-19 pandemic, including the impact of the pandemic on our operations and the operations of our customers and the communities that we serve;

●

environmental liability associated with our lending activities;

●

the effects of the current low interest rate environment or changes in interest rates on our net interest income, net interest margin, our investments, our loan originations, and our modeling estimates relating to interest rate changes;

●

changes in and uncertainty related to benchmark interest rates used to price our loans, including the elimination of the London Interbank Offered Rate (“LIBOR”);

●

our access to sources of liquidity and capital to address our liquidity needs;

●

our inability to receive dividends from the Bank, pay dividends to our common stockholders or satisfy obligations as they become due;

●

the effects of problems encountered by other financial institutions;

●

our ability to achieve organic loan and deposit growth and the composition of such growth;

●

our ability to attract and retain skilled employees or changes in our management personnel;

●

any failure or interruption of our information and communications systems;

●

our ability to identify and address cybersecurity risks;

●

the effects of the failure of any component of our business infrastructure provided by a third party;

●

our ability to keep pace with technological changes;

●

our ability to successfully develop and commercialize new or enhanced products and services;

●

current and future business, economic and market conditions in the United States (“U.S.”) generally or in the States of Illinois and Iowa in particular;

●

the geographic concentration of our operations in the States of Illinois and Iowa;

●

our ability to effectively compete with other financial services companies and the effects of competition in the financial services industry on our business;

●

our ability to attract and retain customer deposits;

●

our ability to maintain the Bank’s reputation;

●

possible impairment of our goodwill and other intangible assets;

●

the impact of, and changes in applicable laws, regulations and accounting standards and policies;

●

our prior status as an S corporation;

●

possible changes in trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar organizations;

●

the effectiveness of our risk management and internal disclosure controls and procedures;

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●

market perceptions associated with certain aspects of our business;

●

our ability to meet our obligations as a public company, including our obligations under Section 404 of the Sarbanes-Oxley Act of 2002;

●

damage to our reputation from any of the factors described above;

●

our success at managing the risks involved in the foregoing items; and

●

the factors discussed in “Risk Factors”, "Management's Discussion and Analysis of Financial Condition and Results of Operations" or elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange (“SEC”) Commission on March 11, 2022.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Forward-looking statements speak only as of the date they are made. We do not undertake any obligation to update any forward-looking statement in the future, or to reflect circumstances and events that occur after the date on which the forward-looking statement was made.

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PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

HBT FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)


	(Unaudited)
	June 30,		December 31,
	2022		2021
ASSETS
Cash and due from banks	$	25,478	$	23,387
Interest-bearing deposits with banks		134,553		385,881
Cash and cash equivalents		160,031		409,268

Interest-bearing time deposits with banks		—		490
Debt securities available-for-sale, at fair value		924,706		942,168
Debt securities held-to-maturity (fair value of $510,152 in 2022 and $336,027 in 2021)		548,236		336,185
Equity securities with readily determinable fair value		3,103		3,443
Equity securities with no readily determinable fair value		1,952		1,927
Restricted stock, at cost		2,813		2,739
Loans held for sale		5,312		4,942

Loans, before allowance for loan losses		2,451,826		2,499,689
Allowance for loan losses		(24,734)		(23,936)
Loans, net of allowance for loan losses		2,427,092		2,475,753

Bank owned life insurance		7,474		7,393
Bank premises and equipment, net		51,433		52,483
Bank premises held for sale		319		1,452
Foreclosed assets		2,891		3,278
Goodwill		29,322		29,322
Core deposit intangible assets, net		1,453		1,943
Mortgage servicing rights, at fair value		10,089		7,994
Investments in unconsolidated subsidiaries		1,165		1,165
Accrued interest receivable		14,263		14,901
Other assets		32,324		17,408
Total assets	$	4,223,978	$	4,314,254

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Noninterest-bearing	$	1,028,790	$	1,087,659
Interest-bearing		2,673,196		2,650,526
Total deposits		3,701,986		3,738,185

Securities sold under agreements to repurchase		51,091		61,256
Subordinated notes		39,356		39,316
Junior subordinated debentures issued to capital trusts		37,747		37,714
Other liabilities		19,989		25,902
Total liabilities		3,850,169		3,902,373

COMMITMENTS AND CONTINGENCIES (Note 14)

Stockholders' Equity
Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued or outstanding		—		—
Common stock, $0.01 par value; 125,000,000 shares authorized; shares issued of 29,308,491 at 2022 and 29,276,547 at 2021; shares outstanding of 28,831,197 at 2022 and 28,986,061 at 2021		293		293
Surplus		222,087		220,891
Retained earnings		212,506		194,132
Accumulated other comprehensive income (loss)		(52,820)		1,471
Treasury stock at cost, 477,294 shares at 2022 and 290,486 at 2021		(8,257)		(4,906)
Total stockholders’ equity		373,809		411,881
Total liabilities and stockholders’ equity	$	4,223,978	$	4,314,254

See accompanying Notes to Consolidated Financial Statements (Unaudited)

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HBT FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

INTEREST AND DIVIDEND INCOME	(dollars in thousands, except per share data)
Loans, including fees:
Taxable	$	27,843	$	25,278	$	54,649	$	50,412
Federally tax exempt		679		540		1,341		1,150
Securities:
Taxable		5,663		4,058		10,312		7,691
Federally tax exempt		1,138		1,144		2,178		2,280
Interest-bearing deposits in bank		420		115		579		195
Other interest and dividend income		14		12		33		25
Total interest and dividend income		35,757		31,147		69,092		61,753

INTEREST EXPENSE
Deposits		506		613		1,075		1,257
Securities sold under agreements to repurchase		8		8		17		15
Borrowings		1		—		2		1
Subordinated notes		469		469		939		939
Junior subordinated debentures issued to capital trusts		400		357		758		712
Total interest expense		1,384		1,447		2,791		2,924
Net interest income		34,373		29,700		66,301		58,829
PROVISION FOR LOAN LOSSES		145		(2,162)		(439)		(5,567)
Net interest income after provision for loan losses		34,228		31,862		66,740		64,396

NONINTEREST INCOME
Card income		2,714		2,449		5,118		4,707
Wealth management fees		2,322		2,005		4,611		3,977
Service charges on deposit accounts		1,792		1,390		3,444		2,687
Mortgage servicing		661		711		1,319		1,396
Mortgage servicing rights fair value adjustment		366		(310)		2,095		1,385
Gains on sale of mortgage loans		326		1,562		913		3,662
Unrealized gains (losses) on equity securities		(153)		6		(340)		46
Gains (losses) on foreclosed assets		(7)		216		33		140
Gains (losses) on other assets		(43)		(48)		150		(47)
Income on bank owned life insurance		41		—		81		—
Other noninterest income		532		793		1,170		1,629
Total noninterest income		8,551		8,774		18,594		19,582

NONINTEREST EXPENSE
Salaries		12,936		12,173		25,737		24,651
Employee benefits		1,984		1,409		4,428		3,094
Occupancy of bank premises		1,741		1,463		3,801		3,401
Furniture and equipment		623		603		1,175		1,226
Data processing		1,990		1,721		3,643		3,409
Marketing and customer relations		1,205		843		2,056		1,408
Amortization of intangible assets		245		258		490		547
FDIC insurance		298		244		586		484
Loan collection and servicing		278		333		435		698
Foreclosed assets		31		319		163		462
Other noninterest expense		2,511		2,788		5,485		5,318
Total noninterest expense		23,842		22,154		47,999		44,698
INCOME BEFORE INCOME TAX EXPENSE		18,937		18,482		37,335		39,280
INCOME TAX EXPENSE		4,852		4,765		9,646		10,318
NET INCOME	$	14,085	$	13,717	$	27,689	$	28,962

EARNINGS PER SHARE - BASIC	$	0.49	$	0.50	$	0.96	$	1.06
EARNINGS PER SHARE - DILUTED	$	0.49	$	0.50	$	0.95	$	1.05
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING		28,891,202		27,362,579		28,938,634		27,396,557

See accompanying Notes to Consolidated Financial Statements (Unaudited)

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HBT FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

	(dollars in thousands)
NET INCOME	$	14,085	$	13,717	$	27,689	$	28,962

OTHER COMPREHENSIVE (LOSS) INCOME
Unrealized (losses) gains on debt securities available-for-sale		(24,151)		8,800		(77,573)		(14,274)
Reclassification adjustment for amortization of net unrealized losses on debt securities transferred to held-to-maturity		549		199		730		231
Unrealized gains (losses) on derivative instruments		149		(38)		743		181
Reclassification adjustment for net settlements on derivative instruments		67		102		163		201
Total other comprehensive (loss) income, before tax		(23,386)		9,063		(75,937)		(13,661)
Income tax (benefit) expense		(6,666)		2,583		(21,646)		(3,894)
Total other comprehensive (loss) income		(16,720)		6,480		(54,291)		(9,767)
TOTAL COMPREHENSIVE (LOSS) INCOME	$	(2,635)	$	20,197	$	(26,602)	$	19,195

See accompanying Notes to Consolidated Financial Statements (Unaudited)

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HBT FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)


								Accumulated
	Common Stock							Other				Total
	Shares					Retained		Comprehensive		Treasury		Stockholders’
	Outstanding	Amount		Surplus		Earnings		Income (Loss)		Stock		Equity

	(dollars in thousands, except per share data)
Balance, March 31, 2022	28,967,943	$	293	$	221,735	$	203,076	$	(36,100)	$	(5,849)	$	383,155
Net income	—		—		—		14,085		—		—		14,085
Other comprehensive loss	—		—		—		—		(16,720)		—		(16,720)
Stock-based compensation	—		—		352		—		—		—		352
Repurchase of common stock	(136,746)		—		—		—		—		(2,408)		(2,408)
Cash dividends and dividend equivalents ($0.16 per share)	—		—		—		(4,655)		—		—		(4,655)
Balance, June 30, 2022	28,831,197	$	293	$	222,087	$	212,506	$	(52,820)	$	(8,257)	$	373,809

Balance, March 31, 2021	27,382,069	$	275	$	191,004	$	165,735	$	1,906	$	(1,514)	$	357,406
Net income	—		—		—		13,717		—		—		13,717
Other comprehensive income	—		—		—		—		6,480		—		6,480
Stock-based compensation	—		—		181		—		—		—		181
Repurchase of common stock	(27,016)										(466)		(466)
Cash dividends and dividend equivalents ($0.15 per share)	—		—		—		(4,124)		—		—		(4,124)
Balance, June 30, 2021	27,355,053	$	275	$	191,185	$	175,328	$	8,386	$	(1,980)	$	373,194

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HBT FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED)

(Unaudited)


								Accumulated
	Common Stock							Other				Total
	Shares					Retained		Comprehensive		Treasury		Stockholders’
	Outstanding	Amount		Surplus		Earnings		Income (Loss)		Stock		Equity

	(dollars in thousands, except per share data)
Balance, December 31, 2021	28,986,061	$	293	$	220,891	$	194,132	$	1,471	$	(4,906)	$	411,881
Net income	—		—		—		27,689		—		—		27,689
Other comprehensive loss	—		—		—		—		(54,291)		—		(54,291)
Stock-based compensation	—		—		1,253		—		—		—		1,253
Issuance of common stock upon vesting of restricted stock units, net of tax withholdings	31,944		—		(57)		—		—		—		(57)
Repurchase of common stock	(186,808)		—		—		—		—		(3,351)		(3,351)
Cash dividends and dividend equivalents ($0.32 per share)	—		—		—		(9,315)		—		—		(9,315)
Balance, June 30, 2022	28,831,197	$	293	$	222,087	$	212,506	$	(52,820)	$	(8,257)	$	373,809

Balance, December 31, 2020	27,457,306	$	275	$	190,875	$	154,614	$	18,153	$	—	$	363,917
Net income	—		—		—		28,962		—		—		28,962
Other comprehensive loss	—		—		—		—		(9,767)		—		(9,767)
Stock-based compensation	—		—		310		—		—		—		310
Issuance of common stock upon vesting of restricted stock units	20,225		—		—		—		—		—		—
Repurchase of common stock	(122,478)		—		—		—		—		(1,980)		(1,980)
Cash dividends and dividend equivalents ($0.30 per share)	—		—		—		(8,248)		—		—		(8,248)
Balance, June 30, 2021	27,355,053	$	275	$	191,185	$	175,328	$	8,386	$	(1,980)	$	373,194

See accompanying Notes to Consolidated Financial Statements (Unaudited)

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HBT FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
	2022		2021

	(dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	27,689	$	28,962
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		1,532		1,545
Provision for loan losses		(439)		(5,567)
Net amortization of debt securities		3,609		3,553
Deferred income tax expense		141		1,137
Stock-based compensation		1,253		310
Net accretion of discount and deferred loan fees on loans		(3,263)		(5,499)
Net unrealized loss (gain) on equity securities		340		(46)
Net loss on disposals of bank premises and equipment		14		14
Net gain on sales of bank premises held for sale		(187)		—
Impairment losses on bank premises held for sale		23		—
Net gain on sales of foreclosed assets		(98)		(213)
Write-down of foreclosed assets		65		73
Amortization of intangibles		490		547
Increase in mortgage servicing rights		(2,095)		(1,385)
Amortization of discount and issuance costs on subordinated notes and debentures		73		72
Amortization of premium on interest-bearing time deposits with banks		5		—
Amortization of premium on time deposits		(126)		—
Mortgage loans originated for sale		(38,091)		(114,768)
Proceeds from sale of mortgage loans		38,634		127,192
Net gain on sale of mortgage loans		(913)		(3,662)
Increase in cash surrender value of bank owned life insurance		(81)		—
Decrease in accrued interest receivable		638		1,470
Decrease in other assets		1,827		2,190
Increase in other liabilities		(245)		(12,311)
Net cash provided by operating activities		30,795		23,614

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of interest-bearing time deposits with banks		485		—
Proceeds from paydowns, maturities, and calls of debt securities		74,703		101,621
Purchase of securities		(349,769)		(273,352)
Net decrease in loans		52,336		95,944
Purchase of restricted stock		(74)		(241)
Purchases of bank premises and equipment		(496)		(572)
Proceeds from sales of bank premises and equipment		—		17
Proceeds from sales of bank premises held for sale		1,297		—
Proceeds from sales of foreclosed assets		447		1,229
Net cash used in investing activities		(221,071)		(75,354)

CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in deposits		(36,073)		294,100
Net (decrease) increase in repurchase agreements		(10,165)		1,020
Taxes paid related to the vesting of restricted stock units		(57)		—
Repurchase of common stock		(3,351)		(1,980)
Cash dividends and dividend equivalents paid		(9,315)		(8,248)
Net cash (used in) provided by financing activities		(58,961)		284,892

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(249,237)		233,152
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		409,268		312,451
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	160,031	$	545,603

See accompanying Notes to Consolidated Financial Statements (Unaudited)

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HBT FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)


	Six Months Ended June 30,
	2022		2021

	(dollars in thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$	2,860	$	3,118
Cash paid for income taxes	$	7,845	$	12,991

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING ACTIVITIES
Transfers of loans to foreclosed assets	$	27	$	4,856
Sales of foreclosed assets through loan origination	$	—	$	178

See accompanying Notes to Consolidated Financial Statements (Unaudited)

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – ACCOUNTING POLICIES

Basis of Presentation

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

The unaudited consolidated financial statements, including the notes thereto, have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) interim reporting requirements. Certain information in footnote disclosures normally included in financial statements prepared in accordance with GAAP has been condensed or omitted pursuant to rules and regulations of the SEC. These interim unaudited consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 11, 2022.

The unaudited consolidated financial statements include all normal, recurring adjustments necessary for a fair presentation of the results for the interim periods. The results for interim periods are not necessarily indicative of results for a full year.

The Company qualifies as an "emerging growth company" as defined by the Jumpstart Our Business Startups Act (“JOBS Act”). The JOBS Act permits emerging growth companies an extended transition period for complying with new or revised accounting standards affecting public companies. The Company may remain an emerging growth company until the earliest to occur of: (1) the end of the fiscal year following the fifth anniversary of the completion of our initial public offering, which is December 31, 2024, (2) the last day of the fiscal year in which the Company has $1.07 billion or more in annual revenues, (3) the date on which the Company is deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) or (4) the date on which the Company has, during the previous three year period, issued, publicly or privately, more than $1.0 billion in non-convertible debt securities. The Company has elected to use the extended transition period until the Company is no longer an emerging growth company or until the Company chooses to affirmatively and irrevocably opt out of the extended transition period. As a result, the Company’s financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies.

Use of Estimates

The accompanying consolidated financial statements have been prepared in conformity with GAAP. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and the reported results of operations for the periods then ended.

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

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Segment Reporting

The Company’s operations consist of one reportable segment. 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.

Subsequent Events

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

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued 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 variables are best suited to be economic variables 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 securities portfolios, along with other management judgments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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, 2022. The Company is currently evaluating the effect that this standard will have on the consolidated results of operations and financial position.

NOTE 2 – ACQUISITIONS

NXT Bancorporation, Inc.

On October 1, 2021, HBT Financial acquired 100% of the issued and outstanding common stock of NXT Bancorporation, Inc. (“NXT”), the holding company for NXT Bank, pursuant to an Agreement and Plan of Merger dated June 7, 2021. Under the Agreement and Plan of Merger, NXT merged with and into HBT Financial, with HBT Financial as the surviving entity, on October 1, 2021. Additionally, NXT Bank was merged with and into Heartland Bank, with Heartland Bank as the surviving entity, in December 2021.

At the effective time of the merger, each share of NXT was converted into the right to receive 67.6783 shares of HBT Financial common stock, cash in lieu of fractional shares, and $400 in cash. There were 1,799,016 shares of HBT Financial common stock issued at the effective time of the acquisition with an aggregate market value of $29.3 million, based on the closing stock price of $16.27 on October 1, 2021. This transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair values on the date of acquisition. Goodwill of $5.7 million was recorded in the acquisition, which reflects expected synergies from combining the operations of HBT Financial and NXT, and is nondeductible for tax purposes.

The acquisition of NXT provided an opportunity to utilize Heartland Bank’s excess liquidity at the time of acquisition to replace NXT Bank’s higher-cost funding. Additionally, Heartland Bank’s broader range of products and services, as well as a greater ability to meet larger borrowing needs, has provided an opportunity to expand NXT Bank’s customer relationships.

During the three and six months ended June 30, 2021, HBT Financial incurred $0.2 million in pre-tax acquisition expenses related to the acquisition of NXT, comprised primarily of professional fees. 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 three and six months ended June 30, 2022.

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The fair value of the assets acquired and liabilities assumed from NXT on the acquisition date were as follows (dollars in thousands):


	Fair Value
Assets acquired:
Cash and cash equivalents	$	5,862
Interest-bearing time deposits with banks		739
Debt securities		18,295
Equity securities with readily determinable fair value		43
Restricted stock		796
Loans		194,576
Bank owned life insurance		7,352
Bank premises and equipment		3,667
Core deposit intangible assets		199
Mortgage servicing rights		370
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
FHLB advances		12,625
Other liabilities		1,633
Total liabilities assumed		199,924
Net assets acquired	$	34,201

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
Estimate of contractual cash flows not expected to be collected		1,045

There were no loans acquired with deteriorated credit quality from NXT.

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table provides the pro forma information for the results of operations for the three and six months ended June 30, 2021, 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. 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, 2020. 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.


	Pro Forma
	Three Months Ended		Six Months Ended
(dollars in thousands, except per share data)	June 30, 2021		June 30, 2021
Total revenues (net interest income and noninterest income)	$	40,621		83,164
Net income		14,222		30,192
Earnings per share - basic		0.49		1.03
Earnings per share - diluted		0.49		1.03

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 – SECURITIES

Debt Securities

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


June 30, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

Available-for-sale:	(dollars in thousands)
U.S. Treasury	$	169,930	$	—	$	(10,725)	$	159,205
U.S. government agency		60,373		—		(2,156)		58,217
Municipal		286,012		190		(25,661)		260,541
Mortgage-backed:
Agency residential		236,516		152		(11,626)		225,042
Agency commercial		160,576		15		(11,355)		149,236
Corporate		74,345		215		(2,095)		72,465
Total available-for-sale		987,752		572		(63,618)		924,706
Held-to-maturity:
U.S. government agency		88,413		—		(5,364)		83,049
Municipal		40,920		376		(66)		41,230
Mortgage-backed:
Agency residential		108,711		276		(1,971)		107,016
Agency commercial		310,192		45		(31,380)		278,857
Total held-to-maturity		548,236		697		(38,781)		510,152
Total debt securities	$	1,535,988	$	1,269	$	(102,399)	$	1,434,858


December 31, 2021	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

Available-for-sale:	(dollars in thousands)
U.S. Treasury	$	109,002	$	328	$	(354)	$	108,976
U.S. government agency		129,269		1,303		(2,467)		128,105
Municipal		293,837		6,144		(2,904)		297,077
Mortgage-backed:
Agency residential		178,236		2,149		(919)		179,466
Agency commercial		164,875		1,234		(2,048)		164,061
Corporate		63,141		1,638		(296)		64,483
Total available-for-sale		938,360		12,796		(8,988)		942,168
Held-to-maturity:
U.S. government agency		12,349		42		(51)		12,340
Municipal		15,666		809		—		16,475
Mortgage-backed:
Agency residential		20,555		196		(102)		20,649
Agency commercial		287,615		1,749		(2,801)		286,563
Total held-to-maturity		336,185		2,796		(2,954)		336,027
Total debt securities	$	1,274,545	$	15,592	$	(11,942)	$	1,278,195

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 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
	Amortized				Amortized				Amortized
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value

	(dollars in thousands)
U.S. government agency	$	78,841	$	71,048	$	—	$	—	$	7,593	$	7,323
Mortgage-backed:
Agency residential		8,175		7,651		—		—		8,776		8,536
Agency commercial		27,834		25,432		99,271		99,275		118,792		113,861
Total	$	114,850	$	104,131	$	99,271	$	99,275	$	135,161	$	129,720

The debt securities were transferred between categories at fair value, with the transfer date fair value becoming the new amortized cost for each security transferred. The unrealized gain (loss), net of tax, at the date of transfer remains a component of accumulated other comprehensive income, but will be amortized over the remaining life of the debt securities as an adjustment of yield in a manner consistent with amortization of any premium or discount. As a result, the amortization of an unrealized gain (loss) reported in accumulated other comprehensive income will offset or mitigate the effect on interest income of the amortization of the premium or discount for that held-to-maturity debt security.

As of June 30, 2022 and December 31, 2021, the Bank had debt securities with a carrying value of $394.0 million and $353.3 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 Company has no direct exposure to the State of Illinois, but approximately 49% of the municipal portfolio consists of debt securities issued by municipalities located in Illinois as of June 30, 2022. Approximately 81% of such debt securities were general obligation issues as of June 30, 2022.

The amortized cost and fair value of debt securities by contractual maturity, as of June 30, 2022, 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
	Amortized Cost		Fair Value		Amortized Cost		Fair Value

	(dollars in thousands)
Due in 1 year or less	$	29,520	$	29,517	$	2,140	$	2,159
Due after 1 year through 5 years		209,572		202,398		26,318		26,058
Due after 5 years through 10 years		272,306		247,656		77,431		73,997
Due after 10 years		79,262		70,857		23,444		22,065

Mortgage-backed:
Agency residential		236,516		225,042		108,711		107,016
Agency commercial		160,576		149,236		310,192		278,857
Total	$	987,752	$	924,706	$	548,236	$	510,152

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following tables present 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 June 30, 2022 and December 31, 2021:


	Investments in a Continuous Unrealized Loss Position
	Less than 12 Months				12 Months or More				Total
June 30, 2022	Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value

Available-for-sale:	(dollars in thousands)
U.S. Treasury	$	(10,725)	$	159,205	$	—	$	—	$	(10,725)	$	159,205
U.S. government agency		(2,156)		58,197		—		—		(2,156)		58,197
Municipal		(15,751)		176,771		(9,910)		50,424		(25,661)		227,195
Mortgage-backed:
Agency residential		(11,320)		203,603		(306)		4,556		(11,626)		208,159
Agency commercial		(8,812)		114,025		(2,543)		22,685		(11,355)		136,710
Corporate		(1,085)		46,792		(1,010)		3,952		(2,095)		50,744
Total available-for-sale		(49,849)		758,593		(13,769)		81,617		(63,618)		840,210
Held-to-maturity:
U.S. government agency		(2,564)		40,773		(2,800)		42,276		(5,364)		83,049
Municipal		(66)		6,513		—		—		(66)		6,513
Mortgage-backed:
Agency residential		(1,971)		74,978		—		—		(1,971)		74,978
Agency commercial		(31,078)		274,153		(302)		2,238		(31,380)		276,391
Total held-to-maturity		(35,679)		396,417		(3,102)		44,514		(38,781)		440,931
Total debt securities	$	(85,528)	$	1,155,010	$	(16,871)	$	126,131	$	(102,399)	$	1,281,141


	Investments in a Continuous Unrealized Loss Position
	Less than 12 Months				12 Months or More				Total
December 31, 2021	Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value

Available-for-sale:	(dollars in thousands)
U.S. Treasury	$	(354)	$	68,410	$	—	$	—	$	(354)	$	68,410
U.S. government agency		(2,183)		80,219		(284)		5,578		(2,467)		85,797
Municipal		(2,018)		89,424		(886)		17,327		(2,904)		106,751
Mortgage-backed:
Agency residential		(851)		91,703		(68)		4,305		(919)		96,008
Agency commercial		(1,921)		113,111		(127)		6,443		(2,048)		119,554
Corporate		(7)		2,737		(289)		4,671		(296)		7,408
Total available-for-sale		(7,334)		445,604		(1,654)		38,324		(8,988)		483,928
Held-to-maturity:
U.S. government agency		(51)		4,949		—		—		(51)		4,949
Mortgage-backed:
Agency residential		(102)		14,932		—		—		(102)		14,932
Agency commercial		(2,673)		174,428		(128)		2,776		(2,801)		177,204
Total held-to-maturity		(2,826)		194,309		(128)		2,776		(2,954)		197,085
Total debt securities	$	(10,160)	$	639,913	$	(1,782)	$	41,100	$	(11,942)	$	681,013

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of June 30, 2022, there were 87 debt securities in an unrealized loss position for a period of twelve months or more, and 603 debt securities in an unrealized loss position for a period of less than twelve months. These unrealized losses are primarily a result of fluctuations in market interest rates. In analyzing an issuer’s financial condition, management considers whether the debt 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 debt securities are deemed to be temporary.

There were no sales of debt securities during the three and six months ended June 30, 2022 and 2021.

Equity Securities

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

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

The initial cost and carrying values of equity securities, with cumulative net unrealized gains and losses are as follows:


	Readily		No Readily
	Determinable		Determinable
June 30, 2022	Fair Value		Fair Value

	(dollars in thousands)
Initial cost	$	3,142	$	2,117
Cumulative net unrealized gains (losses)		(39)		(165)
Carrying value	$	3,103	$	1,952


	Readily		No Readily
	Determinable		Determinable
December 31, 2021	Fair Value		Fair Value

	(dollars in thousands)
Initial cost	$	3,142	$	2,092
Cumulative net unrealized gains (losses)		301		(165)
Carrying value	$	3,443	$	1,927

As of June 30, 2022 and December 31, 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.

Table of Contents

HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

There were no sales of equity securities during the three and six months ended June 30, 2022 and 2021. Unrealized gains (losses) on equity securities were as follows during the three and six months ended June 30, 2022:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

	(dollars in thousands)
Readily determinable fair value	$	(153)	$	6	$	(340)	$	46
No readily determinable fair value		—		—		—		—
Unrealized gains (losses) on equity securities	$	(153)	$	6	$	(340)	$	46

NOTE 4 – LOANS AND THE ALLOWANCE FOR LOAN LOSSES

Major categories of loans are summarized as follows:


	June 30, 2022		December 31, 2021

	(dollars in thousands)
Commercial and industrial	$	249,839	$	286,946
Agricultural and farmland		230,370		247,796
Commercial real estate - owner occupied		228,997		234,544
Commercial real estate - non-owner occupied		656,093		684,023
Multi-family		269,452		263,911
Construction and land development		332,041		298,048
One-to-four family residential		325,047		327,837
Municipal, consumer, and other		159,987		156,584
Loans, before allowance for loan losses		2,451,826		2,499,689
Allowance for loan losses		(24,734)		(23,936)
Loans, net of allowance for loan losses	$	2,427,092	$	2,475,753

Paycheck Protection Program (PPP) loans (included above)
Commercial and industrial	$	2,823	$	28,404
Agricultural and farmland		9		913
Municipal, consumer, and other		—		171
Total PPP loans	$	2,832	$	29,488

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following tables detail activity in the allowance for loan losses for the three and six months ended June 30:


					Commercial		Commercial								Municipal,
	Commercial		Agricultural		Real Estate		Real Estate				Construction		One-to-four		Consumer,
	and		and		Owner		Non-owner				and Land		Family		and
Three Months Ended June 30, 2022	Industrial		Farmland		Occupied		Occupied		Multi-Family		Development		Residential		Other		Total

Allowance for loan losses:	(dollars in thousands)
Balance, March 31, 2022	$	2,491	$	842	$	1,511	$	7,014	$	1,354	$	4,493	$	1,583	$	5,220	$	24,508
Provision for loan losses		450		82		(287)		(408)		21		(434)		51		670		145
Charge-offs		—		—		—		—		—		—		(47)		(112)		(159)
Recoveries		40		—		—		5		—		—		109		86		240
Balance, June 30, 2022	$	2,981	$	924	$	1,224	$	6,611	$	1,375	$	4,059	$	1,696	$	5,864	$	24,734

					Commercial		Commercial								Municipal,
	Commercial		Agricultural		Real Estate		Real Estate				Construction		One-to-four		Consumer,
	and		and		Owner		Non-owner				and Land		Family		and
Three Months Ended June 30, 2021	Industrial		Farmland		Occupied		Occupied		Multi-Family		Development		Residential		Other		Total

Allowance for loan losses:	(dollars in thousands)
Balance, March 31, 2021	$	2,420	$	865	$	2,715	$	11,330	$	2,090	$	4,006	$	1,573	$	3,760	$	28,759
Provision for loan losses		578		(84)		(769)		(1,511)		(81)		(261)		(45)		11		(2,162)
Charge-offs		(295)		—		—		—		—		—		(41)		(66)		(402)
Recoveries		14		—		—		6		—		179		33		80		312
Balance, June 30, 2021	$	2,717	$	781	$	1,946	$	9,825	$	2,009	$	3,924	$	1,520	$	3,785	$	26,507


					Commercial		Commercial								Municipal,
	Commercial		Agricultural		Real Estate		Real Estate				Construction		One-to-four		Consumer,
	and		and		Owner		Non-owner				and Land		Family		and
Six Months Ended June 30, 2022	Industrial		Farmland		Occupied		Occupied		Multi-Family		Development		Residential		Other		Total

Allowance for loan losses:	(dollars in thousands)
Balance, December 31, 2021	$	2,440	$	845	$	1,840	$	8,145	$	1,263	$	4,914	$	1,311	$	3,178	$	23,936
Provision for loan losses		(203)		79		(716)		(1,804)		112		(855)		171		2,777		(439)
Charge-offs		(5)		—		—		—		—		—		(49)		(239)		(293)
Recoveries		749		—		100		270		—		—		263		148		1,530
Balance, June 30, 2022	$	2,981	$	924	$	1,224	$	6,611	$	1,375	$	4,059	$	1,696	$	5,864	$	24,734

					Commercial		Commercial								Municipal,
	Commercial		Agricultural		Real Estate		Real Estate								Consumer
	and		and		Owner		Non-owner				Construction		Residential		and
Six Months Ended June 30, 2021	Industrial		Farmland		Occupied		Occupied		Multi-Family		and Land		Real Estate		Other		Total

Allowance for loan losses:	(dollars in thousands)
Balance, December 31, 2020	$	3,929	$	793	$	3,141	$	11,251	$	1,957	$	4,232	$	1,801	$	4,734	$	31,838
Provision for loan losses		(1,224)		(12)		(1,195)		(1,439)		52		(577)		(243)		(929)		(5,567)
Charge-offs		(295)		—		—		—		—		—		(113)		(189)		(597)
Recoveries		307		—		—		13		—		269		75		169		833
Balance, June 30, 2021	$	2,717	$	781	$	1,946	$	9,825	$	2,009	$	3,924	$	1,520	$	3,785	$	26,507

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


					Commercial		Commercial								Municipal,
	Commercial		Agricultural		Real Estate		Real Estate				Construction		One-to-four		Consumer,
	and		and		Owner		Non-owner				and Land		Family		and
June 30, 2022	Industrial		Farmland		Occupied		Occupied		Multi-Family		Development		Residential		Other		Total

Loan balances:	(dollars in thousands)
Collectively evaluated for impairment	$	240,604	$	229,409	$	211,886	$	611,614	$	268,880	$	328,912	$	311,353	$	147,226	$	2,349,884
Individually evaluated for impairment		9,101		247		12,524		32,430		—		2,008		8,560		12,737		77,607
Acquired with deteriorated credit quality		134		714		4,587		12,049		572		1,121		5,134		24		24,335
Total	$	249,839	$	230,370	$	228,997	$	656,093	$	269,452	$	332,041	$	325,047	$	159,987	$	2,451,826

Allowance for loan losses:
Collectively evaluated for impairment	$	2,827	$	924	$	993	$	3,968	$	1,372	$	4,056	$	1,594	$	1,873	$	17,607
Individually evaluated for impairment		154		—		208		2,641		—		—		100		3,991		7,094
Acquired with deteriorated credit quality		—		—		23		2		3		3		2		—		33
Total	$	2,981	$	924	$	1,224	$	6,611	$	1,375	$	4,059	$	1,696	$	5,864	$	24,734

					Commercial		Commercial								Municipal,
	Commercial		Agricultural		Real Estate		Real Estate				Construction		One-to-four		Consumer,
	and		and		Owner		Non-owner				and Land		Family		and
December 31, 2021	Industrial		Farmland		Occupied		Occupied		Multi-Family		Development		Residential		Other		Total

Loan balances:	(dollars in thousands)
Collectively evaluated for impairment	$	272,064	$	247,021	$	216,794	$	641,555	$	262,701	$	293,548	$	314,807	$	143,510	$	2,392,000
Individually evaluated for impairment		14,744		12		12,332		29,575		—		2,018		6,897		13,041		78,619
Acquired with deteriorated credit quality		138		763		5,418		12,893		1,210		2,482		6,133		33		29,070
Total	$	286,946	$	247,796	$	234,544	$	684,023	$	263,911	$	298,048	$	327,837	$	156,584	$	2,499,689

Allowance for loan losses:
Collectively evaluated for impairment	$	2,253	$	845	$	1,480	$	5,138	$	1,259	$	4,895	$	1,099	$	1,302	$	18,271
Individually evaluated for impairment		187		—		327		2,999		—		—		210		1,875		5,598
Acquired with deteriorated credit quality		—		—		33		8		4		19		2		1		67
Total	$	2,440	$	845	$	1,840	$	8,145	$	1,263	$	4,914	$	1,311	$	3,178	$	23,936

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


	Unpaid
	Principal		Recorded		Related
June 30, 2022	Balance		Investment		Allowance

With an allowance recorded:	(dollars in thousands)
Commercial and industrial	$	254	$	254	$	154
Agricultural and farmland		—		—		—
Commercial real estate - owner occupied		742		742		208
Commercial real estate - non-owner occupied		14,526		14,513		2,641
Multi-family		—		—		—
Construction and land development		—		—		—
One-to-four family residential		576		534		100
Municipal, consumer, and other		8,312		8,289		3,991
Total	$	24,410	$	24,332	$	7,094

With no related allowance:
Commercial and industrial	$	8,861	$	8,847	$	—
Agricultural and farmland		247		247		—
Commercial real estate - owner occupied		11,936		11,782		—
Commercial real estate - non-owner occupied		17,997		17,917		—
Multi-family		—		—		—
Construction and land development		2,108		2,008		—
One-to-four family residential		9,337		8,026		—
Municipal, consumer, and other		4,488		4,448		—
Total	$	54,974	$	53,275	$	—

Total loans individually evaluated for impairment:
Commercial and industrial	$	9,115	$	9,101	$	154
Agricultural and farmland		247		247		—
Commercial real estate - owner occupied		12,678		12,524		208
Commercial real estate - non-owner occupied		32,523		32,430		2,641
Multi-family		—		—		—
Construction and land development		2,108		2,008		—
One-to-four family residential		9,913		8,560		100
Municipal, consumer, and other		12,800		12,737		3,991
Total	$	79,384	$	77,607	$	7,094

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	Unpaid
	Principal		Recorded		Related
December 31, 2021	Balance		Investment		Allowance

With an allowance recorded:	(dollars in thousands)
Commercial and industrial	$	303	$	303	$	187
Agricultural and farmland		—		—		—
Commercial real estate - owner occupied		3,013		3,013		327
Commercial real estate - non-owner occupied		14,912		14,893		2,999
Multi-family		—		—		—
Construction and land development		—		—		—
One-to-four family residential		1,421		1,314		210
Municipal, consumer, and other		8,523		8,498		1,875
Total	$	28,172	$	28,021	$	5,598

With no related allowance:
Commercial and industrial	$	14,452	$	14,441	$	—
Agricultural and farmland		12		12		—
Commercial real estate - owner occupied		9,534		9,319		—
Commercial real estate - non-owner occupied		14,755		14,682		—
Multi-family		—		—		—
Construction and land development		2,112		2,018		—
One-to-four family residential		7,129		5,583		—
Municipal, consumer, and other		4,603		4,543		—
Total	$	52,597	$	50,598	$	—

Total loans individually evaluated for impairment:
Commercial and industrial	$	14,755	$	14,744	$	187
Agricultural and farmland		12		12		—
Commercial real estate - owner occupied		12,547		12,332		327
Commercial real estate - non-owner occupied		29,667		29,575		2,999
Multi-family		—		—		—
Construction and land development		2,112		2,018		—
One-to-four family residential		8,550		6,897		210
Municipal, consumer, and other		13,126		13,041		1,875
Total	$	80,769	$	78,619	$	5,598

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


	Three Months Ended June 30,
	2022				2021
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized

With an allowance recorded:	(dollars in thousands)
Commercial and industrial	$	267	$	4	$	1,888	$	27
Agricultural and farmland		—		—		165		2
Commercial real estate - owner occupied		745		11		2,744		46
Commercial real estate - non-owner occupied		14,603		185		15,564		197
Multi-family		—		—		—		—
Construction and land development		—		—		—		—
One-to-four family residential		548		4		2,165		23
Municipal, consumer, and other		8,344		46		8,726		39
Total	$	24,507	$	250	$	31,252	$	334

With no related allowance:
Commercial and industrial	$	15,156	$	156	$	7,393	$	76
Agricultural and farmland		252		3		383		5
Commercial real estate - owner occupied		11,887		141		5,530		70
Commercial real estate - non-owner occupied		17,947		340		5,586		70
Multi-family		—		—		874		—
Construction and land development		2,012		26		1,971		—
One-to-four family residential		8,181		84		6,600		48
Municipal, consumer, and other		4,480		33		4,704		22
Total	$	59,915	$	783	$	33,041	$	291

Total loans individually evaluated for impairment:
Commercial and industrial	$	15,423	$	160	$	9,281	$	103
Agricultural and farmland		252		3		548		7
Commercial real estate - owner occupied		12,632		152		8,274		116
Commercial real estate - non-owner occupied		32,550		525		21,150		267
Multi-family		—		—		874		—
Construction and land development		2,012		26		1,971		—
One-to-four family residential		8,729		88		8,765		71
Municipal, consumer, and other		12,824		79		13,430		61
Total	$	84,422	$	1,033	$	64,293	$	625

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(Unaudited)


	Six Months Ended June 30,
	2022				2021
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized

With an allowance recorded:	(dollars in thousands)
Commercial and industrial	$	280	$	8	$	2,076	$	58
Agricultural and farmland		—		—		166		4
Commercial real estate - owner occupied		1,580		44		2,993		87
Commercial real estate - non-owner occupied		14,728		371		17,949		405
Multi-family		—		—		—		—
Construction and land development		—		—		1,118		27
One-to-four family residential		597		9		2,404		46
Municipal, consumer, and other		8,426		85		8,764		79
Total	$	25,611	$	517	$	35,470	$	706

With no related allowance:
Commercial and industrial	$	17,316	$	356	$	4,248	$	90
Agricultural and farmland		244		3		383		11
Commercial real estate - owner occupied		11,460		247		7,554		192
Commercial real estate - non-owner occupied		16,728		538		5,625		138
Multi-family		—		—		875		10
Construction and land development		2,014		48		1,868		26
One-to-four family residential		8,453		141		6,789		97
Municipal, consumer, and other		4,511		54		4,725		44
Total	$	60,726	$	1,387	$	32,067	$	608

Total loans individually evaluated for impairment:
Commercial and industrial	$	17,596	$	364	$	6,324	$	148
Agricultural and farmland		244		3		549		15
Commercial real estate - owner occupied		13,040		291		10,547		279
Commercial real estate - non-owner occupied		31,456		909		23,574		543
Multi-family		—		—		875		10
Construction and land development		2,014		48		2,986		53
One-to-four family residential		9,050		150		9,193		143
Municipal, consumer, and other		12,937		139		13,489		123
Total	$	86,337	$	1,904	$	67,537	$	1,314

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(Unaudited)

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


	Accruing Interest
			30 - 89 Days		90+ Days				Total
June 30, 2022	Current		Past Due		Past Due		Nonaccrual		Loans

	(dollars in thousands)
Commercial and industrial	$	249,547	$	21	$	182	$	89	$	249,839
Agricultural and farmland		229,878		492		—		—		230,370
Commercial real estate - owner occupied		228,997		—		—		—		228,997
Commercial real estate - non-owner occupied		655,089		—		—		1,004		656,093
Multi-family		269,452		—		—		—		269,452
Construction and land development		331,393		131		—		517		332,041
One-to-four family residential		322,580		869		23		1,575		325,047
Municipal, consumer, and other		159,726		198		—		63		159,987
Total	$	2,446,662	$	1,711	$	205	$	3,248	$	2,451,826


	Accruing Interest
			30 - 89 Days		90+ Days				Total
December 31, 2021	Current		Past Due		Past Due		Nonaccrual		Loans

	(dollars in thousands)
Commercial and industrial	$	286,563	$	9	$	—	$	374	$	286,946
Agricultural and farmland		247,772		24		—		—		247,796
Commercial real estate - owner occupied		234,441		103		—		—		234,544
Commercial real estate - non-owner occupied		683,029		823		—		171		684,023
Multi-family		263,911		—		—		—		263,911
Construction and land development		297,465		64		—		519		298,048
One-to-four family residential		325,780		383		32		1,642		327,837
Municipal, consumer, and other		156,297		214		16		57		156,584
Total	$	2,495,258	$	1,620	$	48	$	2,763	$	2,499,689

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


June 30, 2022	Pass		Pass-Watch		Substandard		Doubtful		Total

	(dollars in thousands)
Commercial and industrial	$	231,925	$	8,813	$	9,101	$	—	$	249,839
Agricultural and farmland		215,962		13,530		878		—		230,370
Commercial real estate - owner occupied		199,482		17,815		11,700		—		228,997
Commercial real estate - non-owner occupied		609,298		11,543		35,252		—		656,093
Multi-family		264,487		4,965		—		—		269,452
Construction and land development		329,700		332		2,009		—		332,041
One-to-four family residential		309,631		6,280		9,136		—		325,047
Municipal, consumer, and other		146,964		286		12,737		—		159,987
Total	$	2,307,449	$	63,564	$	80,813	$	—	$	2,451,826


December 31, 2021	Pass		Pass-Watch		Substandard		Doubtful		Total

	(dollars in thousands)
Commercial and industrial	$	267,088	$	5,114	$	14,744	$	—	$	286,946
Agricultural and farmland		221,898		25,213		685		—		247,796
Commercial real estate - owner occupied		198,862		24,098		11,584		—		234,544
Commercial real estate - non-owner occupied		619,212		32,372		32,439		—		684,023
Multi-family		241,362		22,549		—		—		263,911
Construction and land development		268,556		27,474		2,018		—		298,048
One-to-four family residential		308,951		11,221		7,665		—		327,837
Municipal, consumer, and other		143,299		244		13,041		—		156,584
Total	$	2,269,228	$	148,285	$	82,176	$	—	$	2,499,689

There were no new troubled debt restructurings during the three and six months ended June 30, 2022 or 2021.

Of the troubled debt restructurings entered into during the last 12 months, there were none which had subsequent payment defaults during the three and six months ended June 30, 2022 or 2021. 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 June 30, 2022 and December 31, 2021, the Company had $3.3 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.

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 June 30, 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

payment modification due to a COVID-19 related financial hardship and had not returned to regular payments. Substantially all modifications were in the form of a three-month interest-only period or a one-month payment deferral. Some borrowers have received more than one loan payment modification.

As of June 30, 2022 and December 31, 2021, the Company pledged loans totaling $570.7 million and $567.0 million, respectively, to the Federal Home Loan Bank of Chicago (“FHLB”) to secure available FHLB advance borrowing capacity.

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

	(dollars in thousands)
Beginning balance	$	484	$	1,338	$	413	$	1,397
Reclassification from non-accretable difference		100		79		217		153
Accretion income		(47)		(67)		(93)		(200)
Ending balance	$	537	$	1,350	$	537	$	1,350

NOTE 5 – LOAN SERVICING

Mortgage loans serviced for others, which are not included in the accompanying consolidated balance sheets, amounted to $997.6 million and $1.04 billion as of June 30, 2022 and December 31, 2021, respectively. Activity in mortgage servicing rights is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

	(dollars in thousands)
Beginning balance	$	9,723	$	7,629	$	7,994	$	5,934
Capitalized servicing rights		136		356		307		753
Fair value adjustment:
Attributable to payments and principal reductions		(379)		(490)		(686)		(957)
Attributable to changes in valuation inputs and assumptions		609		(176)		2,474		1,589
Total fair value adjustment		230		(666)		1,788		632
Ending balance	$	10,089	$	7,319	$	10,089	$	7,319

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(Unaudited)

NOTE 6 – FORECLOSED ASSETS

Foreclosed assets activity is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

	(dollars in thousands)
Beginning balance	$	3,043	$	4,748	$	3,278	$	4,168
Transfers from loans		8		4,185		27		4,856
Proceeds from sales		(153)		(1,214)		(447)		(1,229)
Sales through loan origination		—		(178)		—		(178)
Net gain (loss) on sales		(7)		216		98		213
Direct write-downs		—		—		(65)		(73)
Ending balance	$	2,891	$	7,757	$	2,891	$	7,757

Gains (losses) on foreclosed assets includes the following:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

	(dollars in thousands)
Direct write-downs	$	—	$	—	$	(65)	$	(73)
Net gain (loss) on sales		(7)		216		98		213
Gains (losses) on foreclosed assets	$	(7)	$	216	$	33	$	140

The carrying value of foreclosed one-to-four family residential real estate properties held as of June 30, 2022 and December 31, 2021 was $8 thousand and $0.2 million, respectively. As of June 30, 2022, there was 1 one-to-four family residential real estate loan in the process of foreclosure totaling $0.2 million. As of December 31, 2021, there were 4 one-to-four family residential real estate loans in the process of foreclosure totaling $0.1 million.

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(Unaudited)

NOTE 7 – DEPOSITS

The Company’s deposits are summarized below:


	June 30, 2022		December 31, 2021

	(dollars in thousands)
Noninterest-bearing deposits	$	1,028,790	$	1,087,659
Interest-bearing deposits:
Interest-bearing demand		1,162,292		1,105,949
Money market		581,058		583,198
Savings		654,953		633,171
Time		274,893		328,208
Total interest-bearing deposits		2,673,196		2,650,526
Total deposits	$	3,701,986	$	3,738,185

Money market deposits include $4.2 million of brokered deposits as of December 31, 2021. Money market deposits also include $6.9 million and $6.9 million of reciprocal transaction deposits as of June 30, 2022 and December 31, 2021, respectively. Time deposits include $1.0 million and $0.9 million of reciprocal time deposits as of June 30, 2022, and December 31, 2021, respectively.

The aggregate amounts of time deposits in denominations of $250 thousand or more amounted to $25.4 million and $59.5 million as of June 30, 2022 and December 31, 2021, respectively. The aggregate amounts of time deposits in denominations of $100 thousand or more amounted to $90.5 million and $133.1 million as of June 30, 2022 and December 31, 2021, respectively.

The components of interest expense on deposits are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

	(dollars in thousands)
Interest-bearing demand	$	144	$	127	$	286	$	244
Money market		110		94		231		183
Savings		52		46		102		87
Time		200		346		456		743
Total interest expense on deposits	$	506	$	613	$	1,075	$	1,257

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 8 – 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 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, 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:


	June 30, 2022				December 31, 2021
	Notional		Fair		Notional		Fair
	Amount		Value		Amount		Value

	(dollars in thousands)
Fair value recorded in other assets	$	17,000	$	226	$	—	$	—
Fair value recorded in other liabilities		—		—		17,000		(680)

As of June 30, 2022, the interest rate swap agreements designated as cash flow hedges had contractual maturities between 2024 and 2025. As of December 31, 2021, the Company had cash pledged and held on deposit at counterparties of $0.8 million.

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

reclassified from accumulated

comprehensive income (loss) to income

other comprehensive income

Three Months Ended

Six Months Ended

June 30,

2022

2021

2022

2021

Designated as cash flow hedges:

(dollars in thousands)

Junior subordinated debentures interest expense

(67)

(102)

(163)

(201)

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(Unaudited)

Interest Rate Swaps Not Designated as Hedging Instruments

The Company may offer interest rate swap agreements to its commercial borrowers in connection with their risk management needs. The Company manages the interest rate risk associated with these contracts by entering into an equal and offsetting derivative with a third-party financial institution. While these interest rate swap agreements generally work together as an economic interest rate hedge, the Company did not designate them for hedge accounting treatment. Consequently, changes in fair value of the corresponding derivative financial asset or liability were recorded as either a charge or credit to current earnings during the period in which the changes occurred.

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


	June 30, 2022				December 31, 2021
	Notional		Fair		Notional		Fair
	Amount		Value		Amount		Value

	(dollars in thousands)
Fair value recorded in other assets:
Interest rate swaps with a commercial borrower counterparty	$	36,495	$	657	$	112,041	$	8,622
Interest rate swaps with a financial institution counterparty		74,142		3,052		3,880		75
Total fair value recorded in other assets	$	110,637	$	3,709	$	115,921	$	8,697

Fair value recorded in other liabilities:
Interest rate swaps with a commercial borrower counterparty	$	74,142	$	(3,052)	$	3,880	$	(75)
Interest rate swaps with a financial institution counterparty		36,495		(657)		112,041		(8,622)
Total fair value recorded in other liabilities	$	110,637	$	(3,709)	$	115,921	$	(8,697)

As of June 30, 2022, the interest rate swap agreements not designated as hedging instruments had contractual maturities between 2022 and 2042. As of December 31, 2021, the carrying value of debt securities pledged and held in safekeeping at a financial institution counterparty was $7.5 million.

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:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021

Not designated as hedging instruments:	(dollars in thousands)
Gross gains	$	4,681	$	2,874	$	10,094	$	10,438
Gross losses		(4,681)		(2,874)		(10,094)		(10,438)
Net gains (losses)	$	—	$	—	$	—	$	—

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 9 – 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		Derivatives		Total

	(dollars in thousands)
Three Months Ended June 30, 2022
Balance, March 31, 2022	$	(24,794)	$	(11,048)	$	(258)	$	(36,100)
Other comprehensive income (loss) before reclassifications		(24,151)		—		149		(24,002)
Reclassifications		—		549		67		616
Other comprehensive income (loss), before tax		(24,151)		549		216		(23,386)
Income tax expense (benefit)		(6,884)		157		61		(6,666)
Other comprehensive income (loss), after tax		(17,267)		392		155		(16,720)
Balance, June 30, 2022	$	(42,061)	$	(10,656)	$	(103)	$	(52,820)

Three Months Ended June 30, 2021
Balance, March 31, 2021	$	6,971	$	(3,985)	$	(1,080)	$	1,906
Transfer from available-for-sale to held-to-maturity		(3)		3		—		—
Other comprehensive income (loss) before reclassifications		8,800		—		(38)		8,762
Reclassifications		—		199		102		301
Other comprehensive income, before tax		8,800		199		64		9,063
Income tax expense		2,508		57		18		2,583
Other comprehensive income, after tax		6,292		142		46		6,480
Balance, June 30, 2021	$	13,260	$	(3,840)	$	(1,034)	$	8,386

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(Unaudited)


	Unrealized Gains (Losses)
	on Debt Securities
	Available-for-Sale		Held-to-Maturity		Derivatives		Total

	(dollars in thousands)
Six Months Ended June 30, 2022
Balance, December 31, 2021	$	5,736	$	(3,514)	$	(751)	$	1,471
Transfer from available-for-sale to held-to-maturity		7,664		(7,664)		—		—
Other comprehensive income (loss) before reclassifications		(77,573)		—		743		(76,830)
Reclassifications		—		730		163		893
Other comprehensive income (loss), before tax		(77,573)		730		906		(75,937)
Income tax expense (benefit)		(22,112)		208		258		(21,646)
Other comprehensive income (loss), after tax		(55,461)		522		648		(54,291)
Balance, June 30, 2022	$	(42,061)	$	(10,656)	$	(103)	$	(52,820)

Six Months Ended June 30, 2021
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		(14,274)		—		181		(14,093)
Reclassifications		—		231		201		432
Other comprehensive income (loss), before tax		(14,274)		231		382		(13,661)
Income tax expense (benefit)		(4,069)		66		109		(3,894)
Other comprehensive income (loss), after tax		(10,205)		165		273		(9,767)
Balance, June 30, 2021	$	13,260	$	(3,840)	$	(1,034)	$	8,386

Reclassifications from accumulated other comprehensive income (loss) for unrealized gains (losses) on debt securities available-for-sale are included in gain (loss) on securities 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.

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 8 for additional information.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 10 – EARNINGS PER SHARE

The Company has granted certain restricted stock units that contain non-forfeitable rights to dividend equivalents. Such restricted stock units are considered participating securities. As such, we have included these restricted stock units in the calculation of basic earnings per share and calculate basic earnings per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings.

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

The following table sets forth the computation of basic and diluted earnings per share:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

	(dollars in thousands)
Numerator:
Net income	$	14,085	$	13,717	$	27,689	$	28,962
Earnings allocated to participating securities		(17)		(25)		(34)		(56)
Numerator for earnings per share - basic and diluted	$	14,068	$	13,692	$	27,655	$	28,906

Denominator:
Weighted average common shares outstanding		28,891,202		27,362,579		28,938,634		27,396,557
Dilutive effect of outstanding restricted stock units		53,674		17,701		48,688		10,137
Weighted average common shares outstanding, including all dilutive potential shares		28,944,876		27,380,280		28,987,322		27,406,694

Earnings per share - Basic	$	0.49	$	0.50	$	0.96	$	1.06
Earnings per share - Diluted	$	0.49	$	0.50	$	0.95	$	1.05

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 11 – STOCK-BASED COMPENSATION PLANS

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 (vi) other cash-based awards to eligible employees, non-employee directors and consultants of the Company. The maximum number of shares of common stock available for issuance under the Omnibus Incentive Plan is 1,820,000 shares.

The following is a summary of stock-based compensation expense (benefit):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

	(dollars in thousands)
Restricted stock units	$	234	$	148	$	842	$	262
Performance restricted stock units		118		33		411		48
Total awards classified as equity		352		181		1,253		310
Stock appreciation rights		7		—		(16)		130
Total stock-based compensation expense	$	359	$	181	$	1,237	$	440

In February 2022, all outstanding restricted stock unit and performance restricted stock unit agreements were modified to address treatment upon retirement. In the event of retirement, and if the retirement eligibility requirements are met, then 100% of unvested restricted stock units and performance restricted stock units will continue to vest in accordance with the originally established vesting schedule. The retirement modification resulted in the acceleration of $0.6 million of expense, although total compensation costs related to the modified agreements remained the same.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Restricted Stock Units

A restricted stock unit grants a participant the right to receive one share of the Company’s common stock, following the completion of the requisite service period. Restricted stock units are classified as equity. Compensation cost is based on the Company’s stock price on the grant date and is recognized on a straight-line basis over the service period for the entire award. Dividend equivalents on restricted stock units, which are either accrued until vested or paid at the same time as dividends on common stock, are classified as dividends charged to retained earnings.

During the six months ended June 30, 2022 and 2021, the total grant date fair value of the restricted stock units granted was $0.9 million and $0.8 million, respectively, based on the grant date closing prices. The total intrinsic value of restricted stock that vested during the six months ended June 30, 2022 and 2021 was $0.7 million and $0.3 million, respectively.

The following is a summary of restricted stock unit activity:


	Three Months Ended June 30,
	2022			2021
		Weighted			Weighted
		Average			Average
	Restricted	Grant Date		Restricted	Grant Date
	Stock Units	Fair Value		Stock Units	Fair Value
Beginning balance	120,631	$	17.98	97,122	$	17.36
Granted	—		—	4,000		17.93
Vested	—		—	—		—
Forfeited	—		—	(1,525)		18.11
Ending balance	120,631	$	17.98	99,597	$	17.37

	Six Months Ended June 30,
	2022			2021
		Weighted			Weighted
		Average			Average
	Restricted	Grant Date		Restricted	Grant Date
	Stock Units	Fair Value		Stock Units	Fair Value
Beginning balance	109,244	$	17.27	71,000	$	18.98
Granted	46,312		19.11	50,347		15.72
Vested	(34,925)		17.26	(20,225)		18.86
Forfeited	—		—	(1,525)		18.11
Ending balance	120,631	$	17.98	99,597	$	17.37

As of June 30, 2022, unrecognized compensation cost related to the non-vested restricted stock units was $1.4 million. This cost is expected to be recognized over the weighted average remaining service period of 1.9 years.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Performance Restricted Stock Units

A performance restricted stock unit is similar to a restricted stock unit, except that the number of shares of the Company’s common stock awarded is based on a performance condition and the completion of the requisite service period. The number of shares of the Company’s common stock that may be earned ranges from 0% to 150% of the number of performance restricted stock units granted. Performance restricted stock units are classified as equity. Compensation cost is based on the Company’s stock price on the grant date and an assessment of the probable outcome of the performance condition. Compensation cost is recognized on a straight-line basis over the service period of the entire award. Changes in the performance condition probability assessment result in cumulative catch-up adjustments to the compensation cost recognized. Dividend equivalents on performance restricted stock units, which are accrued until vested, are classified as dividends charged to retained earnings.

During the six months ended June 30, 2022 and 2021, the total fair value of the performance restricted stock units granted was $0.5 million and $0.4 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:


	Three Months Ended June 30,
	2022			2021
		Weighted			Weighted
	Performance	Average		Performance	Average
	Restricted	Grant Date		Restricted	Grant Date
	Stock Units	Fair Value		Stock Units	Fair Value
Beginning balance	62,067	$	17.02	28,697	$	15.53
Granted	—		—	—		—
Vested	—		—	—		—
Forfeited	—		—	—		—
Ending balance	62,067	$	17.02	28,697	$	15.53

	Six months ended June 30,
	2022			2021
		Weighted			Weighted
	Performance	Average		Performance	Average
	Restricted	Grant Date		Restricted	Grant Date
	Stock Units	Fair Value		Stock Units	Fair Value
Beginning balance	38,344	$	15.72	—	$	—
Granted	23,723		19.14	28,697		15.53
Vested	—		—	—		—
Forfeited	—		—	—		—
Ending balance	62,067	$	17.02	28,697	$	15.53

As of June 30, 2022, unrecognized compensation cost related to non-vested performance restricted stock units was $0.5 million, based on the current assessment of the probable outcome of the performance conditions. This cost is expected to be recognized over the weighted average remaining service period of 1.8 years.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Stock Appreciation Rights

A stock appreciation right grants a participant the right to receive an amount of cash, the value of which equals the appreciation in the Company’s stock price between the grant date and the exercise date. Stock appreciation rights are classified as liabilities. The liability is based on an option-pricing model used to estimate the fair value of the stock appreciation rights. Compensation cost for non-vested stock appreciation rights is recognized on a straight line basis over the service period of the entire award. The non-vested stock appreciation rights vest in four equal annual installments beginning on the first anniversary of the grant date.

The following is a summary of stock appreciation rights activity:


	Three Months Ended June 30,
	2022			2021
	Stock Appreciation Rights Outstanding	Weighted Average Grant Date Assigned Value		Stock Appreciation Rights Outstanding	Weighted Average Grant Date Assigned Value
Beginning balance	91,800	$	16.32	104,040	$	16.32
Granted	—		—	—		—
Exercised	—		—	(6,120)		16.32
Expired	—		—	—		—
Forfeited	—		—	—		—
Ending balance	91,800	$	16.32	97,920	$	16.32

	Six Months Ended June 30,
	2022			2021
	Stock Appreciation Rights	Weighted Average Grant Date Assigned Value		Stock Appreciation Rights	Weighted Average Grant Date Assigned Value
Beginning balance	97,920	$	16.32	105,570	$	16.32
Granted	—		—	—		—
Exercised	(6,120)		16.32	(6,120)		16.32
Expired	—		—	(1,530)		16.32
Forfeited	—		—	—		—
Ending balance	91,800	$	16.32	97,920	$	16.32

A further summary of stock appreciation rights as of June 30, 2022, is as follows:


			Weighted Average
	Stock Appreciation Rights		Remaining
Grant Date Assigned Values	Outstanding	Exercisable	Contractual Term
$ 16.32	91,800	79,560	6.7	years

As of June 30, 2022, unrecognized compensation cost related to non-vested stock appreciation rights was $38 thousand.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of June 30, 2022 and December 31, 2021, the liability recorded for outstanding stock appreciation rights was $0.5 million and $0.5 million, respectively. The Company used an option pricing model to value the stock appreciation rights, using the assumptions in the following table. Expected volatility is derived from the historical volatility of the Company’s stock price and a selected peer group of industry-related companies.


	June 30, 2022			December 31, 2021
Risk-free interest rate		3.00	%		1.40	%
Expected volatility		35.99	%		35.52	%
Expected life (in years)		7.2			7.7
Expected dividend yield		3.58	%		3.20	%

As of June 30, 2022, the liability recorded for previously exercised stock appreciation rights was $0.5 million, which will be paid in two remaining annual installments in 2023 and 2024. As of December 31, 2021, the liability recorded for previously exercised stock appreciation rights was $0.8 million.

NOTE 12 – 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. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by the regulators that, if undertaken, could have a direct material effect on the consolidated financial statements of the Company and the Bank. Additionally, the ability of the Company to pay dividends to its stockholders is dependent upon the ability of the Bank to pay dividends to the Company.

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 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.

Additionally, the Company and the Bank must maintain a “capital conservation buffer” to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. As of June 30, 2022 and December 31, 2021, the capital conservation buffer was 2.5% of risk-weighted assets.

As of June 30, 2022, the Company and the Bank each met all capital adequacy requirements to which they were subject.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The actual and required capital amounts and ratios of the Company (on a consolidated basis) and the Bank are as follows:


	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
June 30, 2022	Amount		Ratio		Amount		Ratio		Amount		Ratio

		(dollars in thousands)
Total Capital (to Risk Weighted Assets)
Consolidated HBT Financial, Inc.	$	496,810	16.76	%	$	237,210	8.00	%		N/A	N/A
Heartland Bank and Trust Company		472,112	15.93			237,035	8.00		$	296,294	10.00	%

Tier 1 Capital (to Risk Weighted Assets)
Consolidated HBT Financial, Inc.	$	432,720	14.59	%	$	177,908	6.00	%		N/A	N/A
Heartland Bank and Trust Company		447,378	15.10			177,777	6.00		$	237,035	8.00	%

Common Equity Tier 1 Capital (to Risk Weighted Assets)
Consolidated HBT Financial, Inc.	$	396,138	13.36	%	$	133,431	4.50	%		N/A	N/A
Heartland Bank and Trust Company		447,378	15.10			133,332	4.50		$	192,591	6.50	%

Tier 1 Capital (to Average Assets)
Consolidated HBT Financial, Inc.	$	432,720	10.05	%	$	172,307	4.00	%		N/A	N/A
Heartland Bank and Trust Company		447,378	10.39			172,215	4.00		$	215,269	5.00	%


	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
December 31, 2021	Amount		Ratio		Amount		Ratio		Amount		Ratio

		(dollars in thousands)
Total Capital (to Risk Weighted Assets)
Consolidated HBT Financial, Inc.	$	479,320	16.88	%	$	227,115	8.00	%		N/A	N/A
Heartland Bank and Trust Company		452,162	15.94			226,950	8.00		$	283,688	10.00	%

Tier 1 Capital (to Risk Weighted Assets)
Consolidated HBT Financial, Inc.	$	416,068	14.66	%	$	170,336	6.00	%		N/A	N/A
Heartland Bank and Trust Company		428,226	15.09			170,213	6.00		$	226,950	8.00	%

Common Equity Tier 1 Capital (to Risk Weighted Assets)
Consolidated HBT Financial, Inc.	$	379,519	13.37	%	$	127,752	4.50	%		N/A	N/A
Heartland Bank and Trust Company		428,226	15.09			127,659	4.50		$	184,397	6.50	%

Tier 1 Capital (to Average Assets)
Consolidated HBT Financial, Inc.	$	416,068	9.84	%	$	169,171	4.00	%		N/A	N/A
Heartland Bank and Trust Company		428,226	10.13			169,070	4.00		$	211,337	5.00	%

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 13 – FAIR VALUE OF FINANCIAL INSTRUMENTS

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 is summarized in Note 1 to the Company’s annual consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 11, 2022. There were no transfers between levels during the three and six months ended June 30, 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:


June 30, 2022	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value

		(dollars in thousands)
Debt securities available-for-sale:
U.S. Treasury	$	159,205	$	—	$	—	$	159,205
U.S. government agency		—		58,217		—		58,217
Municipal		—		260,541		—		260,541
Mortgage-backed:
Agency residential		—		225,042		—		225,042
Agency commercial		—		149,236		—		149,236
Corporate		—		72,465		—		72,465
Equity securities with readily determinable fair values		3,103		—		—		3,103
Mortgage servicing rights		—		—		10,089		10,089
Derivative financial assets		—		3,935		—		3,935
Derivative financial liabilities		—		3,709		—		3,709


December 31, 2021	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value

		(dollars in thousands)
Debt securities available-for-sale:
U.S. Treasury	$	108,976	$	—	$	—	$	108,976
U.S. government agency		—		128,105		—		128,105
Municipal		—		297,077		—		297,077
Mortgage-backed:
Agency residential		—		179,466		—		179,466
Agency commercial		—		164,061		—		164,061
Corporate		—		64,483		—		64,483
Equity securities with readily determinable fair values		3,443		—		—		3,443
Mortgage servicing rights		—		—		7,994		7,994
Derivative financial assets		—		8,697		—		8,697
Derivative financial liabilities		—		9,377		—		9,377

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 June 30, 2022.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.

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.

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.

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following tables present additional information about the unobservable inputs used in the fair value measurement of the mortgage servicing rights (dollars in thousands):


June 30, 2022	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Mortgage servicing rights	$	10,089	Discounted cash flows	Constant pre-payment rates (CPR)	7.0% to 41.2% (7.9%)
				Discount rate	9.0% to 11.0% (9.1%)

December 31, 2021	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Mortgage servicing rights	$	7,994	Discounted cash flows	Constant pre-payment rates (CPR)	7.0% to 88.9% (11.7%)
				Discount rate	9.0% to 11.0% (9.0%)

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:


June 30, 2022	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value

		(dollars in thousands)
Loans held for sale	$	—	$	5,312	$	—	$	5,312
Collateral-dependent impaired loans		—		—		17,238		17,238
Bank premises held for sale		—		—		319		319
Foreclosed assets		—		—		2,891		2,891


December 31, 2021	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value

		(dollars in thousands)
Loans held for sale	$	—	$	4,942	$	—	$	4,942
Collateral-dependent impaired loans		—		—		22,423		22,423
Bank premises held for sale		—		—		1,452		1,452
Foreclosed assets		—		—		3,278		3,278

Loans Held for Sale

Mortgage loans originated and held for sale are carried at the lower of cost or estimated fair value. 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.

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Collateral-Dependent Impaired Loans

In accordance with the provisions of the loan impairment guidance, impairment was measured for loans with respect to which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement. The fair value of collateral-dependent impaired loans is estimated based on the fair value of the underlying collateral supporting the loan. Collateral-dependent impaired loans require classification in the fair value hierarchy. Impaired loans include loans acquired with deteriorated credit quality. Collateral values are estimated using Level 3 inputs based on customized discounting criteria.

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.

Foreclosed Assets

Foreclosed assets are recorded at fair value based on property appraisals, less estimated selling costs, at the date of the transfer. 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 estimated costs to sell. These discounts and estimates are developed by management by comparison to historical results.

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following tables present quantitative information about unobservable inputs used in nonrecurring Level 3 fair value measurements (dollars in thousands):


June 30, 2022	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent impaired loans	$	17,238	Appraisal of collateral	Appraisal adjustments	Not meaningful
Bank premises held for sale		319	Appraisal	Appraisal adjustments	7% (7%)
Foreclosed assets		2,891	Appraisal	Appraisal adjustments	7% (7%)

December 31, 2021	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent impaired loans	$	22,423	Appraisal of collateral	Appraisal adjustments	Not meaningful
Bank premises held for sale		1,452	Appraisal	Appraisal adjustments	7% (7%)
Foreclosed assets		3,278	Appraisal	Appraisal adjustments	7% (7%)

Other Fair Value Methods

The following methods and assumptions were used by the Company in estimating fair value disclosures of its other financial instruments. There were no changes in the methods and significant assumptions used to estimate the fair value of these financial instruments.

Cash and Cash Equivalents

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

Restricted Stock

The carrying amount of FHLB stock approximates fair value based on the redemption provisions of the FHLB.

Loans

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

Investments in Unconsolidated Subsidiaries

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

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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. Time deposits also include public funds time deposits.

Securities Sold Under Agreements to Repurchase

The fair values of repurchase agreements with variable interest rates are presumed to approximate their recorded carrying amounts.

Subordinated Notes

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

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.

Accrued Interest

The carrying amounts of accrued interest approximate fair value.

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair values have been estimated using data which management considered the best available and estimation methodologies deemed suitable for the pertinent category of financial instrument.

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table provides summary information on the carrying amounts and estimated fair values of the Company’s financial instruments:


	Fair Value	June 30, 2022				December 31, 2021
	Hierarchy	Carrying		Estimated		Carrying		Estimated
	Level	Amount		Fair Value		Amount		Fair Value

			(dollars in thousands)
Financial assets:
Cash and cash equivalents	Level 1	$	160,031	$	160,031	$	409,268	$	409,268
Debt securities held-to-maturity	Level 2		548,236		510,152		336,185		336,027
Restricted stock	Level 3		2,813		2,813		2,739		2,739
Loans, net	Level 3		2,427,092		2,450,897		2,475,753		2,494,686
Investments in unconsolidated subsidiaries	Level 3		1,165		1,165		1,165		1,165
Accrued interest receivable	Level 2		14,263		14,263		14,901		14,901

Financial liabilities:
Time deposits	Level 3		274,893		268,761		328,208		327,779
Securities sold under agreements to repurchase	Level 2		51,091		51,091		61,256		61,256
Subordinated notes	Level 3		39,356		38,854		39,316		41,602
Junior subordinated debentures	Level 3		37,747		33,787		37,714		33,640
Accrued interest payable	Level 2		974		974		1,043		1,043

The Company estimated the fair value of lending related commitments as described in Note 14 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.

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 14 – COMMITMENTS AND CONTINGENCIES

Financial Instruments

The Bank is party to credit-related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. 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:


	Contractual Amount
	June 30, 2022		December 31, 2021

		(dollars in thousands)
Commitments to extend credit	$	656,359	$	609,947
Standby letters of credit		14,485		12,960

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, by the Bank upon extension of credit is based on management’s credit evaluation of the customer. Collateral held varies, but may include real estate, accounts receivable, inventory, property, plant, and equipment, and income-producing properties.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those standby letters of credit are primarily issued to support extensions of credit. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to customers. The Bank secures the standby letters of credit with the same collateral used to secure the related loan.

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Legal Contingencies

In the normal course of business, the Company, or its subsidiaries, are involved in various legal proceedings. In the opinion of management, any liability resulting from pending proceedings would not be expected to have a material adverse effect on the Company's consolidated financial statements.

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, DeBaere, et al v. Heartland Bank and Trust Company. 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.

The Bank intends to vigorously defend the lawsuit. The Company does not believe a loss 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 related to this matter has not been recorded. However, an unfavorable outcome is reasonably possible, and the Company would not characterize the chance of any loss as “remote.” Given the early stage of this case, the Company cannot yet offer an opinion on the estimated range of any possible loss, in the event of an unfavorable opinion.

Miller, et al v. State Bank of Lincoln and Heartland Bank and Trust Company

The Bank is a defendant in a purported class action lawsuit filed in May 2020, in the Circuit Court of Logan County, Illinois, Miller, et al v. State Bank of Lincoln and the Bank. 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.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context requires otherwise, references in this report to the “Company,” “we,” “us” and “our” refer to HBT Financial, Inc. and its subsidiaries.

The following is management’s discussion and analysis of the financial condition as of June 30, 2022 (unaudited), as compared with December 31, 2021, and the results of operations for the three and six months ended June 30, 2022 and 2021 (unaudited). Management’s discussion and analysis should be read in conjunction with the Company’s unaudited consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q, as well as the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 11, 2022. Results of operations for the three and six months ended June 30, 2022 and 2021 are not necessarily indicative of results to be attained for any other period.

OVERVIEW

HBT Financial, Inc., headquartered in Bloomington, Illinois, is the holding company for Heartland Bank and Trust Company, and has banking roots that can be traced back to 1920. We provide a comprehensive suite of business, commercial, wealth management, and retail banking products and services to businesses, families, and local governments throughout Central and Northeastern Illinois and Eastern Iowa. As of June 30, 2022, the Company had total assets of $4.2 billion, loans held for investment of $2.5 billion, and total deposits of $3.7 billion.

Market Area

We currently operate 61 branch locations. We hold a leading deposit share in many of our Central Illinois markets, which we define as a top three deposit share rank, providing the foundation for our strong deposit base. The stability provided by this low-cost funding is a key driver of our strong track record of financial performance. Below is a summary of our loan and deposit balances by geographic region.


	June 30, 2022		December 31, 2021

Total loans	(dollars in thousands)
Illinois by metropolitan and micropolitan statistical areas
Bloomington-Normal	$	482,857	$	527,161
Champaign-Urbana		207,188		191,646
Chicago		1,201,306		1,196,605
Lincoln		80,252		87,153
Ottawa-Peru		92,547		101,117
Peoria		121,539		123,143
Total Illinois		2,185,689		2,226,825
Iowa		266,137		272,864
Total loans	$	2,451,826	$	2,499,689

Total deposits
Illinois by metropolitan and micropolitan statistical areas
Bloomington-Normal	$	862,265	$	887,587
Champaign-Urbana		210,429		203,899
Chicago		1,262,718		1,237,486
Lincoln		204,439		203,098
Ottawa-Peru		401,417		407,156
Peoria		606,973		610,155
Total Illinois		3,548,241		3,549,381
Iowa		153,745		188,804
Total deposits	$	3,701,986	$	3,738,185

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NXT Bancorporation, Inc. Acquisition

On October 1, 2021, the Company completed its acquisition of NXT Bancorporation, Inc. (“NXT”), the holding company for NXT Bank. The acquisition expanded the Company’s footprint into Eastern Iowa with four locations that began operating as branches of Heartland Bank following the merger and system conversion of NXT Bank into Heartland Bank in December 2021. After considering business combination accounting adjustments, NXT added total assets of $234.1 million, total loans of $194.6 million, and total deposits of $181.6 million.

Cash consideration of $10.6 million and stock consideration of approximately 1.8 million shares of HBT common stock resulted in aggregate consideration of $39.9 million. Goodwill of $5.7 million was recorded in the acquisition.

The Company did not incur expenses related to the acquisition of NXT during the three and six months ended June 30, 2022. The Company incurred the following pre-tax acquisition expenses related to the acquisition of NXT during the second quarter of 2021 (dollars in thousands):


Data processing	$	7
Legal fees and other noninterest expense		150
Total NXT acquisition-related expenses	$	157

Branch Rationalization Plan

In April 2021, the Company made plans to close or consolidate six branches. One branch was consolidated during the second quarter of 2021, and the remaining five branches were closed during the third quarter of 2021. The Company estimates annual pre-tax cost savings, net of associated revenue impacts, related to the branch rationalization plan to be approximately $1.1 million.

The Company incurred the following pre-tax branch closure expenses during the second quarter of 2021 (dollars in thousands):


NONINTEREST INCOME
Gains (losses) on other assets	$	(34)

NONINTEREST EXPENSE
Salaries		58
Marketing and customer relations		5
Legal fees and other noninterest expense		7
Total noninterest expense		70
Total branch closure costs	$	104

Paycheck Protection Program Loans

During 2021 and 2020, we funded a total of $290.1 million of Paycheck Protection Program (“PPP”) loans. The vast majority of those loans have received full forgiveness, and we continue to process forgiveness applications.

As of June 30, 2022, PPP loans totaled $2.8 million, net of $0.1 million of net deferred origination fees remaining to be recognized as loan interest income. Recognition of net deferred origination fees is accelerated upon loan forgiveness or repayment prior to contractual maturity. Net deferred origination fees on PPP loans recognized as taxable loan interest income totaled $0.6 million and $2.4 million during the three months ended June 30, 2022 and 2021, respectively, and $1.4 million and $4.6 million during the six months ended June 30, 2022 and 2021, respectively.

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FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Economic Conditions

The Company's business and financial performance are affected by economic conditions generally in the U.S. and more directly in the Illinois and Iowa markets where we primarily operate. The significant economic factors that are most relevant to our business and our financial performance include the general economic conditions in the U.S. and in the Company's markets (including the effect of inflationary pressures), unemployment rates, real estate markets, and interest rates.

COVID-19 Pandemic

Although the Company has had continuous business operations since the beginning of the COVID-19 pandemic, the pandemic has caused significant economic disruption throughout the U.S. and the communities that we serve. While the economic outlook has generally improved relative to 2020 and 2021, there remains uncertainty surrounding the longer lasting impact on specific industries and potential surges in COVID-19 infections with new virus variants. As a result, the businesses we serve may be adversely impacted and the ability of our customers to fulfill their contractual obligations to us may deteriorate.

Interest Rates

Net interest income is our primary source of revenue. Net interest income is equal to the excess of interest income earned on interest earning assets (including discount accretion on purchased loans plus certain loan fees) over interest expense incurred on interest-bearing liabilities. The level of interest rates as well as the volume of interest-earning assets and interest-bearing liabilities both impact net interest income. Net interest income is also influenced by both the pricing and mix of interest-earning assets and interest-bearing liabilities which, in turn, are impacted by external factors such as local economic conditions, competition for loans and deposits, the monetary policy of the Federal Reserve Board (“FRB”) and market interest rates.

The cost of our deposits and short-term wholesale borrowings is largely based on short-term interest rates, which are primarily driven by the FRB’s actions. The yields generated by our loans and securities are typically driven by short-term and long-term interest rates, which are set by the market and, to some degree, by the FRB’s actions. Our net interest income is therefore influenced by movements in such interest rates and the pace at which such movements occur. Generally, we expect increases in market interest rates will increase our net interest income and net interest margin in future periods, while decreases in market interest rates may decrease our net interest income and net interest margin in future periods.

Credit Trends

We focus on originating loans with appropriate risk/reward profiles. We have a detailed loan policy that guides our overall loan origination philosophy and a well-established loan approval process that requires experienced credit officers to approve larger loan relationships. Although we believe our loan approval and credit review processes are strengths that allow us to maintain a high quality loan portfolio, we recognize that credit trends in the markets in which we operate and in our loan portfolio can materially impact our financial condition and performance and that these trends are primarily driven by the economic conditions in our markets.

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Competition

Our profitability and growth are affected by the highly competitive nature of the financial services industry. We compete with community banks in all our markets and, to a lesser extent, with money center banks, primarily in the Chicago MSA. Additionally, we compete with non-bank financial services companies and other financial institutions operating within the areas we serve. We compete by emphasizing personalized service and efficient decision-making tailored to individual needs. We do not rely on any individual, group, or entity for a material portion of our loans or our deposits. We continue to see increased competitive pressures on loan rates and terms which may affect our financial results in the future.

Digital Banking

Throughout the banking industry, in-person branch traffic is expected to continue to decline as more customers turn to digital banking for routine banking transactions. The COVID-19 pandemic has accelerated this transition, and in-person branch traffic is not expected to return to pre-pandemic levels. We plan to continue investing in our digital banking platforms, while maintaining an appropriately sized branch network. An inability to meet evolving customer expectations, with the appropriate level of security, for both digital and in-person banking may adversely affect our financial results in the future.

Regulatory Environment and Trends

We are subject to federal and state regulation and supervision, which continue to evolve as the legal and regulatory framework governing our operations continues to change. The current operating environment includes extensive regulation and supervision in areas such as consumer compliance, the Bank Secrecy Act and anti-money laundering compliance, risk management and internal audit. We anticipate that this environment of extensive regulation and supervision will continue for the industry. As a result, changes in the regulatory environment may result in additional costs for additional compliance, risk management and audit personnel or professional fees associated with advisors and consultants.

FACTORS AFFECTING COMPARABILITY OF FINANCIAL RESULTS

JOBS Act Accounting Election

We qualify as an “emerging growth company” under the JOBS Act. The JOBS Act permits us an extended transition period for complying with new or revised accounting standards affecting public companies. The Company may remain an emerging growth company until the earliest to occur of: (1) the end of the fiscal year following the fifth anniversary of the completion of our initial public offering, which is December 31, 2024, (2) the last day of the fiscal year in which the Company has $1.07 billion or more in annual revenues, (3) the date on which the Company is deemed to be a “large accelerated filer” under the Exchange Act or (4) the date on which the Company has, during the previous three year period, issued, publicly or privately, more than $1.0 billion in non-convertible debt securities. We have elected to use the extended transition period until we are no longer an emerging growth company or until we choose to affirmatively and irrevocably opt out of the extended transition period. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies.

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RESULTS OF OPERATIONS

Overview of Recent Financial Results

The following table presents selected financial results and measures:


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021

	(dollars in thousands, except per share amounts)
Consolidated Statement of Income Information
Total interest and dividend income	$	35,757		$	31,147		$	69,092		$	61,753
Total interest expense		1,384			1,447			2,791			2,924
Net interest income		34,373			29,700			66,301			58,829
Provision for loan losses		145			(2,162)			(439)			(5,567)
Net interest income after provision for loan losses		34,228			31,862			66,740			64,396
Total noninterest income		8,551			8,774			18,594			19,582
Total noninterest expense		23,842			22,154			47,999			44,698
Income before income tax expense		18,937			18,482			37,335			39,280
Income tax expense		4,852			4,765			9,646			10,318
Net income	$	14,085		$	13,717		$	27,689		$	28,962

Adjusted net income ⁽¹⁾	$	13,836			14,168		$	26,063		$	28,201

Net interest income (tax-equivalent basis) ^{(1) (2)}	$	34,971		$	30,203		$	67,428		$	59,835

Share and Per Share Information
Earnings per share - Diluted	$	0.49		$	0.50		$	0.95		$	1.05
Adjusted earnings per share - Diluted ⁽¹⁾		0.48			0.52			0.90			1.03

Weighted average shares of common stock outstanding		28,891,202			27,362,579			28,938,634			27,396,557

Summary Ratios
Net interest margin *		3.34	%		3.14	%		3.21	%		3.19	%
Net interest margin (tax-equivalent basis) * ^{(1) (2)}		3.39			3.19			3.26			3.25
Yield on loans *		4.64			4.63			4.54			4.60
Yield on interest-earning assets *		3.47			3.29			3.34			3.35
Cost of interest-bearing liabilities *		0.20			0.23			0.20			0.24
Cost of total deposits *		0.05			0.07			0.06			0.08

Efficiency ratio		54.97	%		56.91	%		55.96	%		56.31	%
Efficiency ratio (tax-equivalent basis) ^{(1) (2)}		54.22			56.18			55.23			55.59

Return on average assets *		1.32	%		1.40	%		1.29	%		1.52	%
Return on average stockholders' equity *		14.92			15.07			14.23			16.03
Return on average tangible common equity * ⁽¹⁾		16.25			16.22			15.45			17.27

Adjusted return on average assets * ⁽¹⁾		1.29	%		1.45	%		1.22	%		1.48	%
Adjusted return on average stockholders' equity * ⁽¹⁾		14.66			15.56			13.40			15.61
Adjusted return on average tangible common equity * ⁽¹⁾		15.96			16.76			14.55			16.81

* Annualized measure.

(1)	See "Non-GAAP Financial Information" for reconciliation of non-GAAP measure to their most closely comparable GAAP measures.

(2)	On a tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%.

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Comparison of the Three Months Ended June 30, 2022 to the Three Months Ended June 30, 2021

For the three months ended June 30, 2022, net income was $14.1 million increasing by $0.4 million, or 2.7%, when compared to net income for the three months ended June 30, 2021. Notable changes include the following:

●

A $4.7 million increase in net interest income, primarily attributable to higher average balances of interest-earning assets following the NXT acquisition in the fourth quarter of 2021 and an increased interest-earning asset yield primarily due to a more favorable asset mix;

●

A provision for loan losses of $0.1 million was recognized during the three months ended June 30, 2022, compared to a negative provision for loan losses of $2.2 million during the three months ended June 30, 2021;

●

A $1.7 million increase in noninterest expense, primarily reflecting a higher base level of noninterest expense following the NXT acquisition; and

●

A $1.2 million decrease in gains on sale of mortgage loans, primarily attributable to a lower level of mortgage refinancing activity due to increases in interest rates.

Comparison of the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021

For the six months ended June 30, 2022, net income was $27.7 million decreasing by $1.3 million, or 4.4%, when compared to net income for the six months ended June 30, 2021. Notable changes include the following:

●

A $7.5 million increase in net interest income, primarily attributable to higher average balances of interest-earning assets following the NXT acquisition in the fourth quarter of 2021;

●

A negative provision for loan losses of $0.4 million was recognized during the six months ended June 30, 2022, compared to a negative provision for loan losses of $5.6 million during the six months ended June 30, 2021;

●

A $2.7 million decrease in gains on sale of mortgage loans, primarily attributable to a lower level of mortgage refinancing activity due to increases in interest rates; and

●

A $3.3 million increase in noninterest expense, primarily reflecting a higher base level of noninterest expense following the NXT acquisition.

Net Interest Income

Net interest income equals the excess of interest income (including discount accretion on acquired loans) plus fees earned on interest earning assets over interest expense incurred on interest-bearing liabilities. Interest rate spread and net interest margin are utilized to measure and explain changes in net interest income. Interest rate spread is the difference between the yield on interest-earning assets and the rate paid for interest-bearing liabilities that fund those assets. The net interest margin is expressed as the percentage of net interest income to average interest-earning assets. The net interest margin exceeds the interest rate spread because noninterest-bearing sources of funds, principally noninterest-bearing demand deposits and stockholders’ equity, also support interest-earning assets.

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The following tables set forth average balances, average yields and costs, and certain other information for the three and six months ended June 30, 2022 and 2021. Average balances are daily average balances. Nonaccrual loans are included in the computation of average balances but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees and costs, discounts and premiums, as well as purchase accounting adjustments that are accreted or amortized to interest income or expense.


	Three Months Ended
	June 30, 2022						June 30, 2021
	Average						Average
	Balance		Interest		Yield/Cost *		Balance		Interest		Yield/Cost *

	(dollars in thousands)
ASSETS
Loans	$	2,467,851	$	28,522	4.64	%	$	2,234,388	$	25,818	4.63	%
Securities		1,422,096		6,801	1.92			1,121,104		5,202	1.86
Deposits with banks		240,692		420	0.70			438,001		115	0.11
Other		2,809		14	2.07			2,726		12	1.83
Total interest-earning assets		4,133,448	$	35,757	3.47	%		3,796,219	$	31,147	3.29	%
Allowance for loan losses		(24,579)						(28,939)
Noninterest-earning assets		177,433						156,559
Total assets	$	4,286,302					$	3,923,839

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Interest-bearing deposits:
Interest-bearing demand	$	1,159,077	$	144	0.05	%	$	1,019,488	$	127	0.05	%
Money market		582,016		110	0.08			502,448		94	0.08
Savings		661,661		52	0.03			601,615		46	0.03
Time		284,880		200	0.28			290,865		346	0.48
Total interest-bearing deposits		2,687,634		506	0.08			2,414,416		613	0.10
Securities sold under agreements to repurchase		51,057		8	0.07			47,170		8	0.07
Borrowings		440		1	1.34			440		—	0.39
Subordinated notes		39,346		469	4.79			39,265		469	4.80
Junior subordinated debentures issued to capital trusts		37,738		400	4.26			37,671		357	3.80
Total interest-bearing liabilities		2,816,215	$	1,384	0.20	%		2,538,962	$	1,447	0.23	%
Noninterest-bearing deposits		1,072,883						992,699
Noninterest-bearing liabilities		18,673						26,988
Total liabilities		3,907,771						3,558,649
Stockholders' Equity		378,531						365,190
Total liabilities and stockholders’ equity	$	4,286,302					$	3,923,839

Net interest income/Net interest margin ⁽¹⁾			$	34,373	3.34	%			$	29,700	3.14	%
Tax-equivalent adjustment ⁽²⁾				598	0.05					503	0.05
Net interest income (tax-equivalent basis)/ Net interest margin (tax-equivalent basis) ^{(2) (3)}			$	34,971	3.39	%			$	30,203	3.19	%
Net interest rate spread ⁽⁴⁾					3.27	%					3.06	%
Net interest-earning assets ⁽⁵⁾	$	1,317,233					$	1,257,257
Ratio of interest-earning assets to interest-bearing liabilities		1.47						1.50
Cost of total deposits					0.05	%					0.07	%

* Annualized measure.

(1)	Net interest margin represents net interest income divided by average total interest-earning assets.

(2)	On a tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%.

(3)	See "Non-GAAP Financial Information" for reconciliation of non-GAAP measure to their most closely comparable GAAP measures.

(4)	Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(5)	Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

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	Six Months Ended
	June 30, 2022						June 30, 2021
	Average						Average
	Balance		Interest		Yield/Cost *		Balance		Interest		Yield/Cost *

	(dollars in thousands)
ASSETS
Loans	$	2,487,320	$	55,990	4.54	%	$	2,259,136	$	51,562	4.60	%
Securities		1,372,284		12,490	1.84			1,063,312		9,971	1.89
Deposits with banks		305,053		579	0.38			392,213		195	0.10
Other		2,775		33	2.43			2,612		25	1.93
Total interest-earning assets		4,167,432	$	69,092	3.34	%		3,717,273	$	61,753	3.35	%
Allowance for loan losses		(24,340)						(30,390)
Noninterest-earning assets		171,624						156,093
Total assets	$	4,314,716					$	3,842,976

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Interest-bearing deposits:
Interest-bearing demand	$	1,151,495	$	286	0.05	%	$	1,008,664	$	244	0.05	%
Money market		590,098		231	0.08			492,472		183	0.07
Savings		655,645		102	0.03			571,921		87	0.03
Time		297,706		456	0.31			292,509		743	0.51
Total interest-bearing deposits		2,694,944		1,075	0.08			2,365,566		1,257	0.11
Securities sold under agreements to repurchase		52,050		17	0.07			46,761		15	0.06
Borrowings		470		2	1.01			470		1	0.42
Subordinated notes		39,335		939	4.82			39,255		939	4.83
Junior subordinated debentures issued to capital trusts		37,730		758	4.05			37,663		712	3.81
Total interest-bearing liabilities		2,824,529	$	2,791	0.20	%		2,489,715	$	2,924	0.24	%
Noninterest-bearing deposits		1,075,387						956,806
Noninterest-bearing liabilities		22,466						32,077
Total liabilities		3,922,382						3,478,598
Stockholders' Equity		392,334						364,378
Total liabilities and stockholders’ equity	$	4,314,716						3,842,976

Net interest income/Net interest margin ⁽¹⁾			$	66,301	3.21	%			$	58,829	3.19	%
Tax-equivalent adjustment ⁽²⁾				1,127	0.05					1,006	0.06
Net interest income (tax-equivalent basis)/ Net interest margin (tax-equivalent basis) ^{(2) (3)}			$	67,428	3.26	%			$	59,835	3.25	%
Net interest rate spread ⁽⁴⁾					3.14	%					3.11	%
Net interest-earning assets ⁽⁵⁾	$	1,342,903					$	1,227,558
Ratio of interest-earning assets to interest-bearing liabilities		1.48						1.49
Cost of total deposits					0.06	%					0.08	%

* Annualized measure.

(1)	Net interest margin represents net interest income divided by average total interest-earning assets.

(2)	On a tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%.

(3)	See "Non-GAAP Financial Information" for reconciliation of non-GAAP measure to their most closely comparable GAAP measures.

(4)	Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(5)	Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

Table of Contents

The following table sets forth the components of loan interest income, which includes contractual interest on loans, loan fees, and accretion of acquired loan discounts.


	Three Months Ended June 30,								Six Months Ended June 30,
	2022				2021				2022				2021
			Yield				Yield				Yield				Yield
	Interest		Contribution *		Interest		Contribution *		Interest		Contribution *		Interest		Contribution *

	(dollars in thousands)
Contractual interest	$	26,433	4.31	%	$	22,089	3.96	%	$	51,887	4.21	%	$	44,772	3.99	%
Loan fees (excluding PPP loans)		1,124	0.18			1,202	0.22			2,279	0.18			1,978	0.18
PPP loan fees		642	0.10			2,361	0.42			1,381	0.11			4,587	0.41
Accretion of acquired loan discounts		323	0.05			166	0.03			443	0.04			225	0.02
Total loan interest income	$	28,522	4.64	%	$	25,818	4.63	%	$	55,990	4.54	%	$	51,562	4.60	%

* Annualized measure.

The following table sets forth the components of net interest income. Total interest income consists of contractual interest on loans, contractual interest on securities, contractual interest on interest-bearing deposits in banks, loan fees, accretion of acquired loan discounts, net securities amortization, and other interest and dividend income. Total interest expense consists of contractual interest on deposits, contractual interest on other interest-bearing liabilities and other interest expense.


	Three Months Ended June 30,								Six Months Ended June 30,
	2022				2021				2022				2021
			Net Interest				Net Interest				Net Interest				Net Interest
			Margin				Margin				Margin				Margin
	Interest		Contribution *		Interest		Contribution *		Interest		Contribution *		Interest		Contribution *

	(dollars in thousands)
Interest income:
Contractual interest on loans	$	26,433	2.57	%	$	22,089	2.33	%	$	51,887	2.51	%	$	44,772	2.43	%
Contractual interest on securities		8,647	0.84			7,023	0.74			16,099	0.78			13,524	0.73
Contractual interest on deposits with banks		420	0.04			115	0.01			579	0.03			195	0.01
Loan fees (excluding PPP loans)		1,124	0.11			1,202	0.13			2,279	0.11			1,978	0.11
PPP loan fees		642	0.06			2,361	0.25			1,381	0.07			4,587	0.25
Accretion of acquired loan discounts		323	0.03			166	0.02			443	0.02			225	0.01
Securities amortization, net		(1,846)	(0.18)			(1,821)	(0.19)			(3,609)	(0.18)			(3,553)	(0.19)
Other		14	—			12	—			33	—			25	—
Total interest income		35,757	3.47			31,147	3.29			69,092	3.34			61,753	3.35

Interest expense:
Contractual interest on deposits		552	0.05			610	0.07			1,193	0.05			1,251	0.07
Contractual interest on other interest-bearing liabilities		777	0.07			696	0.07			1,482	0.07			1,394	0.07
Other		55	0.01			141	0.01			116	0.01			279	0.02
Total interest expense		1,384	0.13			1,447	0.15			2,791	0.13			2,924	0.16
Net interest income		34,373	3.34			29,700	3.14			66,301	3.21			58,829	3.19
Tax equivalent adjustment ⁽¹⁾		598	0.05			503	0.05			1,127	0.05			1,006	0.06
Net interest income (tax equivalent) ^{(1) (2)}	$	34,971	3.39	%	$	30,203	3.19	%	$	67,428	3.26	%	$	59,835	3.25	%

* Annualized measure.

(1)	On a tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%.

(2)	See "Non-GAAP Financial Information" for reconciliation of non-GAAP measure to their most closely comparable GAAP measures.

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Rate/Volume Analysis

The following table sets forth the dollar amount of changes in interest income and interest expense for the major categories of our interest-earning assets and interest-bearing liabilities. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to changes attributable to volume (i.e., changes in average balances multiplied by the prior-period average rate), and changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both volume and rate that cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.


	Three Months Ended June 30, 2022						Six Months Ended June 30, 2022
	vs.						vs.
	Three Months Ended June 30, 2021						Six Months Ended June 30, 2021
	Increase (Decrease) Due to						Increase (Decrease) Due to
	Volume		Rate		Total		Volume		Rate		Total

	(dollars in thousands)
Interest-earning assets:
Loans	$	2,698	$	6	$	2,704	$	5,145	$	(717)	$	4,428
Securities		1,435		164		1,599		2,820		(301)		2,519
Deposits with banks		(74)		379		305		(52)		436		384
Other		—		2		2		2		6		8
Total interest-earning assets		4,059		551		4,610		7,915		(576)		7,339

Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand		17		—		17		35		7		42
Money market		15		1		16		38		10		48
Savings		6		—		6		14		1		15
Time		(7)		(139)		(146)		13		(300)		(287)
Total interest-bearing deposits		31		(138)		(107)		100		(282)		(182)
Securities sold under agreements to repurchase		—		—		—		2		—		2
Borrowings		—		1		1		—		1		1
Subordinated notes		1		(1)		—		2		(2)		—
Junior subordinated debentures issued to capital trusts		1		42		43		1		45		46
Total interest-bearing liabilities		33		(96)		(63)		105		(238)		(133)
Change in net interest income	$	4,026	$	647	$	4,673	$	7,810	$	(338)	$	7,472

Comparison of the Three Months Ended June 30, 2022 to the Three Months Ended June 30, 2021

Net interest income for the three months ended June 30, 2022, was $34.4 million, increasing $4.7 million, or 15.7%, from the three months ended June 30, 2021. The increase is primarily attributable to higher average balances of interest-earnings assets following the NXT acquisition and an increased interest-earning asset yield primarily due to a more favorable asset mix. These higher average balances, as well as higher yields on interest-earning assets driven by recent increases in benchmark interest rates, more than offset a $1.7 million decrease in PPP loan fees recognized as loan interest income.

Net interest margin increased to 3.34% for the three months ended June 30, 2022 compared to 3.14% for the three months ended June 30, 2021. The increase was primarily attributable to a more favorable mix of interest-earnings assets. Additionally, the contribution of PPP loan fees to net interest margin decreased to 6 basis points during the three months ended June 30, 2022 from 25 basis points during the three months ended June 30, 2021.

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Comparison of the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021

Net interest income for the six months ended June 30, 2022, was $66.3 million, increasing $7.5 million, or 12.7%, from the six months ended June 30, 2021. The increase is primarily attributable to higher average balances of interest-earning assets following the NXT acquisition. These higher average balances more than offset a $3.2 million decrease in PPP loan fees recognized as loan interest income.

Net interest margin increased slightly to 3.21% for the six months ended June 30, 2022 compared to 3.19% for the six months ended June 30, 2021. The contribution of PPP loans to net interest margin decreased to 7 basis points during the six months ended June 30, 2022 from 25 basis points during the six months ended June 30, 2021. This decrease was more than offset by an increase in contractual interest on loans, driven by recent increases in benchmark interest rates.

The quarterly net interest margins were as follows:


	2022		2021
Three months ended:
March 31	3.08	%	3.25	%
June 30	3.34		3.14
September 30	—		3.18
December 31	—		3.17

In March 2020, the Federal Open Markets Committee (“FOMC”), in response to the economic downturn caused by the COVID-19 pandemic, lowered the target range for the federal funds rate to 0% to 0.25% and announced the FRB would substantially increase its Treasury and agency mortgage-backed securities holdings. This resulted in a historically low interest rate environment which lasted through the rest of 2020 and into 2021, putting downward pressure on our net interest margin.

In 2021, the FOMC began to taper the pace of its security purchases, and, in March 2022, the FOMC raised the target range for the federal funds rate. Since March 2022, the FOMC has raised the target range for the federal funds rate three additional times, set the target range for the federal funds rate to 2.25% to 2.50% at the July 2022 meeting, and indicated that the FRB will continue reducing its security holdings. Additionally, the FOMC indicated that it anticipates that ongoing increases in the target range will be appropriate, although this stance may be adjusted if risks emerge that impede the FRB’s dual mandate of maximum employment and price stability.

As a result of these developments, interest rates have risen which we expect will lead to improvements in our net interest margin. In general, we believe that increases in market interest rates will lead to improved net interest margins while decreases in market interest rates will result in lower net interest margins. Additionally, deposit costs are expected to increase in the second half of 2022, but should be more than offset by continued increases in earning asset yields resulting from higher rates.

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Provision for Loan Losses

Provisions for loan losses are charged to operations in order to maintain the allowance for loan losses at a level we consider necessary to absorb probable incurred credit losses in the loan portfolio. In determining the level of the allowance for loan losses, management considers past and current loss experience, evaluations of collateral, current economic conditions, volume and type of lending, adverse situations that may affect a borrower’s ability to repay a loan and the levels of nonperforming and other classified loans. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates as more information becomes available or as events change. We assess the allowance for loan losses on a quarterly basis and make provisions for loan losses in order to maintain the allowance. The provision for loan losses is a function of the allowance for loan loss methodology we use to determine the appropriate level of the allowance for inherent loan losses after accounting for net charge-offs (recoveries).

Credit losses in our loan portfolio are highly dependent on the economic conditions in the communities that we serve. The general deterioration in economic conditions initially caused by the COVID-19 pandemic adversely affected the communities that we serve beginning in 2020. As a result, our allowance for loan losses initially increased at the onset of the COVID-19 pandemic, remained elevated during the remainder of 2020, and then gradually returned to near pre-pandemic levels during 2021 as economic conditions improved in our market areas. Potential deterioration of economic conditions, whether due to the COVID-19 pandemic or other factors, may lead to higher credit losses and adversely impact our financial condition and results of operations.

Comparison of the Three Months Ended June 30, 2022 to the Three Months Ended June 30, 2021

The Company recorded a provision for loan losses of $0.1 million during the three months ended June 30, 2022, compared to a negative provision for loan losses of $2.2 million during the three months ended June 30, 2021. The provision during the three months ended June 30, 2022 was primarily due to changes in qualitative factors, resulting in a $0.4 million increase in required reserve, reflecting a slight deterioration in the economic environment since the first quarter of 2022 such as emerging concerns regarding inflation adversely affecting the buying power of households and a slowing housing market. Mostly offsetting the change in qualitative factors was a $0.2 million decrease in specific reserves on loans individually evaluated for impairment, and a $0.1 million net recovery.

Comparison of the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021

The Company recorded a negative provision for loan losses of $0.4 million during the six months ended June 30, 2022, compared to a negative provision for loan losses of $5.6 million during the six months ended June 30, 2021. The negative provision during the six months ended June 30, 2022 was primarily due to net recoveries of $1.2 million during this period. This was partially offset by a $0.8 million increase in required reserves, reflecting a $1.5 million increase in specific reserves on loans individually evaluated for impairment and improvements in qualitative factors, relative to December 31, 2021, which resulted in a $0.7 million decrease in required reserves.

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Noninterest Income

The following table sets forth the major categories of noninterest income for the periods indicated:


	Three Months Ended June 30,						Six Months Ended June 30,
	2022		2021		$ Change		2022		2021		$ Change

	(dollars in thousands)
Card income	$	2,714	$	2,449	$	265	$	5,118	$	4,707	$	411
Wealth management fees		2,322		2,005		317		4,611		3,977		634
Service charges on deposit accounts		1,792		1,390		402		3,444		2,687		757
Mortgage servicing		661		711		(50)		1,319		1,396		(77)
Mortgage servicing rights fair value adjustment		366		(310)		676		2,095		1,385		710
Gains on sale of mortgage loans		326		1,562		(1,236)		913		3,662		(2,749)
Unrealized gains (losses) on equity securities		(153)		6		(159)		(340)		46		(386)
Gains (losses) on foreclosed assets		(7)		216		(223)		33		140		(107)
Gains (losses) on other assets		(43)		(48)		5		150		(47)		197
Income on bank owned life insurance		41		—		41		81		—		81
Other noninterest income		532		793		(261)		1,170		1,629		(459)
Total noninterest income	$	8,551	$	8,774	$	(223)	$	18,594	$	19,582	$	(988)

Comparison of the Three Months Ended June 30, 2022 to the Three Months Ended June 30, 2021

Total noninterest income for the three months ended June 30, 2022, was $8.6 million, a decrease of $0.2 million, or 2.5%, from the three months ended June 30, 2021. Notable changes in noninterest income include the following:

●

A $1.2 million decrease in gains on sale of mortgage loans, primarily attributable to a lower level of mortgage refinancing activity due to recent interest rate increases. A lower level of mortgage refinancing activity is anticipated during the remainder of 2022 and is expected to result in lower gains on sale of mortgage loans relative to 2021;

●

A $0.7 million increase in the mortgage servicing rights fair value adjustment, primarily resulting from slower mortgage prepayment speed assumptions;

●

A $0.4 million increase in service charges on deposit accounts;

●

A $0.3 million increase in wealth management fees, reflecting a $0.2 million increase in farm management fees primarily due to increased commodity prices relative to 2021, and a $0.1 million increase in farm real estate brokerage fees. Additionally, a decline in assets under management resulting from market performance since 2021 is expected to result in lower wealth management revenue during the remainder of 2022; and

●

A $0.3 million increase in card income primarily due to increased debit and credit card transaction volume.

Table of Contents

Comparison of the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021

Total noninterest income for the six months ended June 30, 2022, was $18.6 million, a decrease of $1.0 million, or 5.0%, from the six months ended June 30, 2021. Notable changes in noninterest income include the following:

●

A $2.7 million decrease in gains on sale of mortgage loans, primarily attributable to a lower level of mortgage refinancing activity, due to recent interest rate increases. A lower level of mortgage refinancing activity is anticipated during the remainder of 2022 and is expected to result in lower gains on sale of mortgage loans relative to 2021;

●

A $0.7 million increase in the mortgage servicing rights fair value adjustment, primarily resulting from slower mortgage prepayment speed assumptions;

●

A $0.8 million increase in service charges on deposit accounts;

●

A $0.6 million increase in wealth management fees, reflecting a $0.3 million increase in farm management fees, primarily due to increased commodity prices relative to 2021, and a $0.3 million increase in farm real estate brokerage fees. Additionally, a decline in assets under management resulting from market performance since 2021 is expected to result in lower wealth management revenue during the remainder of 2022;

●

A $0.5 million decrease in other noninterest income, primarily resulting from a $0.4 million decrease in loan fees collected on loans due to a lower level of mortgage refinancing activity; and

●

A $0.4 million increase in card income primarily due to increased debit and credit card transaction volume.

Table of Contents

Noninterest Expense

The following table sets forth the major categories of noninterest expense for the periods indicated:


	Three Months Ended June 30,						Six Months Ended June 30,
	2022		2021		$ Change		2022		2021		$ Change

	(dollars in thousands)
Salaries	$	12,936	$	12,173	$	763	$	25,737	$	24,651	$	1,086
Employee benefits		1,984		1,409		575		4,428		3,094		1,334
Occupancy of bank premises		1,741		1,463		278		3,801		3,401		400
Furniture and equipment		623		603		20		1,175		1,226		(51)
Data processing		1,990		1,721		269		3,643		3,409		234
Marketing and customer relations		1,205		843		362		2,056		1,408		648
Amortization of intangible assets		245		258		(13)		490		547		(57)
FDIC insurance		298		244		54		586		484		102
Loan collection and servicing		278		333		(55)		435		698		(263)
Foreclosed assets		31		319		(288)		163		462		(299)
Other noninterest expense		2,511		2,788		(277)		5,485		5,318		167
Total noninterest expense	$	23,842	$	22,154	$	1,688	$	47,999	$	44,698	$	3,301

Comparison of the Three Months Ended June 30, 2022 to the Three Months Ended June 30, 2021

Total noninterest expense for the three months ended June 30, 2022, was $23.8 million, an increase of $1.7 million, or 7.6%, from the three months ended June 30, 2021. Notable changes in noninterest expense include the following:

●

Following the NXT acquisition on October 1, 2021, there was a higher base level of noninterest expense, primarily related to personnel costs and branch operations;

●

A $0.4 million increase in marketing expense, primarily due to variations in timing of marketing campaigns as well as a slightly higher marketing budget relative to 2021;

●

A $0.3 million decrease in foreclosed asset expense, primarily due to fewer properties held in 2022 relative to 2021; and

●

A $0.3 million decrease in other noninterest expense, primarily due to the absence of $0.2 million of legal and professional fees related to the NXT acquisition which were present in the 2021 results.

Comparison of the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021

Total noninterest expense for the six months ended June 30, 2022, was $48.0 million, an increase of $3.3 million, or 7.4%, from the six months ended June 30, 2021. Notable changes in noninterest expense include the following:

●

Following the NXT acquisition on October 1, 2021, there was a higher base level of noninterest expense, primarily related to personnel costs and branch operations;

●

The $1.3 million increase in employee benefits expenses also included accelerated recognition of $0.6 million of stock compensation expense during February 2022 as a result of a modification to all outstanding restricted stock unit and performance restricted stock unit agreements to address treatment upon retirement. Total compensation costs related to the modified agreements remains the same;

●

A $0.7 million increase in marketing expense, primarily due to variations in timing of marketing campaigns as well as a slightly higher marketing budget relative to 2021; and

●

A $0.3 million decrease in foreclosed asset expense, primarily due to fewer properties held in 2022 relative to 2021.

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Income Taxes

Comparison of the Three Months Ended June 30, 2022 to the Three Months Ended June 30, 2021

We recorded income tax expense of $4.9 million, or 25.6% effective tax rate, during the three months ended June 30, 2022, compared to $4.8 million, or 25.8% effective tax rate, during the three months ended June 30, 2021. The slight decrease in effective tax rate was primarily due to lower overall state income taxes.

Comparison of the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021

We recorded income tax expense of $9.6 million, or 25.8% effective tax rate, during the six months ended June 30, 2022, compared to $10.3 million, or 26.3% effective tax rate, during the six months ended June 30, 2021. The slight decrease in effective tax rate was primarily due to lower overall state income taxes.

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FINANCIAL CONDITION


	June 30,			December 31,
	2022			2021			$ Change		% Change

Consolidated Balance Sheet Information	(dollars in thousands, except per share data)
Cash and cash equivalents	$	160,031		$	409,268		$	(249,237)	(60.9)	%
Debt securities available-for-sale, at fair value		924,706			942,168			(17,462)	(1.9)
Debt securities held-to-maturity		548,236			336,185			212,051	63.1
Loans held for sale		5,312			4,942			370	7.5

Loans, before allowance for loan losses		2,451,826			2,499,689			(47,863)	(1.9)
Less: allowance for loan losses		24,734			23,936			798	3.3
Loans, net of allowance for loan losses		2,427,092			2,475,753			(48,661)	(2.0)

Goodwill		29,322			29,322			—	—
Core deposit intangible assets, net		1,453			1,943			(490)	(25.2)
Other assets		127,826			114,673			13,153	11.5
Total assets	$	4,223,978		$	4,314,254		$	(90,276)	(2.1)	%

Total deposits	$	3,701,986		$	3,738,185		$	(36,199)	(1.0)	%
Securities sold under agreements to repurchase		51,091			61,256			(10,165)	(16.6)
Subordinated notes		39,356			39,316			40	0.1
Junior subordinated debentures		37,747			37,714			33	0.1
Other liabilities		19,989			25,902			(5,913)	(22.8)
Total liabilities		3,850,169			3,902,373			(52,204)	(1.3)
Total stockholders' equity		373,809			411,881			(38,072)	(9.2)
Total liabilities and stockholders' equity	$	4,223,978		$	4,314,254		$	(90,276)	(2.1)	%

Tangible assets ⁽¹⁾	$	4,193,203		$	4,282,989		$	(89,786)	(2.1)	%
Tangible common equity ⁽¹⁾		343,034			380,616			(37,582)	(9.9)

Core deposits ⁽¹⁾	$	3,676,617		$	3,674,435		$	2,182	0.1	%

Share and Per Share Information
Book value per share	$	12.97		$	14.21
Tangible book value per share ⁽¹⁾		11.90			13.13

Shares of common stock outstanding		28,831,197			28,986,061

Balance Sheet Ratios
Loan to deposit ratio		66.23	%		66.87	%
Core deposits to total deposits ⁽¹⁾		99.31			98.29
Stockholders' equity to total assets		8.85			9.55
Tangible common equity to tangible assets ⁽¹⁾		8.18			8.89

(1)	See "Non-GAAP Financial Information" for reconciliation of non-GAAP measure to their most closely comparable GAAP measures.

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Total assets were $4.22 billion at June 30, 2022, a decrease of $90.3 million, or 2.1%, from December 31, 2021. Notable changes in our consolidated balance sheet include the following:

●

Excess liquidity, including excess cash held at December 31, 2021, was reinvested into debt securities which increased by $194.6 million;

●

Loans decreased by $47.9 million, which includes a $26.7 million decrease due to the ongoing forgiveness of PPP loans;

●

Total deposits decreased by $36.2 million, primarily due to lower balances maintained in retail and business accounts, partially offset by a seasonal increase in public fund accounts as a result of real estate tax collections in the second quarter of 2022; and

●

Increases in market interest rates since December 31, 2021 drove a decrease in fair value of debt securities resulting in $77.6 million of unrealized losses in the available-for-sale portfolio and substantially contributing to a total decrease of $54.3 million in accumulated other comprehensive income (loss).

Loan Portfolio

The following table sets forth the composition of the loan portfolio, excluding loans held-for-sale, by type of loan.


	June 30, 2022				December 31, 2021
	Balance		Percent		Balance		Percent

	(dollars in thousands)
Commercial and industrial	$	249,839	10.2	%	$	286,946	11.5	%
Agricultural and farmland		230,370	9.4			247,796	9.9
Commercial real estate - owner occupied		228,997	9.3			234,544	9.4
Commercial real estate - non-owner occupied		656,093	26.8			684,023	27.4
Multi-family		269,452	11.0			263,911	10.5
Construction and land development		332,041	13.5			298,048	11.9
One-to-four family residential		325,047	13.3			327,837	13.1
Municipal, consumer, and other		159,987	6.5			156,584	6.3
Loans, before allowance for loan losses		2,451,826	100.0	%		2,499,689	100.0	%
Allowance for loan losses		(24,734)				(23,936)
Loans, net of allowance for loan losses	$	2,427,092			$	2,475,753

PPP loans (included above)
Commercial and industrial	$	2,823	0.1	%	$	28,404	1.1	%
Agricultural and farmland		9	—			913	0.1
Municipal, consumer, and other		—	—			171	—
Total PPP loans	$	2,832	0.1	%	$	29,488	1.2	%

Loans, before allowance for loan losses were $2.45 billion at June 30, 2022, a decrease of $47.9 million, or 1.9%, from December 31, 2021, primarily due to the ongoing forgiveness of PPP loans which decreased by $26.7 million. Additionally, new loan production was impacted by seasonally lighter demand in the first quarter of 2022, project delays due to higher materials costs and interest rates, and an increasingly competitive loan pricing environment in our markets.

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Loan Portfolio Maturities

The following table summarizes the scheduled maturities of the loan portfolio. Demand loans (loans having no stated repayment schedule or maturity) and overdraft loans are reported as being due in one year or less.


			After 1 Year		After 5 Years
	1 Year		Through		Through		After
June 30, 2022	or Less		5 Years		15 Years		15 Years		Total

	(dollars in thousands)
Commercial and industrial	$	160,468	$	69,566	$	19,805	$	—	$	249,839
Agricultural and farmland		90,820		94,507		42,242		2,801		230,370
Commercial real estate - owner occupied		18,723		141,283		65,256		3,735		228,997
Commercial real estate - non-owner occupied		77,032		408,702		169,831		528		656,093
Multi-family		23,434		171,746		74,272		—		269,452
Construction and land development		176,270		143,995		11,478		298		332,041
One-to-four family residential		73,121		112,475		81,550		57,901		325,047
Municipal, consumer, and other		49,817		17,229		71,876		21,065		159,987
Total	$	669,685	$	1,159,503	$	536,310	$	86,328	$	2,451,826

The following table summarizes loans maturing after one year, segregated into variable and fixed interest rates.


	Variable Interest Rates
	Repricing		Repricing		Total		Predetermined
	1 Year		After		Variable		(Fixed)
June 30, 2022	or Less		1 Year		Interest Rates		Interest Rates		Total

	(dollars in thousands)
Commercial and industrial	$	8,056	$	22	$	8,078	$	81,293	$	89,371
Agricultural and farmland		7,643		5,788		13,431		126,119		139,550
Commercial real estate - owner occupied		29,517		19,467		48,984		161,290		210,274
Commercial real estate - non-owner occupied		67,933		20,931		88,864		490,197		579,061
Multi-family		26,370		30		26,400		219,618		246,018
Construction and land development		81,035		75		81,110		74,661		155,771
One-to-four family residential		67,059		21,493		88,552		163,374		251,926
Municipal, consumer, and other		31,544		11,987		43,531		66,639		110,170
Total	$	319,157	$	79,793	$	398,950	$	1,383,191	$	1,782,141

Nonperforming Assets

Nonperforming loans consist of all loans 90 days or more past due or on nonaccrual. Nonperforming assets consist of all nonperforming loans and foreclosed assets. Typically, loans are placed on nonaccrual when they reach 90 days past due, or when, in management’s opinion, there is reasonable doubt regarding the collection of the amounts due through the normal means of the borrower. Interest accrued and unpaid at the time a loan is placed on nonaccrual status is reversed from interest income. Interest payments received on nonaccrual loans are recognized in accordance with our significant accounting policies. Once a loan is placed on nonaccrual status, the borrower must generally demonstrate at least six months of payment performance and we must believe that all remaining principal and interest is fully collectible, before the loan is eligible to return to accrual status. Management believes the Company’s lending practices and active approach to managing nonperforming assets has resulted in timely resolution of problem assets.

Loans acquired with deteriorated credit quality are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. However, these loans may be considered performing, even though they may be contractually past due, as any non-payment of contractual principal or interest is considered in the periodic re-estimation of expected cash flows and is included in the resulting recognition of current period loan loss provision or future period yield adjustments. The accrual of interest is discontinued on loans acquired with deteriorated credit quality if management can no longer estimate future cash flows on the loan. Therefore, interest revenue, through accretion of the difference between the carrying value of the loans and the expected cash flows, is being recognized on all loans acquired with deteriorated credit quality, except those on which management can no longer estimate future cash flows.

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The following table sets forth information concerning nonperforming loans and nonperforming assets as of each of the dates indicated.


	June 30, 2022			December 31, 2021

	(dollars in thousands)
NONPERFORMING ASSETS
Nonaccrual	$	3,248		$	2,763
Past due 90 days or more, still accruing ⁽¹⁾		182			16
Total nonperforming loans		3,430			2,779
Foreclosed assets		2,891			3,278
Total nonperforming assets	$	6,321		$	6,057

Allowance for loan losses	$	24,734		$	23,936
Loans, before allowance for loan losses		2,451,826			2,499,689

CREDIT QUALITY RATIOS
Allowance for loan losses to loans, before allowance for loan losses		1.01	%		0.96	%
Allowance for loan losses to nonaccrual loans		761.51			866.30
Allowance for loan losses to nonperforming loans		721.11			861.32
Nonaccrual loans to loans, before allowance for loan losses		0.13			0.11
Nonperforming loans to loans, before allowance for loan losses		0.14			0.11
Nonperforming assets to total assets		0.15			0.14
Nonperforming assets to loans, before allowance for loan losses, and foreclosed assets		0.26			0.24

(1)	Excludes loans acquired with deteriorated credit quality that are past due 90 or more days totaling $23 thousand and $32 thousand as of June 30, 2022, and December 31, 2021, respectively.

Total nonperforming assets were $6.3 million at June 30, 2022, increasing slightly since December 31, 2021. Our level of nonperforming assets has remained low in recent years, representing only 0.15% and 0.14% of total assets as of June 30, 2022 and December 31, 2021, respectively. We believe our continuous credit monitoring and collection efforts have resulted in lower levels of nonperforming assets, while also recognizing that favorable economic conditions prior to the COVID-19 pandemic and substantial federal economic stimulus during the pandemic have also contributed to these lower levels.

Troubled Debt Restructurings

In general, if the Company grants a troubled debt restructuring (“TDR”) that involves either the absence of principal amortization or a material extension of an existing loan amortization period in excess of our underwriting standards, the loan will be placed on nonaccrual status. However, if a TDR is well secured by an abundance of collateral and the collectability of both interest and principal is probable, the loan may remain on accrual status. A nonaccrual TDR in full compliance with the payment requirements specified in the loan modification for at least six months may return to accrual status, if the collectability of both principal and interest is probable. All TDRs are individually evaluated for impairment.

The following table presents TDRs by loan category.


	June 30, 2022						December 31, 2021
	Accruing		Nonaccrual		Total		Accruing		Nonaccrual		Total

	(dollars in thousands)
Commercial and industrial	$	167	$	—	$	167	$	203	$	—	$	203
Commercial real estate - owner occupied		1,595		—		1,595		1,671		—		1,671
Commercial real estate - non-owner occupied		1,238		—		1,238		1,278		—		1,278
One-to-four family residential		344		—		344		360		—		360
Total troubled debt restructurings	$	3,344	$	—	$	3,344	$	3,512	$	—	$	3,512

TDRs have remained a small portion of our loan portfolio as loan modifications to borrowers with deteriorating financial condition are generally offered only as part of an overall workout strategy to minimize losses to the Company.

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Risk Classification of Loans

Our policies, consistent with regulatory guidelines, provide for the classification of loans and other assets that are considered to be of lesser quality as pass-watch, substandard, doubtful, or loss.

A pass-watch loan is still considered a "pass" credit and is not a classified or criticized asset, but is a reflection of a borrower who exhibits credit weaknesses or downward trends warranting close attention and increased monitoring. These potential weaknesses may result in deterioration of the repayment prospects for the loan. No loss of principal or interest is expected, and the borrower does not pose sufficient risk to warrant classification.

A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized as probable that the borrower will not pay principal and interest in accordance with the contractual terms.

An asset classified as doubtful has all the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets is not warranted; such balances are promptly charged-off as required by applicable federal regulations.

As of June 30, 2022 and December 31, 2021, our risk classifications of loans were as follows:


	June 30, 2022		December 31, 2021

	(dollars in thousands)
Pass	$	2,307,449	$	2,269,228
Pass-watch		63,564		148,285
Substandard		80,813		82,176
Doubtful		—		—
Total	$	2,451,826	$	2,499,689

Pass-watch loans decreased $84.7 million, or 57.1% and substandard loans decreased $1.4 million, or 1.7%, from December 31, 2021 to June 30, 2022. This overall improvement was primarily driven by better economic conditions, relative to 2021, which resulted in both risk rating upgrades and paydowns.

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Net Charge-offs and Recoveries

The following table summarizes net charge-offs (recoveries) to average loans, before allowance for loan losses, by loan category.


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021

	(dollars in thousands)
Net charge-offs (recoveries)
Commercial and industrial	$	(40)		$	281		$	(744)		$	(12)
Agricultural and farmland		—			—			—			—
Commercial real estate - owner occupied		—			—			(100)			—
Commercial real estate - non-owner occupied		(5)			(6)			(270)			(13)
Multi-family		—			—			—			—
Construction and land development		—			(179)			—			(269)
One-to-four family residential		(62)			8			(214)			38
Municipal, consumer, and other		26			(14)			91			20
Total	$	(81)		$	90		$	(1,237)		$	(236)

Average loans, before allowance for loan losses
Commercial and industrial	$	274,696		$	383,383		$	290,496		$	401,174
Agricultural and farmland		230,755			229,253			231,486			220,837
Commercial real estate - owner occupied		223,757			202,252			224,257			205,145
Commercial real estate - non-owner occupied		682,317			538,888			693,092			545,942
Multi-family		251,840			220,691			249,319			226,564
Construction and land development		324,806			210,745			320,033			213,559
One-to-four family residential		327,191			308,808			328,671			312,593
Municipal, consumer, and other		152,489			140,368			149,966			133,322
Total	$	2,467,851		$	2,234,388		$	2,487,320		$	2,259,136

Net charge-offs (recoveries) to average loans, before allowance for loan losses *
Commercial and industrial		(0.06)	%		0.29	%		(0.52)	%		(0.01)	%
Agricultural and farmland		—			—			—			—
Commercial real estate - owner occupied		—			—			(0.09)			—
Commercial real estate - non-owner occupied		—			—			(0.08)			—
Multi-family		—			—			—			—
Construction and land development		—			(0.34)			—			(0.25)
One-to-four family residential		(0.08)			0.01			(0.13)			0.02
Municipal, consumer, and other		0.07			(0.04)			0.12			0.03
Total		(0.01)	%		0.02	%		(0.10)	%		(0.02)	%

* Annualized measure.

The net charge-offs (recoveries) to average total loans before allowance for loan losses ratio has remained low for several years. We believe our continuous credit monitoring and collection efforts have resulted in lower levels of loan losses, while also recognizing that favorable economic conditions prior to the COVID-19 pandemic and substantial federal economic stimulus during the pandemic have also contributed to reduced loan losses.

Securities

The Company’s investment policy emphasizes safety of the principal, liquidity needs, expected returns, cash flow targets and consistency with our interest rate risk management strategy. The composition and maturities of the debt securities portfolio as of June 30, 2022, are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. Security yields have not been adjusted to a tax-equivalent basis.

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	June 30, 2022
	Available-for-Sale				Held-to-Maturity				Total
			Weighted				Weighted				Weighted
	Amortized		Average		Amortized		Average		Amortized		Average
	Cost		Yield		Cost		Yield		Cost		Yield

	(dollars in thousands)
Due in 1 year or less
U.S. government agency	$	3,039	0.17	%	$	—	—	%	$	3,039	0.17	%
Municipal		5,973	2.85			2,140	3.63			8,113	3.05
Mortgage-backed:
Agency residential		256	1.99			—	—			256	1.99
Agency commercial		5,135	2.31			—	—			5,135	2.31
Corporate		20,508	2.87			—	—			20,508	2.87
Total	$	34,911	2.54	%	$	2,140	3.63	%	$	37,051	2.61	%

Due after 1 year through 5 years
U.S. Treasury	$	110,241	1.34	%	$	—	—	%	$	110,241	1.34	%
U.S. government agency		26,853	2.41			10,000	2.18			36,853	2.35
Municipal		55,602	2.20			16,318	3.29			71,920	2.45
Mortgage-backed:
Agency residential		12,782	2.35			8,415	1.62			21,197	2.06
Agency commercial		37,719	2.27			8,280	2.72			45,999	2.35
Corporate		16,876	4.29			—	—			16,876	4.29
Total	$	260,073	2.01	%	$	43,013	2.59	%	$	303,086	2.09	%

Due after 5 years through 10 years
U.S. Treasury	$	59,689	1.46	%	$	—	—	%	$	59,689	1.46	%
U.S. government agency		30,481	2.32			57,626	2.45			88,107	2.41
Municipal		147,175	1.75			19,805	3.34			166,980	1.94
Mortgage-backed:
Agency residential		85,685	2.10			4,138	3.51			89,823	2.17
Agency commercial		73,813	1.63			221,735	1.86			295,548	1.80
Corporate		34,961	3.85			—	—			34,961	3.85
Total	$	431,804	1.97	%	$	303,304	2.09	%	$	735,108	2.02	%

Due after 10 years
U.S. government agency	$	—	—	%	$	20,787	2.71	%	$	20,787	2.71	%
Municipal		77,262	1.89			2,657	3.62			79,919	1.95
Mortgage-backed:
Agency residential		137,793	2.21			96,158	3.58			233,951	2.77
Agency commercial		43,909	1.98			80,177	2.01			124,086	2.00
Corporate		2,000	4.50			—	—			2,000	4.50
Total	$	260,964	2.10	%	$	199,779	2.86	%	$	460,743	2.43	%

Total
U.S. Treasury	$	169,930	1.38	%	$	—	—	%	$	169,930	1.38	%
U.S. government agency		60,373	2.26			88,413	2.48			148,786	2.39
Municipal		286,012	1.90			40,920	3.36			326,932	2.08
Mortgage-backed:
Agency residential		236,516	2.18			108,711	3.43			345,227	2.57
Agency commercial		160,576	1.90			310,192	1.92			470,768	1.91
Corporate		74,345	3.70			—	—			74,345	3.70
Total	$	987,752	2.03	%	$	548,236	2.42	%	$	1,535,988	2.17	%

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SOURCES OF FUNDS

Deposits

Management continues to focus on growing non-maturity deposits, through the Company’s relationship-driven banking philosophy and community-focused marketing programs, and to deemphasize higher cost deposit categories, such as time deposits. Additionally, the Bank continues to add and improve digital banking services to solidify deposit relationships.

The following table sets forth the distribution of average deposits, by account type:


	Three Months Ended June 30,												Percent
	2022						2021						Change in
	Average		Percent of		Weighted		Average		Percent of		Weighted		Average
	Balance		Total Deposits		Average Cost *		Balance		Total Deposits		Average Cost *		Balance

	(dollars in thousands)
Noninterest-bearing	$	1,072,883	28.5	%	—	%	$	992,699	29.1	%	—	%	8.1	%
Interest-bearing demand		1,159,077	30.8		0.05			1,019,488	29.9		0.05		13.7
Money market		582,016	15.5		0.08			502,448	14.8		0.08		15.8
Savings		661,661	17.6		0.03			601,615	17.7		0.03		10.0
Total non-maturity deposits		3,475,637	92.4		0.04			3,116,250	91.5		0.03		11.5
Time		284,880	7.6		0.28			290,865	8.5		0.48		(2.1)
Total deposits	$	3,760,517	100.0	%	0.05	%	$	3,407,115	100.0	%	0.07	%	10.4	%

	Six Months Ended June 30,												Percent
	2022						2021						Change in
	Average		Percent of		Weighted		Average		Percent of		Weighted		Average
	Balance		Total Deposits		Average Cost *		Balance		Total Deposits		Average Cost *		Balance

	(dollars in thousands)
Noninterest-bearing	$	1,075,387	28.5	%	—	%	$	956,806	28.8	%	—	%	12.4	%
Interest-bearing demand		1,151,495	30.5		0.05			1,008,664	30.4		0.05		14.2
Money market		590,098	15.7		0.08			492,472	14.8		0.07		19.8
Savings		655,645	17.4		0.03			571,921	17.2		0.03		14.6
Total non-maturity deposits		3,472,625	92.1		0.04			3,029,863	91.2		0.03		14.6
Time		297,706	7.9		0.31			292,509	8.8		0.51		1.8
Total deposits	$	3,770,331	100.0	%	0.06	%	$	3,322,372	100.0	%	0.08	%	13.5	%

* Annualized measure.

Comparison of the Three Months Ended June 30, 2022 to the Three Months Ended June 30, 2021

The average balances of non-maturity deposits increased 11.5% from the three months ended June 30, 2021 to the three months ended June 30, 2022, with the increase primarily attributable to higher balances maintained by deposit customers following the receipt of federal economic stimulus, in the form of PPP loan proceeds by commercial customers and direct payments received by retail customers, although this trend reversed slightly late in the second quarter of 2022. Additionally, the NXT acquisition added $139.4 million of non-maturity deposits on October 1, 2021. Time deposits decreased slightly due to continued run-off of higher cost time deposits which were mostly offset by the addition of $42.1 million of time deposits acquired from NXT.

Comparison of the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021

The average balances of non-maturity deposits increased 14.6% from the six months ended June 30, 2021 to the six months ended June 30, 2022, with the increase primarily attributable to higher balances maintained by deposit customers following the receipt of federal economic stimulus, in the form of PPP loan proceeds by commercial customers and direct payments received by retail customers, although this trend reversed slightly late in the second quarter of 2022. Additionally, the NXT acquisition added $139.4 million of non-maturity deposits on October 1, 2021. Time deposits increased slightly due to the addition of $42.1 million of time deposits acquired from NXT which were mostly offset by the continued run-off of higher cost time deposits.

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The following table sets forth time deposits by remaining maturity as of June 30, 2022:


	3 Months or		Over 3 through		Over 6 through		Over
	Less		6 Months		12 Months		12 Months		Total

	(dollars in thousands)
Time deposits:
Amounts less than $100,000	$	38,457	$	36,936	$	56,008	$	53,013	$	184,414
Amounts of $100,000 but less than $250,000		14,327		13,369		18,704		18,710		65,110
Amounts of $250,000 or more		8,190		8,188		5,690		3,301		25,369
Total time deposits	$	60,974	$	58,493	$	80,402	$	75,024	$	274,893

As of June 30, 2022 and December 31, 2021, the Bank’s uninsured deposits, including related accrued interest, were estimated to be $800.9 million and $845.7 million, respectively.

LIQUIDITY

Bank Liquidity

The overall objective of bank liquidity management is to ensure the availability of sufficient cash funds to meet all financial commitments and to take advantage of investment opportunities. The Bank manages liquidity in order to meet deposit withdrawals on demand or at contractual maturity, to repay borrowings as they mature, and to fund new loans and investments as opportunities arise.

The Bank continuously monitors its liquidity positions to ensure that assets and liabilities are managed in a manner that will meet all of our short-term and long-term cash requirements. The Bank manages its liquidity position to meet our daily cash flow needs, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives. The Bank also monitors liquidity requirements in light of interest rate trends, changes in the economy, the scheduled maturity and interest rate sensitivity of the investment and loan portfolios and deposits, and regulatory capital requirements.

As part of the Bank’s liquidity management strategy, the Bank is also focused on minimizing costs of liquidity and attempts to decrease these costs by promoting noninterest bearing and low-cost deposits and replacing higher cost funding including time deposits and borrowed funds. While the Bank does not control the types of deposit instruments our clients choose, those choices can be influenced with the rates and the deposit specials offered.

Additional sources of liquidity include unpledged securities, federal funds purchased, and borrowings from the FHLB. Unpledged securities may be sold or pledged as collateral for borrowings to meet liquidity needs. Interest is charged at the prevailing market rate on federal funds purchased and FHLB borrowings. Funds available through federal funds purchased and FHLB borrowings are used primarily to meet daily liquidity needs. The total remaining credit available to the Bank from the FHLB at June 30, 2022 was $361.6 million.

As of June 30, 2022, management believed adequate liquidity existed to meet all projected cash flow obligations of the Bank. As of June 30, 2022, the Bank had no material commitments for capital expenditures.

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Holding Company Liquidity

The Company is a corporation separate and apart from the Bank and, therefore, it must provide for its own liquidity. As of June 30, 2022, HBT Financial, Inc. had cash and cash equivalents of $24.0 million.

The Company’s main source of funding is dividends declared and paid to it by the Bank. Due to state banking laws, the Bank may not declare dividends in any calendar year in an amount that would exceed accumulated retained earnings, after giving effect to any unrecognized losses and bad debts, without the prior approval of the Illinois Department of Financial and Professional Regulation. In addition, dividends paid by the Bank to the Company would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements. Management believes that these limitations will not impact the Company’s ability to meet its ongoing short-term cash obligations. During the three and six months ended June 30, 2022, the Bank paid $6.0 million and $12.0 million in dividends to the Company, respectively. During the three and six months ended June 30, 2021, the Bank did not pay a dividend to the Company.

The liquidity needs of the Company on an unconsolidated basis consist primarily of operating expenses, interest payments on the subordinated notes and junior subordinated debentures, and shareholder distributions in the form of dividends and stock repurchases. During the three months ended June 30, 2022 and 2021, holding company operating expenses consisted of interest expense of $0.9 million and $0.8 million, respectively, and other operating expenses of $1.0 million and $0.7 million, respectively. During the six months ended June 30, 2022 and 2021, holding company operating expenses consisted of interest expense of $1.7 million and $1.7 million, respectively, and other operating expenses of $2.5 million and $1.3 million, respectively.

Additionally, the Company paid $4.7 million and $4.1 million of dividends to stockholders during the three months ended June 30, 2022 and 2021, respectively, and paid $9.3 million and $8.2 million of dividends to stockholders during the six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022, management was not aware of any known trends, events or uncertainties that had or were reasonably likely to have a material impact on the Company’s liquidity.

As of June 30, 2022, management believed adequate liquidity existed to meet all projected cash flow obligations of the Company. As of June 30, 2022, the Company had no material commitments for capital expenditures.

CAPITAL RESOURCES

The overall objectives of capital management are to ensure the availability of sufficient capital to support loan, deposit and other asset and liability growth opportunities and to maintain capital to absorb unforeseen losses or write-downs that are inherent in the business risks associated with the banking industry. The Company seeks to balance the need for higher capital levels to address such unforeseen risks and the goal to achieve an adequate return on the capital invested by our stockholders.

Regulatory Capital Requirements

The Company and Bank are each subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the financial statements of the Company and the Bank.

In addition to meeting minimum capital requirements, the Company and the Bank must also maintain a “capital conservation buffer” to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. As of June 30, 2022 and December 31, 2021, the capital conservation buffer requirement was 2.5% of risk-weighted assets.

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As of June 30, 2022 and December 31, 2021, the Company and the Bank met all capital adequacy requirements to which they were subject. As of those dates, the Bank was “well capitalized” under the regulatory prompt corrective action provisions.

The following table sets forth actual capital ratios of the Company and the Bank as of the dates indicated, as well as the minimum ratios for capital adequacy purposes with the capital conservation buffer, and the minimum ratios to be well capitalized under regulatory prompt corrective action provisions.


					For Capital		To Be Well
					Adequacy Purposes		Capitalized Under
	June 30,		December 31,		With Capital		Prompt Corrective
	2022		2021		Conversation Buffer ⁽¹⁾		Action Provisions ⁽²⁾
Total Capital (to Risk Weighted Assets)
Consolidated HBT Financial, Inc.	16.76	%	16.88	%	10.50	%	N/A
Heartland Bank and Trust Company	15.93		15.94		10.50		10.00	%

Tier 1 Capital (to Risk Weighted Assets)
Consolidated HBT Financial, Inc.	14.59	%	14.66	%	8.50	%	N/A
Heartland Bank and Trust Company	15.10		15.09		8.50		8.00	%

Common Equity Tier 1 Capital (to Risk Weighted Assets)
Consolidated HBT Financial, Inc.	13.36	%	13.37	%	7.00	%	N/A
Heartland Bank and Trust Company	15.10		15.09		7.00		6.50	%

Tier 1 Capital (to Average Assets)
Consolidated HBT Financial, Inc.	10.05	%	9.84	%	4.00		N/A
Heartland Bank and Trust Company	10.39		10.13		4.00		5.00	%

(1)	The Tier 1 capital to average assets ratio (known as the “leverage ratio”) is not impacted by the capital conservation buffer.

(2)	The prompt corrective action provisions are not applicable to bank holding companies.

N/A Not applicable.

As of June 30, 2022, management was not aware of any known trends, events or uncertainties that had or were reasonably likely to have a material impact on the Company’s capital resources.

Cash Dividends

During 2021, the Company paid quarterly cash dividends of $0.15 per share. On January 25, 2022, the Company announced an increase of $0.01 and paid a $0.16 per share dividend during the first and second quarters of 2022.

Stock Repurchase Program

Under the Company’s stock repurchase program, the Company repurchased 136,746 shares of its common stock at a weighted average price of $17.61 during the three months ended June 30, 2022. Repurchases were conducted in compliance with Rule 10b-18 and in compliance with Regulation M under the Exchange Act. The Company’s Board of Directors authorized the repurchase of up to $15.0 million of its common stock under its stock repurchase program in effect until January 1, 2023. As of June 30, 2022, the Company had $11.6 million remaining under the current stock repurchase authorization.

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OFF-BALANCE SHEET ARRANGEMENTS

As a financial services provider, the Bank routinely is a party to various financial instruments with off-balance sheet risks, such as commitments to extend credit, standby letters of credit, unused lines of credit, commitments to sell loans, and interest rate swaps. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process afforded to loans originated by the Bank. Although commitments to extend credit are considered while evaluating our allowance for loan losses, as of June 30, 2022 and December 31, 2021, there were no reserves for unfunded commitments. For additional information, see “Note 14 – Commitments and Contingencies” to the consolidated financial statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company has established various accounting policies that govern the application of GAAP in the preparation of its consolidated financial statements.

Critical accounting estimates are those that are critical to the portrayal and understanding of the Company's financial condition and results of operations and require management to make assumptions that are difficult, subjective or complex. These estimates involve judgments, assumptions and uncertainties that are susceptible to change. In the event that different assumptions or conditions were to prevail, and depending on the severity of such changes, the possibility of a materially different financial condition or materially different results of operations is a reasonable likelihood. Further, changes in accounting standards could impact the Company's critical accounting estimates.

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 11, 2022. For more information, please refer to “Note 1 – Summary of Significant Accounting Policies” to our consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 11, 2022.

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NON-GAAP FINANCIAL INFORMATION

This Quarterly Report on Form 10-Q contains certain financial information determined by methods other than those in accordance with GAAP. Management believes that it is a standard practice in the banking industry to present these non-GAAP financial measures, and accordingly believes that providing these measures may be useful for peer comparison purposes. These disclosures should not be viewed as substitutes for the results determined to be in accordance with GAAP; nor are they necessarily comparable to non-GAAP financial measures that may be presented by other companies. See our reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures below.


Non-GAAP Financial Measure	Definition	How the Measure Provides Useful Information to Investors
Adjusted Net Income	● Net income, with the following adjustments: - excludes acquisition expenses, - excludes branch closure expenses, - excludes charges related to termination of certain employee benefit plans, - excludes net earnings (losses) from closed or sold operations, - excludes realized gains (losses) on sales of closed branch premises, - excludes realized gains (losses) on sales of securities, - excludes mortgage servicing rights fair value adjustment, and - the income tax effect of these pre-tax adjustments.	● Enhances comparisons to prior periods and, accordingly, facilitates the development of future projections and earnings growth prospects. ● We also sometimes refer to ratios that include Adjusted Net Income, such as: - Adjusted Return on Average Assets, which is Adjusted Net Income divided by average assets. - Adjusted Return on Average Equity, which is Adjusted Net Income divided by average equity. - Adjusted Earnings Per Share - Basic, which is Adjusted Net Income allocated to common shares divided by weighted average common shares outstanding. - Adjusted Earnings Per Share – Diluted, which is Adjusted Net Income allocated to common shares divided by weighted average common shares outstanding, including all dilutive potential shares.
Net Interest Income (Tax Equivalent Basis)	● Net interest income adjusted for the tax-favored status of tax-exempt loans and securities. ⁽¹⁾	● We believe the tax equivalent basis is the preferred industry measurement of net interest income. ● Enhances comparability of net interest income arising from taxable and tax-exempt sources. ● We also sometimes refer to Net Interest Margin (Tax Equivalent Basis), which is Net Interest Income (Tax Equivalent Basis) divided by average interest-earning assets.
Efficiency Ratio (Tax Equivalent Basis)	● Noninterest expense less amortization of intangible assets divided by the sum of net interest income (tax equivalent basis) and noninterest income. ⁽¹⁾	● Provides a measure of productivity in the banking industry. ● Calculated to measure the cost of generating one dollar of revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue.

(1)	Tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%.

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Non-GAAP Financial Measure	Definition	How the Measure Provides Useful Information to Investors
Tangible Common Equity to Tangible Assets	● Tangible Common Equity is total stockholders’ equity less goodwill and other intangible assets. ● Tangible Assets is total assets less goodwill and other intangible assets.	● Generally used by investors, our management, and banking regulators to evaluate capital adequacy. ● Facilitates comparison of our earnings with the earnings of other banking organization with significant amounts of goodwill or intangible assets. ● We also sometimes refer to ratios that include Tangible Common Equity, such as: - Tangible Book Value Per Share, which is Tangible Common Equity divided by shares of common stock outstanding. - Return on Average Tangible Common Equity, which is net income divided by average Tangible Common Equity. - Adjusted Return on Average Tangible Common Equity, which is Adjusted Net Income divided by average Tangible Common Equity.
Core Deposits	● Total deposits, excluding: - Time deposits of $250,000 or more, and - Brokered deposits	● Provides investors with information regarding the stability of the Company’s sources of funds. ● We also sometimes refer to the ratio of Core Deposits to total deposits.

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Reconciliation of Non-GAAP Financial Measure - Adjusted Net Income and Adjusted Return on Average Assets


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021

	(dollars in thousands)
Net income	$	14,085		$	13,717		$	27,689		$	28,962
Adjustments:
Acquisition expenses		—			(157)			—			(157)
Branch closure expenses		—			(104)			—			(104)
Gains (losses) on sales of closed branch premises		(18)			—			179			—
Mortgage servicing rights fair value adjustment		366			(310)			2,095			1,385
Total adjustments		348			(571)			2,274			1,124
Tax effect of adjustments		(99)			120			(648)			(363)
Less adjustments after tax effect		249			(451)			1,626			761
Adjusted net income	$	13,836		$	14,168		$	26,063		$	28,201

Average assets	$	4,286,302		$	3,923,839		$	4,314,716		$	3,842,976

Return on average assets *		1.32	%		1.40	%		1.29	%		1.52	%
Adjusted return on average assets *		1.29			1.45			1.22			1.48

* Annualized measure.

Reconciliation of Non-GAAP Financial Measure - Adjusted Earnings Per Share


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

	(dollars in thousands, except per share amounts)
Numerator:
Net income	$	14,085	$	13,717	$	27,689	$	28,962
Earnings allocated to participating securities ⁽¹⁾		(17)		(25)		(34)		(56)
Numerator for earnings per share - basic and diluted	$	14,068	$	13,692	$	27,655	$	28,906

Adjusted net income	$	13,836	$	14,168	$	26,063	$	28,201
Earnings allocated to participating securities ⁽¹⁾		(17)		(26)		(32)		(54)
Numerator for adjusted earnings per share - basic and diluted	$	13,819	$	14,142	$	26,031	$	28,147

Denominator:
Weighted average common shares outstanding		28,891,202		27,362,579		28,938,634		27,396,557
Dilutive effect of outstanding restricted stock units		53,674		17,701		48,688		10,137
Weighted average common shares outstanding, including all dilutive potential shares		28,944,876		27,380,280		28,987,322		27,406,694

Earnings per share - Basic	$	0.49	$	0.50	$	0.96	$	1.06
Earnings per share - Diluted	$	0.49	$	0.50	$	0.95	$	1.05

Adjusted earnings per share - Basic	$	0.48	$	0.52	$	0.90	$	1.03
Adjusted earnings per share - Diluted	$	0.48	$	0.52	$	0.90	$	1.03

(1)

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Reconciliation of Non-GAAP Financial Measure – Net Interest Income and Net Interest Margin (Tax Equivalent Basis)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021

	(dollars in thousands)
Net interest income (tax equivalent basis)
Net interest income	$	34,373		$	29,700		$	66,301		$	58,829
Tax-equivalent adjustment ⁽¹⁾		598			503			1,127			1,006
Net interest income (tax equivalent basis) ⁽¹⁾	$	34,971		$	30,203		$	67,428		$	59,835

Net interest margin (tax equivalent basis)
Net interest margin *		3.34	%		3.14	%		3.21	%		3.19	%
Tax-equivalent adjustment * ⁽¹⁾		0.05			0.05			0.05			0.06
Net interest margin (tax equivalent basis) * ⁽¹⁾		3.39	%		3.19	%		3.26	%		3.25	%

Average interest-earning assets	$	4,133,448		$	3,796,219		$	4,167,432		$	3,717,273

* Annualized measure.

(1)	On a tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%.

Reconciliation of Non-GAAP Financial Measure - Efficiency Ratio (Tax Equivalent Basis)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021

	(dollars in thousands)
Efficiency ratio (tax equivalent basis)
Total noninterest expense	$	23,842		$	22,154		$	47,999		$	44,698
Less: amortization of intangible assets		245			258			490			547
Adjusted noninterest expense	$	23,597		$	21,896		$	47,509		$	44,151

Net interest income	$	34,373		$	29,700		$	66,301		$	58,829
Total noninterest income		8,551			8,774			18,594			19,582
Operating revenue		42,924			38,474			84,895			78,411
Tax-equivalent adjustment ⁽¹⁾		598			503			1,127			1,006
Operating revenue (tax-equivalent basis) ⁽¹⁾	$	43,522		$	38,977		$	86,022		$	79,417

Efficiency ratio		54.97	%		56.91	%		55.96	%		56.31	%
Efficiency ratio (tax equivalent basis) ⁽¹⁾		54.22			56.18			55.23			55.59

(1)	On a tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%.

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Reconciliation of Non-GAAP Financial Measure - Tangible Common Equity to Tangible Assets and Tangible Book Value Per Share


	June 30, 2022			December 31, 2021

	(dollars in thousands, except per share data)
Tangible Common Equity
Total stockholders' equity	$	373,809		$	411,881
Less: Goodwill		29,322			29,322
Less: Core deposit intangible assets, net		1,453			1,943
Tangible common equity	$	343,034		$	380,616

Tangible Assets
Total assets	$	4,223,978		$	4,314,254
Less: Goodwill		29,322			29,322
Less: Core deposit intangible assets, net		1,453			1,943
Tangible assets	$	4,193,203		$	4,282,989

Total stockholders' equity to total assets		8.85	%		9.55	%
Tangible common equity to tangible assets		8.18			8.89

Shares of common stock outstanding		28,831,197			28,986,061

Book value per share	$	12.97		$	14.21
Tangible book value per share		11.90			13.13

Reconciliation of Non-GAAP Financial Measure – Return on Average Tangible Common Equity, Adjusted Return on Average Stockholders’ Equity, and Adjusted Return on Average Tangible Common Equity


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021

	(dollars in thousands)
Average Tangible Common Equity
Total stockholders' equity	$	378,531		$	365,190		$	392,334		$	364,378
Less: Goodwill		29,322			23,620			29,322			23,620
Less: Core deposit intangible assets, net		1,597			2,410			1,720			2,547
Average tangible common equity	$	347,612		$	339,160		$	361,292		$	338,211

Net income	$	14,085		$	13,717		$	27,689		$	28,962
Adjusted net income		13,836			14,168			26,063			28,201

Return on average stockholders' equity *		14.92	%		15.07	%		14.23	%		16.03	%
Return on average tangible common equity *		16.25			16.22			15.45			17.27

Adjusted return on average stockholders' equity *		14.66	%		15.56	%		13.40	%		15.61	%
Adjusted return on average tangible common equity *		15.96			16.76			14.55			16.81

* Annualized measure.

Reconciliation of Non-GAAP Financial Measure - Core Deposits


	June 30, 2022			December 31, 2021

	(dollars in thousands)
Core Deposits
Total deposits	$	3,701,986		$	3,738,185
Less: time deposits of $250,000 or more		25,369			59,512
Less: brokered deposits		—			4,238
Core deposits	$	3,676,617		$	3,674,435

Core deposits to total deposits		99.31	%		98.29	%

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Managing risk is an essential part of successfully managing a financial institution. Our most prominent risk exposures are interest rate risk and credit risk.

Interest Rate Risk

Our most significant form of market risk is interest rate risk inherent in the normal course of lending and deposit-taking activities. Interest rate risk is the potential reduction of net interest income as a result of changes in interest rates. Management believes that our ability to successfully respond to changes in interest rates will have a significant impact on our financial results. To that end, management actively monitors and manages our interest rate exposure.

The Company’s Asset/Liability Management Committee (“ALCO”), which is authorized by the Company’s board of directors, monitors our interest rate sensitivity and makes decisions relating to that process. The ALCO’s goal is to structure our asset/liability composition to maximize net interest income while managing interest rate risk so as to minimize the adverse impact of changes in interest rates on net interest income and capital in either a rising or declining interest rate environment. Profitability is affected by fluctuations in interest rates. A sudden and substantial change in interest rates may adversely impact our earnings because the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis.

We monitor the impact of changes in interest rates on our net interest income and economic value of equity (“EVE”) using rate shock analysis. Net interest income simulations measure the short-term earnings exposure from changes in market rates of interest in a rigorous and explicit fashion. Our current financial position is combined with assumptions regarding future business to calculate net interest income under varying hypothetical rate scenarios. EVE measures our long-term earnings exposure from changes in market rates of interest. EVE is defined as the present value of assets minus the present value of liabilities at a point in time. A decrease in EVE due to a specified rate change indicates a decline in the long-term earnings capacity of the balance sheet assuming that the rate change remains in effect over the life of the current balance sheet.

The following table sets forth the estimated impact on our EVE and net interest income of immediate and parallel changes in interest rates at the specified levels.


					Increase (Decrease) in
	Estimated Increase				Estimated Net Interest Income
	(Decrease) in EVE				Year 1				Year 2
Change in Interest Rates (basis points)	Amount		Percent		Amount		Percent		Amount		Percent

	(dollars in thousands)
June 30, 2022
+400	$	130,759	18.1	%	$	23,121	15.5	%	$	37,496	24.0	%
+300		116,344	16.1			17,920	12.0			29,675	19.0
+200		91,283	12.7			12,340	8.3			20,886	13.4
+100		53,725	7.5			6,401	4.3			11,122	7.1
Flat		—	—			—	—			—	—
-100		(88,870)	(12.3)			(11,591)	(7.8)			(17,837)	(11.4)

December 31, 2021
+400	$	92,106	19.7	%	$	23,230	18.7	%	$	38,485	31.7	%
+300		76,708	16.4			17,938	14.5			30,487	25.1
+200		51,627	11.1			12,154	9.8			21,339	17.6
+100		12,453	2.7			5,818	4.7			11,062	9.1
Flat		—	—			—	—			—	—
-100		34,852	7.5			(4,098)	(3.3)			(7,746)	(6.4)

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Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in EVE and net interest income requires that we make certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The EVE and net interest income table presented above assumes that the composition of our interest-rate-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and, accordingly, the data does not reflect any actions that we may undertake in response to changes in interest rates, such as changes in rates paid on certain deposit accounts based on local competitive factors, which could change the actual impact on EVE and net interest income. The table also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or the repricing characteristics of specific assets and liabilities. Accordingly, although the EVE and net interest income table provides an indication of our sensitivity to interest rate changes at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results.

Credit Risk

Credit risk is the risk that borrowers or counterparties will be unable or unwilling to repay their obligations in accordance with the underlying contractual terms. We manage and control credit risk in the loan portfolio by adhering to well-defined underwriting criteria and account administration standards established by management. Our loan policy documents underwriting standards, approval levels, exposure limits and other limits or standards deemed necessary and prudent. Portfolio diversification at the borrower, industry, and product levels is actively managed to mitigate concentration risk. In addition, credit risk management also includes an independent loan review process that assesses compliance with loan policy, compliance with loan documentation standards, accuracy of the risk rating and overall credit quality of the loan portfolio.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this report was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2022, the end of the period covered by this report, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is: (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure; and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) or Rule 15d-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are sometimes party to legal actions that are routine and incidental to our business. Management, in consultation with legal counsel, does not expect the ultimate disposition of any or a combination of these matters to have a material adverse effect on our assets, business, cash flow, financial condition, liquidity, prospects and results of operations; however, given the nature, scope and complexity of the extensive legal and regulatory landscape applicable to our business, including laws and regulations governing consumer protection, fair lending, fair labor, privacy, information security and anti-money laundering and anti-terrorism laws, we, like all banking organizations, are subject to heightened legal and regulatory compliance and litigation risk.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 11, 2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

None.

Issuer Purchases of Equity Securities

On December 14, 2021, the Company’s board of directors approved a stock repurchase program that authorizes the Company to repurchase up to $15 million of its common stock. The stock repurchase program will be in effect until January 1, 2023 with the timing of purchases and number of shares repurchased dependent upon a variety of factors including price, trading volume, corporate and regulatory requirements, and market conditions. The Company is not obligated to purchase any shares under the stock repurchase program, and the stock repurchase program may be suspended or discontinued at any time without notice.

The following table sets forth information about the Company’s purchases of its common stock during the second quarter of 2022, all of which were conducted in compliance with Rule 10b-18 and Regulation M under the Exchange Act:


				Total Number of Shares	Approximate Dollar Value of
	Total Number	Average		Purchased as Part of	Shares That May Yet be Purchased
	of Shares	Price Paid		Publicly Announced	Under the Plans or Programs
Period	Purchased	Per Share		Plans or Programs	(in thousands)
April 1 - 30, 2022	51,535	$	18.29	51,535	$	13,114
May 1 - 31, 2022	55,030		16.94	55,030		12,182
June 1 - 30, 2022	30,181		17.64	30,181		11,649
Total	136,746	$	17.61	136,746	$	11,649

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

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ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


Exhibit No.		Description

31.1		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a).

31.2		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a).

32.1 *		Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350.

32.2 *		Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350.

101.INS		iXBRL Instance Document.

101.SCH		iXBRL Taxonomy Extension Schema Document.

101.CAL		iXBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB		iXBRL Taxonomy Extension Label Linkbase Document.

101.PRE		iXBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF		iXBRL Taxonomy Extension Definition Linkbase Document.

104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibits 101).

*	This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	HBT FINANCIAL, INC.

August 3, 2022	By:	/s/ Matthew J. Doherty
		Matthew J. Doherty
		Chief Financial Officer
		(on behalf of the registrant and as principal financial officer)