SEC Filing | HBT Financial

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hbt-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2023

o 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 x No o

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 x No o

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	o	Accelerated filer	x

Non-accelerated filer	o	Smaller reporting company	x

Emerging growth company	x

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. o

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

As of October 24, 2023, there were 31,710,005 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	62
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	90
Item 4.	Controls and Procedures	91
PART II. OTHER INFORMATION		92
Item 1.	Legal Proceedings	92
Item 1A.	Risk Factors	92
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	92
Item 3.	Defaults Upon Senior Securities	92
Item 4.	Mine Safety Disclosures	92
Item 5.	Other Information	93
Item 6.	Exhibits	93

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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 (including the Israeli-Palestinian conflict and the Russian invasion of Ukraine), 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;

•changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies, the Financial Accounting Standards Board (the “FASB”) or the Public Company Accounting Oversight Board (including the Company’s adoption of the current expected credit losses (“CECL”) methodology);

•changes in state and federal laws, regulations and governmental policies concerning the Company’s general business and any changes in response to the recent failures of other banks;

•changes in interest rates and prepayment rates of the Company’s assets (including the impact of LIBOR phase-out and the recent and potential additional rate increases by the Federal Reserve);

•increased competition in the financial services sector, including from non-bank competitors such as credit unions and “fintech” companies, and the inability to attract new customers;

•changes in technology and the ability to develop and maintain secure and reliable electronic systems;

•unexpected results of acquisitions, which may include failure to realize the anticipated benefits of acquisitions and the possibility that transaction costs may be greater than anticipated;

•the loss of key executives or employees;

•changes in consumer spending;

•unexpected outcomes of existing or new litigation involving the Company;

•the economic impact of exceptional weather occurrences such as tornadoes, floods and blizzards;

•fluctuations in the value of securities held in our securities portfolio;

•concentrations within our loan portfolio, large loans to certain borrowers, and large deposits from certain clients;

•the concentration of large deposits from certain clients who have balances above current FDIC insurance limits and may withdraw deposits to diversify their exposure;

•the level of non-performing assets on our balance sheets;

•interruptions involving our information technology and communications systems or third-party servicers;

•breaches or failures of our information security controls or cybersecurity-related incidents;

•our asset quality and any loan charge-offs;

•the composition of our loan portfolio;

•the effects of 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;

•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 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;

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

•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;

•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;

•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, 2022, filed with the Securities and Exchange (“SEC”) Commission on March 8, 2023.

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


	(Unaudited)
(dollars in thousands, except per share data)	September 30, 2023		December 31, 2022
ASSETS
Cash and due from banks	$	24,757	$	18,970
Interest-bearing deposits with banks	87,156		95,189
Cash and cash equivalents	111,913		114,159

Interest-bearing time deposits with banks	500		—
Debt securities available-for-sale, at fair value	753,163		843,524
Debt securities held-to-maturity (fair value of $450,313 at 2023 and $478,801 at 2022)	527,144		541,600
Equity securities with readily determinable fair value	3,106		3,029
Equity securities with no readily determinable fair value	2,300		1,977
Restricted stock, at cost	11,165		7,965
Loans held for sale	3,563		615

Loans, before allowance for credit losses	3,342,786		2,620,253
Allowance for credit losses	(38,863)		(25,333)
Loans, net of allowance for credit losses	3,303,923		2,594,920

Bank owned life insurance	23,747		7,557
Bank premises and equipment, net	64,713		50,469
Bank premises held for sale	35		235
Foreclosed assets	1,519		3,030
Goodwill	59,820		29,322
Intangible assets, net	21,402		1,070
Mortgage servicing rights, at fair value	20,156		10,147
Investments in unconsolidated subsidiaries	1,614		1,165
Accrued interest receivable	23,447		19,506
Other assets	58,538		56,444
Total assets	$	4,991,768	$	4,286,734

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Noninterest-bearing	$	1,086,877	$	994,954
Interest-bearing	3,111,191		2,592,070
Total deposits	4,198,068		3,587,024

Securities sold under agreements to repurchase	28,900		43,081
Federal Home Loan Bank advances	177,650		160,000
Subordinated notes	39,454		39,395
Junior subordinated debentures issued to capital trusts	52,774		37,780
Other liabilities	38,671		45,822
Total liabilities	4,535,517		3,913,102

COMMITMENTS AND CONTINGENCIES (Note 15)

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 32,730,698 at 2023 and 29,308,491 at 2022; shares outstanding of 31,774,140 at 2023 and 28,752,626 at 2022	327		293
Surplus	295,483		222,783
Retained earnings	256,050		232,004
Accumulated other comprehensive income (loss)	(78,432)		(71,759)
Treasury stock at cost, 956,558 shares at 2023 and 555,865 at 2022	(17,177)		(9,689)
Total stockholders’ equity	456,251		373,632
Total liabilities and stockholders’ equity	$	4,991,768	$	4,286,734

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 September 30,				Nine Months Ended September 30,
(dollars in thousands, except per share data)	2023		2022		2023		2022

INTEREST AND DIVIDEND INCOME
Loans, including fees:
Taxable	$	49,640	$	29,855	$	138,948	$	84,504
Federally tax exempt	1,072		842		3,064		2,183
Securities:
Taxable	6,451		6,635		19,585		16,947
Federally tax exempt	978		1,207		3,337		3,385
Interest-bearing deposits in bank	714		458		2,234		1,037
Other interest and dividend income	186		17		420		50
Total interest and dividend income	59,041		39,014		167,588		108,106

INTEREST EXPENSE
Deposits	7,211		587		13,908		1,662
Securities sold under agreements to repurchase	35		9		107		26
Borrowings	2,108		85		5,594		87
Subordinated notes	470		470		1,409		1,409
Junior subordinated debentures issued to capital trusts	938		473		2,582		1,231
Total interest expense	10,762		1,624		23,600		4,415
Net interest income	48,279		37,390		143,988		103,691
PROVISION FOR CREDIT LOSSES	480		386		6,460		(53)
Net interest income after provision for credit losses	47,799		37,004		137,528		103,744

NONINTEREST INCOME
Card income	2,763		2,569		8,326		7,687
Wealth management fees	2,381		2,059		6,998		6,670
Service charges on deposit accounts	2,040		1,927		5,830		5,371
Mortgage servicing	1,169		697		3,522		2,016
Mortgage servicing rights fair value adjustment	23		351		(460)		2,446
Gains on sale of mortgage loans	476		354		1,125		1,267
Realized gains (losses) on sales of securities	(813)		—		(1,820)		—
Unrealized gains (losses) on equity securities	(46)		(107)		(61)		(447)
Gains (losses) on foreclosed assets	550		(225)		443		(192)
Gains (losses) on other assets	52		(31)		161		119
Income on bank owned life insurance	153		41		415		122
Other noninterest income	742		599		2,362		1,769
Total noninterest income	9,490		8,234		26,841		26,828

NONINTEREST EXPENSE
Salaries	15,644		12,752		51,715		38,489
Employee benefits	2,616		1,771		7,658		6,199
Occupancy of bank premises	2,573		1,979		7,460		5,780
Furniture and equipment	667		668		2,135		1,843
Data processing	2,581		1,631		9,787		5,274
Marketing and customer relations	1,679		880		3,874		2,936
Amortization of intangible assets	720		243		1,950		733
FDIC insurance	512		302		1,705		888
Loan collection and servicing	345		336		971		771
Foreclosed assets	76		97		234		260
Other noninterest expense	3,258		3,339		13,088		8,824
Total noninterest expense	30,671		23,998		100,577		71,997
INCOME BEFORE INCOME TAX EXPENSE	26,618		21,240		63,792		58,575
INCOME TAX EXPENSE	6,903		5,613		16,396		15,259
NET INCOME	$	19,715	$	15,627	$	47,396	$	43,316

EARNINGS PER SHARE - BASIC	$	0.62	$	0.54	$	1.50	$	1.50
EARNINGS PER SHARE - DILUTED	$	0.62	$	0.54	$	1.49	$	1.49
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING	31,829,250		28,787,662		31,598,650		28,887,757

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 September 30,				Nine Months Ended September 30,
(dollars in thousands)	2023		2022		2023		2022

NET INCOME	$	19,715	$	15,627	$	47,396	$	43,316

OTHER COMPREHENSIVE LOSS
Unrealized losses on debt securities available-for-sale	(11,326)		(35,358)		(12,521)		(112,931)
Reclassification adjustment for losses on securities available-for-sale realized in income	13		—		1,820		—
Reclassification adjustment for amortization of net unrealized losses on debt securities transferred to held-to-maturity	518		504		1,483		1,234
Unrealized gains on derivative instruments	58		374		219		1,117
Reclassification adjustment for net settlements on derivative instruments	(131)		14		(334)		177
Total other comprehensive loss, before tax	(10,868)		(34,466)		(9,333)		(110,403)
Income tax benefit	(3,098)		(9,824)		(2,660)		(31,470)
Total other comprehensive loss	(7,770)		(24,642)		(6,673)		(78,933)
TOTAL COMPREHENSIVE INCOME (LOSS)	$	11,945	$	(9,015)	$	40,723	$	(35,617)

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)


	Common Stock							Accumulated Other Comprehensive Income (Loss)				Total Stockholders’ Equity
(dollars in thousands, except per share data)	Shares Outstanding	Amount		Surplus		Retained Earnings				Treasury Stock

Balance, June 30, 2023	31,865,868	$	327	$	294,875	$	241,777	$	(70,662)	$	(15,465)	$	450,852

Net income	—	—		—		19,715		—		—		19,715
Other comprehensive loss	—	—		—		—		(7,770)		—		(7,770)
Stock-based compensation	—	—		608		—		—		—		608


Repurchase of common stock	(91,728)	—		—		—		—		(1,712)		(1,712)
Cash dividends and dividend equivalents ($0.17 per share)	—	—		—		(5,442)		—		—		(5,442)




Balance, September 30, 2023	31,774,140	$	327	$	295,483	$	256,050	$	(78,432)	$	(17,177)	$	456,251

Balance, June 30, 2022	28,831,197	$	293	$	222,087	$	212,506	$	(52,820)	$	(8,257)	$	373,809
Net income	—	—		—		15,627		—		—		15,627
Other comprehensive loss	—	—		—		—		(24,642)		—		(24,642)
Stock-based compensation	—	—		349		—		—		—		349


Repurchase of common stock	(78,571)	—		—		—		—		(1,432)		(1,432)
Cash dividends and dividend equivalents ($0.16 per share)	—	—		—		(4,638)		—		—		(4,638)





Balance, September 30, 2022	28,752,626	$	293	$	222,436	$	223,495	$	(77,462)	$	(9,689)	$	359,073

See accompanying Notes to Consolidated Financial Statements (Unaudited)

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HBT FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED)
(Unaudited)


	Common Stock							Accumulated Other Comprehensive Income (Loss)				Total Stockholders’ Equity
(dollars in thousands, except per share data)	Shares Outstanding	Amount		Surplus		Retained Earnings				Treasury Stock

Balance, December 31, 2022	28,752,626	$	293	$	222,783	$	232,004	$	(71,759)	$	(9,689)	$	373,632
Cumulative effect of change in accounting principle (ASU 2016-13)	—	—		—		(6,922)		—		—		(6,922)
Net income	—	—		—		47,396		—		—		47,396
Other comprehensive loss	—	—		—		—		(6,673)		—		(6,673)
Stock-based compensation	—	—		1,559		—		—		—		1,559
Issuance of common stock upon vesting of restricted stock units, net of tax withholdings	43,607	—		(181)		—		—		—		(181)
Issuance of common stock in Town and Country acquisition	3,378,600	34		71,322		—		—		—		71,356
Repurchase of common stock	(400,693)	—		—		—		—		(7,488)		(7,488)
Cash dividends and dividend equivalents ($0.51 per share)	—	—		—		(16,428)		—		—		(16,428)




Balance, September 30, 2023	31,774,140	$	327	$	295,483	$	256,050	$	(78,432)	$	(17,177)	$	456,251

Balance, December 31, 2021	28,986,061	$	293	$	220,891	$	194,132	$	1,471	$	(4,906)	$	411,881
Net income	—	—		—		43,316		—		—		43,316
Other comprehensive loss	—	—		—		—		(78,933)		—		(78,933)
Stock-based compensation	—	—		1,602		—		—		—		1,602
Issuance of common stock upon vesting of restricted stock units, net of tax withholdings	31,944	—		(57)		—		—		—		(57)

Repurchase of common stock	(265,379)	—		—		—		—		(4,783)		(4,783)
Cash dividends and dividend equivalents ($0.48 per share)	—	—		—		(13,953)		—		—		(13,953)





Balance, September 30, 2022	28,752,626	$	293	$	222,436	$	223,495	$	(77,462)	$	(9,689)	$	359,073

See accompanying Notes to Consolidated Financial Statements (Unaudited)

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HBT FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	Nine Months Ended September 30,
(dollars in thousands)	2023		2022

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	47,396	$	43,316
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	2,362		2,296
Provision for credit losses	6,460		(53)
Net amortization of debt securities	4,391		5,337
Deferred income tax expense (benefit)	2,492		(245)
Stock-based compensation	1,559		1,602
Net accretion of discount and deferred loan fees on loans	(5,312)		(4,320)
Net realized loss on sales of securities	1,820		—
Net unrealized loss on equity securities	61		447
Net loss (gain) on disposals of bank premises and equipment	(84)		8
Net gain on sales of bank premises held for sale	(75)		(187)
Impairment losses on bank premises held for sale	—		61
Net gain on sales of foreclosed assets	(632)		(118)
Write-down of foreclosed assets	189		310
Amortization of intangibles	1,950		733
Decrease (increase) in mortgage servicing rights	460		(2,446)
Amortization of discount and issuance costs on subordinated notes and debentures	104		109
Amortization of discount on Federal Home Loan Bank advances	275		—
Amortization of premium on interest-bearing time deposits with banks	—		5
Amortization of premium on time deposits	(330)		(164)
Mortgage loans originated for sale	(53,187)		(50,467)
Proceeds from sale of mortgage loans	52,976		54,379
Net gain on sale of mortgage loans	(1,125)		(1,267)
Increase in cash surrender value of bank owned life insurance	(408)		(122)
Increase in accrued interest receivable	(828)		(1,980)
Decrease in other assets	12,530		289
Increase (decrease) in other liabilities	(20,198)		1,583
Net cash provided by operating activities	52,846		49,106

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of interest-bearing time deposits with banks	249		485
Purchase of interest-bearing time deposits with banks	(500)		—
Proceeds from sales of securities available-for-sale	185,280		—
Proceeds from paydowns, maturities, and calls of debt securities	74,616		129,629
Purchase of securities	(3,010)		(368,794)
Purchase of loans	(49,859)		—
Net increase in loans	(32,506)		(74,769)
Purchase of restricted stock	(20,143)		(1,311)
Proceeds from redemption of restricted stock	19,765		—
Purchases of bank premises and equipment	(1,951)		(683)
Proceeds from sales of bank premises and equipment	222		8
Proceeds from sales of bank premises held for sale	310		1,297
Proceeds from sales of foreclosed assets	3,274		476

Net cash paid for acquisition of Town and Country	(14,454)		—
Net cash provided by (used in) investing activities	161,293		(313,662)

CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in deposits	(109,043)		(94,578)
Net decrease in repurchase agreements	(14,181)		(13,126)
Net decrease (increase) in Federal Home Loan Bank advances	(69,064)		60,000
Taxes paid related to the vesting of restricted stock units	(181)		(57)
Repurchase of common stock	(7,488)		(4,783)
Cash dividends and dividend equivalents paid	(16,428)		(13,953)
Net cash used in financing activities	(216,385)		(66,497)

NET DECREASE IN CASH AND CASH EQUIVALENTS	(2,246)		(331,053)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	114,159		409,268
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	111,913	$	78,215

See accompanying Notes to Consolidated Financial Statements (Unaudited)

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HBT FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)


	Nine Months Ended September 30,
(dollars in thousands)	2023		2022

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$	21,788	$	4,851
Cash paid for income taxes	$	15,867	$	13,805

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING ACTIVITIES
Transfers of loans to foreclosed assets	$	1,049	$	27

Transfers of bank premises and equipment to bank premises held for sale	$	35	$	—

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 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, 2022, filed with the SEC on March 8, 2023.

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 $1.235 billion or more in annual revenues, (3) the date on which the Company is deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) or (4) the date on which the Company has, during the previous three year period, issued, publicly or privately, more than $1.0 billion in non-convertible debt securities. The Company has elected to use the extended transition period until the Company is no longer an emerging growth company or until the Company chooses to affirmatively and irrevocably opt out of the extended transition period. As a result, the Company’s financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies.

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 credit losses and fair value of assets acquired and liabilities assumed in business combinations.

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.

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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.

Impact of Recently Adopted Accounting Standards

On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which replaces the incurred loss methodology with an expected loss methodology, commonly referred to as the current expected credit losses (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and debt securities held-to-maturity. It also applies to off-balance sheet credit exposures not accounted for as insurance, such as loan commitments and letters of credit. In addition, Accounting Standards Codification (“ASC”) 326 made changes to the accounting for debt securities available-for-sale. One such change is to require credit losses be presented as an allowance rather than as a write-down on debt securities available-for-sale management does not intend to sell or believes that it is more likely than not they will be required to sell.

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for reporting periods beginning after December 31, 2022 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded a net decrease to retained earnings of $6.9 million as of January 1, 2023 for the cumulative effect of adopting ASC 326. The following table illustrates the impact of ASC 326 on the allowance for credit losses:


	January 1, 2023
(dollars in thousands)	Pre-ASC 326 Adoption		Impact of ASC 326 Adoption		As Reported under ASC 326

Assets:
Allowance for credit losses on loans
Commercial and industrial	$	3,279	$	(822)	$	2,457
Commercial real estate - owner occupied	1,193		587		1,780
Commercial real estate - non-owner occupied	6,721		501		7,222
Construction and land development	4,223		1,969		6,192
Multi-family	1,472		85		1,557
One-to-four family residential	1,759		797		2,556
Agricultural and farmland	796		1,567		2,363
Municipal, consumer, and other	5,890		2,299		8,189
Allowance for credit losses on loans	$	25,333	$	6,983	$	32,316

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

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The Company also adopted ASC 326 using the prospective transition approach for purchase credit deteriorated (“PCD”) financial assets that were previously classified as purchased credit impaired (“PCI”) and accounted for under ASC 310-30. In accordance with ASC 326, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2023, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $0.2 million to the allowance for credit losses. The remaining noncredit discount will be accreted into interest income at the effective interest rate as of January 1, 2023.

On January 1, 2023, the Company also adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 eliminates the recognition and measurement guidance for troubled debt restructurings (“TDRs”) by creditors in ASC 310-40. This ASU also enhances disclosure requirements for certain loan restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity will apply refinancing and restructuring guidance to determine whether a modification or other form of restructuring results in a new loan or a continuation of an existing loan. Additionally, the amendments in ASU 2022-02 require a public business entity to disclosure current-period gross write-offs by year of origination for financing receivables and net investments in leases in the existing vintage disclosures. This standard did not have a material impact on the Company’s consolidated results of operations or financial position.

Recent Accounting Pronouncements

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value and that contractual sale restrictions cannot be recognized and measured as a separate unit of account. The amendments in this update are effective for years beginning after December 15, 2023, including interim periods within those years. This standard is not expected to have a material impact on the Company’s consolidated results of operations or financial position.

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method. ASU 2022-01 replaces the current last-of-layer hedge accounting method with an expanded portfolio layer method that permits multiple hedged layers of a single closed portfolio. The scope of the portfolio layer method is also expanded to include non-prepayable financial assets. ASU 2022-01 also provides additional guidance on the accounting for and disclosure of hedge basis adjustments that are applicable to the portfolio layer method, and specifies how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. Amendments related to hedge basis adjustments which are included in this standard apply on a modified retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings on the initial application date. Amendments related to hedge basis adjustments which are included in this standard apply on a modified retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings on the initial application date. Amendments related to disclosure which are included in this standard may be applied on a prospective basis from the initial application date, or on a retrospective basis to each prior period presented after the date of adoption of the amendments in ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments in this update are effective for years beginning after December 15, 2023, including interim periods within those years. Early adoption is permitted. This standard is not expected to have a material impact on the Company’s consolidated results of operations or financial position.

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform, if certain criteria are met. In January 2021, the FASB also issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which refined the scope for certain optional expedients and exceptions for contract modifications and hedge accounting to apply to derivative contracts and certain hedging relationships affected by the discounting transition. Entities may apply the provisions as of the beginning of the reporting period when the election is made and are available until December 31, 2024. The Company is currently evaluating the effect that this standard will have on the consolidated results of operations and financial position.

In March 2023, the FASB issued ASU 2023-02, Investments—Equity Method and Joint Ventures (Topic 323). ASU 2023-02 permits an election to use the proportional amortization method to account for equity investments made primarily for the purpose of receiving income tax credits and other income tax benefits, regardless of the tax credit program from which the income tax credits are received, provided that certain conditions are met. The proportional amortization method results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the income statement as a component of income tax expense. ASU 2023-02 must be applied on a retrospective or modified retrospective basis, and is applicable for the Company beginning after December 15, 2023. Early adoption is permitted. The Company is currently evaluating the effect that this standard will have on the consolidated results of operations and financial position.

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 2 – ACQUISITIONS

Town and Country Financial Corporation

On February 1, 2023, HBT Financial acquired 100% of the issued and outstanding common stock of Town and Country Financial Corporation (“Town and Country”), the holding company for Town and Country Bank, pursuant to an Agreement and Plan of Merger dated August 23, 2022. Under the Agreement and Plan of Merger, Town and Country merged with and into HBT Financial, with HBT Financial as the surviving entity, immediately followed by the merger of Town and Country Bank with and into Heartland Bank, with Heartland Bank as the surviving entity.

At the effective time of the merger, each share of Town and Country was converted into the right to receive, subject to the election and proration procedures as provided in the Merger Agreement, one of the following: (i) 1.9010 shares of HBT Financial’s common stock, or (ii) $35.66 in cash, or (iii) a combination of cash and HBT Financial common stock. Total consideration consisted of 3,378,600 shares of HBT Financial’s common stock and $38.0 million in cash. In lieu of fractional shares, holders of Town and Country common stock received cash. Based upon the closing price of HBT Financial common stock of $21.12 on February 1, 2023, the aggregate transaction value was approximately $109.4 million.

This transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair values on the date of acquisition. Fair values are subject to refinement for up to one year after the closing date of February 1, 2023. Measurement period adjustments of $0.1 million were recorded in the third quarter of 2023 as more information became available regarding Town and Country's tax assets and liabilities. Goodwill of $30.5 million was recorded in the acquisition, which reflects expected synergies from combining the operations of HBT Financial and Town and Country, and is nondeductible for tax purposes.

The acquisition of Town and Country further enhanced HBT Financial’s footprint in Central Illinois, and expanded our footprint into metro-east St. Louis. During the three and nine months ended September 30, 2023 and 2022, HBT Financial incurred the following expenses related to the acquisition of Town and Country:


	Three Months Ended				Nine Months Ended
(dollars in thousands)	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022

PROVISION FOR CREDIT LOSSES	$	—	$	—	$	5,924	$	—
NONINTEREST EXPENSE
Salaries	—		—		3,584		—


Furniture and equipment	—		—		39		—
Data processing	—		—		2,031		—
Marketing and customer relations	—		—		24		—


Loan collection and servicing	—		—		125		—

Legal fees and other noninterest expense	—		462		1,964		462
Total noninterest expense	—		462		7,767		462
Total acquisition-related expenses	$	—	$	462	$	13,691	$	462

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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 Town and Country on the acquisition date of February 1, 2023 were as follows (dollars in thousands):


	Fair Value
Assets acquired:
Cash and cash equivalents	$	23,542
Interest-bearing time deposits with banks	249
Debt securities	167,869
Equity securities	90
Restricted stock	2,822
Loans held for sale	1,612

Loans, before allowance for credit losses	635,376
Allowance for credit losses	(1,247)
Loans, net of allowance for credit losses	634,129

Bank owned life insurance	15,782
Bank premises and equipment	14,828
Foreclosed assets	271
Intangible assets	22,282
Mortgage servicing rights	10,469
Investments in unconsolidated subsidiaries	449
Accrued interest receivable	3,113
Other assets	9,151
Total assets acquired	906,658

Liabilities assumed:
Deposits	720,417
FHLB advances	86,439
Junior subordinated debentures	14,949
Other liabilities	5,999
Total liabilities assumed	827,804
Net assets acquired	$	78,854

Consideration paid:
Cash	$	37,996
Common stock	71,356
Total consideration paid	$	109,352

Goodwill	$	30,498

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HBT FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Of the loans acquired, there were $89.8 million which exhibited more-than-insignificant credit deterioration on the acquisition date. The following table provides a summary of these PCD loans at acquisition (dollars in thousands):


Unpaid principal balance	$	89,822
Allowance for credit losses at acquisition	(1,247)
Non-credit discount	(2,218)
Purchase price	$	86,357

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

The following table provides the pro forma information for the results of operations for the three and nine months ended September 30, 2023 and 2022, as if the acquisition of Town and Country had occurred on January 1, 2022. The pro forma results combine the historical results of Town and Country into HBT Financial’s consolidated statements of income, including the impact of certain acquisition accounting adjustments, which include loan discount accretion, intangible assets amortization, deposit premium amortization, and borrowing premium amortization. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results that would have been obtained had the acquisition actually occurred on January 1, 2022. No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, provision for credit losses, expense efficiencies or asset dispositions. The acquisition-related expenses that have been recognized are included in net income in the following table.

Pro Forma

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands, except per share data)</