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What changed in HBT Financial, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of HBT Financial, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+334 added−380 removedSource: 10-K (2024-03-06) vs 10-K (2023-03-08)

Top changes in HBT Financial, Inc.'s 2023 10-K

334 paragraphs added · 380 removed · 257 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

84 edited+15 added−16 removed105 unchanged
Biggest changeThese laws mandate financial services companies to have policies and procedures with respect to measures designed to address the following matters: (i) customer identification programs; (ii) money laundering; (iii) terrorist financing; (iv) identifying and reporting suspicious activities and currency transactions; (v) currency crimes; and (vi) cooperation between FDIC-insured institutions and law enforcement authorities. ​ 19 Table of Contents Federal Home Loan Bank Membership The Bank is a member of the Federal Home Loan Bank (“FHLB”) System, an organization created under the Federal Home Loan Bank Act of 1932 to serve as a central credit facility for its members through eleven U.S. government-sponsored banks, including the FHLB of Chicago.
Biggest changeThe laws mandate financial services companies to have policies and procedures with respect to measures designed to address: (i) customer identification programs; (ii) money laundering; (iii) terrorist financing; (iv) identifying and reporting suspicious activities and currency transactions; (v) currency crimes; and (vi) cooperation between FDIC-insured institutions and law enforcement authorities.
Community Reinvestment Act Requirements The CRA requires the Bank to have a continuing and affirmative obligation in a safe and sound manner to help meet the credit needs of the entire community, including low- and moderate-income neighborhoods. Federal regulators regularly assess the Bank’s record of meeting the credit needs of its communities.
Community Reinvestment Act Requirements The Community Reinvestment Act of 1977 ("CRA") requires the Bank to have a continuing and affirmative obligation in a safe and sound manner to help meet the credit needs of the entire community, including low- and moderate-income neighborhoods. Federal regulators regularly assess the Bank’s record of meeting the credit needs of its communities.
Under the capital regulations of the Federal Reserve, in order to be well capitalized, a banking organization must maintain: ● A ratio of Common Equity Tier 1 Capital to risk-weighted assets of 6.5% or more; ● A ratio of Tier 1 Capital to total risk-weighted assets of 8% or more; ● A ratio of Total Capital to total risk-weighted assets of 10% or more; and ● A leverage ratio of Tier 1 Capital to total adjusted average quarterly assets of 5% or greater.
Under the capital regulations of the Federal Reserve, in order to be well capitalized, a banking organization must maintain: • A ratio of Common Equity Tier 1 Capital to risk-weighted assets of 6.5% or more; • A ratio of Tier 1 Capital to total risk-weighted assets of 8% or more; • A ratio of Total Capital to total risk-weighted assets of 10% or more; and • A leverage ratio of Tier 1 Capital to total adjusted average quarterly assets of 5% or more.
In addition to numerous disclosure requirements, the Dodd-Frank Act and the CFPB’s enabling rules imposed new standards for mortgage loan originations on all lenders, including banks and savings associations, in an effort to strongly encourage lenders to verify a borrower’s ability to repay, while also establishing a presumption of compliance for certain “qualified mortgages.” The CFPB’s rules have not had a significant impact on the Bank’s operations, except for higher compliance costs. ​ 21 Table of Contents
In addition to numerous disclosure requirements, the Dodd-Frank Act and the CFPB’s enabling rules imposed new standards for mortgage loan originations on all lenders, including banks and savings associations, in an effort to strongly encourage lenders to verify a borrower’s ability to repay, while also establishing a presumption of compliance for certain “qualified mortgages.” The CFPB’s rules have not had a significant impact on the Bank’s operations, except for higher compliance costs. 17 Table of Contents
ITEM 1. BUSINESS COMPANY OVERVIEW HBT Financial, Inc. (the “Company”), a Delaware corporation incorporated in 1982, is a bank holding company headquartered in Bloomington, Illinois that has elected to be regulated as a financial holding company.
ITEM 1. BUSINESS COMPANY OVERVIEW HBT Financial, Inc. (the “Company” or "HBT Financial"), a Delaware corporation incorporated in 1982, is a bank holding company headquartered in Bloomington, Illinois that has elected to be regulated as a financial holding company.
The Company also is in compliance with the capital conservation buffer. 12 Table of Contents Prompt Corrective Action The concept of an institution being “well-capitalized” is part of a regulatory enforcement regime that provides the federal banking regulators with broad power to take “prompt corrective action” to resolve the problems of depository institutions based on the capital level of each particular institution.
The Company also is in compliance with the capital conservation buffer. 9 Table of Contents Prompt Corrective Action The concept of an institution being “well-capitalized” is part of a regulatory enforcement regime that provides the federal banking regulators with broad power to take “prompt corrective action” to resolve the problems of depository institutions based on the capital level of each particular institution.
The total base assessment rates currently range from 1.5 basis points to 30 basis points. At least semi-annually, the FDIC updates its loss and income projections for the DIF and, if needed, increases or decreases the assessment rates, following notice and comment on proposed rulemaking. The reserve ratio is the DIF balance divided by estimated insured deposits.
The total base assessment rates currently range from 1.5 basis points to 30 basis points. At least semi-annually, the FDIC updates its loss and income projections for the DIF and, if needed, increases or decreases the assessment rates, following notice and comment on proposed rulemaking. For this purpose, the reserve ratio is the DIF balance divided by estimated insured deposits.
As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company should eliminate, defer or significantly reduce dividends to shareholders if: (i) the company’s net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; (ii) the prospective rate of earnings retention is inconsistent with the company’s capital needs and overall current and prospective financial condition; or (iii) the company will not 14 Table of Contents meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.
As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company should eliminate, defer or significantly reduce dividends to shareholders if: (i) the company’s net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; (ii) the prospective rate of earnings retention is inconsistent with the company’s capital needs and overall current and prospective financial condition; or (iii) the company will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.
It is possible under the Basel III Rule to be well-capitalized while remaining out of compliance with the capital conservation buffer discussed above. As of December 31, 2022: (i) the Bank was not subject to a directive from the FDIC to increase its capital; and (ii) the Bank was well-capitalized, as defined by FDIC regulations.
It is possible under the Basel III Rule to be well-capitalized while remaining out of compliance with the capital conservation buffer discussed above. As of December 31, 2023: (i) the Bank was not subject to a directive from the FDIC to increase its capital; and (ii) the Bank was well-capitalized, as defined by FDIC regulations.
The principal exception allows bank holding companies to engage in, and to own shares of companies engaged in, certain businesses found by the Federal Reserve prior to November 11, 1999 to be “so closely related to banking ... as to be a proper incident thereto.” This authority permits the Company to engage in a variety of banking-related businesses, including the ownership and operation of a savings association, or any entity engaged in consumer finance, equipment leasing, the operation of a computer service bureau (including software development), and mortgage banking and brokerage services.
The principal exception allows bank holding companies to engage in, and to own shares of companies engaged in, certain businesses found by the Federal Reserve prior to November 10 Table of Contents 11, 1999 to be “so closely related to banking ... as to be a proper incident thereto.” This authority permits the Company to engage in a variety of banking-related businesses, including the ownership and operation of a savings association, or any entity engaged in consumer finance, equipment leasing, the operation of a computer service bureau (including software development), and mortgage banking and brokerage services.
The Basel III Rule is applicable to all banking organizations that are subject to minimum capital requirements, including federal and state banks and savings and loan associations, as well as to most bank and savings and loan holding companies. The Company and the Bank are each subject to the Basel III Rule.
The Basel III Rule is applicable to all banking organizations that are subject to minimum capital requirements, including federal and state banks and savings and loan associations, as well as to most bank and savings and loan holding companies. The Company and the Bank are both subject to the Basel III Rule.
One test, referred to as the liquidity coverage ratio (“LCR”) is designed to ensure that the banking entity has an adequate stock of unencumbered high-quality liquid assets that can be converted easily and immediately in private markets into cash to meet liquidity needs for a 30-calendar day liquidity stress scenario.
One test, referred to as the Liquidity Coverage Ratio, or LCR, is designed to ensure that the banking entity has an adequate stock of unencumbered high-quality liquid assets that can be converted easily and immediately in private markets into cash to meet liquidity needs for a 30-calendar day liquidity stress scenario.
Our management believes our scale in these mid-sized markets and the relative scarcity of money center banking institutions operating in them creates a highly defensible market position whereby we can continue to maintain our funding cost advantage relative to our peer groups. We believe the Chicago MSA provides significant opportunities for loan growth.
Our management believes our scale in these mid-sized markets and the relative scarcity of money center banking institutions operating in them creates a highly defensible market position whereby we can continue to maintain our funding cost advantage relative to our peers. We believe the Chicago MSA provides significant opportunities for loan growth.
The Basel III Rule also changed the definition of capital by establishing more stringent criteria that instruments must meet to be considered Additional Tier 1 Capital (primarily non-cumulative perpetual preferred 11 Table of Contents stock that meets certain requirements) and Tier 2 Capital (primarily other types of preferred stock and subordinated debt, subject to limitations).
The Basel III Rule also changed the definition of capital by establishing more stringent criteria that instruments must meet to be considered Additional Tier 1 Capital (primarily non-cumulative perpetual preferred stock that meets certain requirements) and Tier 2 Capital (primarily other types of preferred stock and subordinated debt, subject to limitations).
On December 18, 2015, the federal banking agencies issued a statement to reinforce prudent risk-management practices related to CRE lending, having observed substantial growth in many CRE asset and lending markets, increased competitive pressures, rising CRE concentrations in banks, 20 Table of Contents and an easing of CRE underwriting standards.
On December 18, 2015, the federal banking agencies issued a statement to reinforce prudent risk-management practices related to CRE lending, having observed substantial growth in many CRE asset and lending markets, increased competitive pressures, rising CRE concentrations in banks, and an easing of CRE underwriting standards.
Our long history of providing relationship-based, personal banking services; the successful integration of several strategic in-market acquisitions; and a relatively small presence of money center and 7 Table of Contents super-regional banks in our mid-sized markets has enabled us to maintain meaningful market share in these markets.
Our long history of providing relationship-based, personal banking services; the successful integration of several strategic in-market acquisitions; and a relatively small presence of money center and super-regional banks in our mid-sized markets has enabled us to maintain meaningful market share in these markets.
Although regulatory standards do not have the force of law, if an institution operates in an unsafe and unsound manner, the FDIC-insured institution’s primary federal regulator may require the institution to submit a plan for achieving and maintaining compliance.
Although regulatory 14 Table of Contents standards do not have the force of law, if an institution operates in an unsafe and unsound manner, the FDIC-insured institution’s primary federal regulator may require the institution to submit a plan for achieving and maintaining compliance.
These final rules prohibit creditors from extending residential mortgage loans without regard for the consumer’s ability to repay and add restrictions and requirements to residential mortgage origination and servicing practices. In addition, these rules restrict the imposition of prepayment penalties and restrict compensation practices relating to residential mortgage loan origination.
These final rules prohibit creditors from extending residential mortgage loans without regard for the consumer’s ability to repay and add restrictions and requirements to residential mortgage origination and servicing practices. In addition, 16 Table of Contents these rules restrict the imposition of prepayment penalties and restrict compensation practices relating to residential mortgage loan origination.
Because the Bank is not a member of the Federal Reserve System, it is subject to the examination, supervision, reporting, and enforcement requirements of the FDIC, as the Bank’s primary federal regulator. Deposit Insurance As an FDIC-insured institution, the Bank is required to pay deposit insurance premium assessments to the FDIC.
Because the Bank is not a member of the Federal Reserve System, it is subject to the examination, supervision, reporting, and enforcement requirements of the FDIC, as the Bank’s primary federal regulator. 12 Table of Contents Deposit Insurance As an FDIC-insured institution, the Bank is required to pay deposit insurance premium assessments to the FDIC.
The Basel III Rule also constrained the inclusion of minority interests, mortgage-servicing assets, and deferred tax assets in capital, and it required deductions from Common Equity Tier 1 Capital in the event that such assets exceeded a percentage of a banking institution’s Common Equity Tier 1 Capital.
The Basel III Rule also constrained the inclusion of minority interests, mortgage-servicing assets, and deferred tax assets in capital, and it required deductions from Common Equity Tier 1 Capital if such assets exceeded a percentage of a banking institution’s Common Equity Tier 1 Capital.
The legislation also directed the Federal Reserve to promulgate rules prohibiting excessive compensation paid to executives of bank holding companies, regardless of whether such companies are publicly traded. 15 Table of Contents Supervision and Regulation of the Bank General The Bank is an Illinois-chartered bank.
The legislation also directed the Federal Reserve to promulgate rules prohibiting excessive compensation paid to executives of bank holding companies, regardless of whether such companies are publicly traded. Supervision and Regulation of the Bank General The Bank is an Illinois-chartered bank.
The Company’s common stock is traded on the Nasdaq Global Select Market under the symbol “HBT.” The roots of our Company can be traced back to 1920 when M.B. Drake, the grandfather of our current Chairman and CEO, Fred Drake, helped found a community bank in Cornland, Illinois.
The Company’s common stock is traded on the Nasdaq Global Select Market under the symbol “HBT.” The roots of our Company can be traced back to 1920 when M.B. Drake, the grandfather of our Executive Chairman, Fred Drake, helped found a community bank in Cornland, Illinois.
As of December 31, 2022, the Company had regulatory capital in excess of the Federal Reserve’s requirements and met the requirements to be well-capitalized.
As of December 31, 2023, the Company had regulatory capital in excess of the Federal Reserve’s requirements and met the requirements to be well-capitalized.
We have produced consistently strong earnings even through challenging times such as the 2008-2009 financial crisis as well as the COVID-19 pandemic. ● Continue disciplined growth. We have a strong track record of organic and acquisitive growth with our seasoned senior management team. ● Uphold our Midwestern values.
We have produced consistently strong earnings even through challenging cycles such as the 2008-2009 global financial crisis as well as the COVID-19 pandemic. • Continue disciplined growth. We have a strong track record of successful organic and acquisitive growth with our seasoned senior management team. • Uphold our Midwestern values.
More specifically, the bank regulatory agencies described the goals of the CRA Proposal as follows: (i) to expand access to credit, investment, and basic banking services in low and moderate income communities; (ii) to adapt to changes in the banking industry, including mobile and internet banking by modernizing assessment areas while maintaining a focus on branch based areas; (iii) to provide greater clarity, consistency, and transparency in the application of the regulations through the use of standardized metrics as part of CRA evaluation and clarifying eligible CRA activities focused on low and moderate income communities and under–served rural communities; (iv) to tailor CRA rules and data collection to bank size and business model; and (v) to maintain a unified approach among the regulators.
More specifically, the bank regulatory agencies described the goals of the CRA Rule as follows: (i) to expand access to credit, investment, and basic banking services in low and moderate income communities; (ii) 15 Table of Contents to adapt to changes in the banking industry, including mobile and internet banking by modernizing assessment areas while maintaining a focus on branch based areas; (iii) to provide greater clarity, consistency, and transparency in the application of the regulations through the use of standardized metrics as part of CRA evaluation and clarifying eligible CRA activities focused on low and moderate income communities and underserved rural communities; (iv) to tailor CRA rules and data collection to bank size and business model; and (v) to maintain a unified approach among the regulators.
In addition, institutions that seek the freedom to make capital distributions (including for dividends and repurchases of stock), and pay discretionary bonuses to executive officers without restriction, also must maintain 2.5% in Common Equity Tier 1 Capital attributable to a capital conservation buffer.
In addition, institutions that want to make capital distributions (including for dividends and repurchases of stock), and pay discretionary bonuses to executive officers without restriction, also must maintain 2.5% in Common Equity Tier 1 Capital attributable to a capital conservation buffer.
Certain limitations and reporting requirements also are placed on extensions of credit by the Bank to its directors and officers, to directors and officers of the Company and its subsidiaries, to principal shareholders of the 17 Table of Contents Company, and to “related interests” of such directors, officers and principal shareholders.
Certain limitations and reporting requirements also are placed on extensions of credit by the Bank to its directors and officers, to directors and officers of the Company and its subsidiaries, to principal shareholders of the Company, and to “related interests” of such directors, officers and principal shareholders.
Not only did the Basel III Rule increase most of the required minimum capital ratios in effect prior to January 1, 2015, but, in requiring that forms of capital be of higher quality to absorb loss, it introduced the concept of Common Equity Tier 1 Capital, which consists primarily of common stock, related surplus (net of Treasury stock), retained earnings, and Common Equity Tier 1 minority interests subject to certain regulatory adjustments.
Not only did it increase most of the required minimum capital ratios in effect prior to January 1, 2015, but, in requiring that forms of capital be of higher 8 Table of Contents quality to absorb loss, it introduced the concept of Common Equity Tier 1 Capital, which consists primarily of common stock, related surplus (net of Treasury stock), retained earnings, and Common Equity Tier 1 minority interests subject to certain regulatory adjustments.
Although the reforms primarily targeted systemically important financial service providers, their influence filtered down in varying degrees to community banks over time and caused our compliance and risk management processes, and the costs thereof, to increase.
Although the reforms primarily targeted systemically important financial service providers, their influence filtered down in varying degrees to community banks over time and caused our compliance and risk 7 Table of Contents management processes, and the costs thereof, to increase.
The CRA Proposal is designed to update how CRA activities qualify for consideration, where CRA activities are considered, and how CRA activities are evaluated.
The CRA Rule is designed to update how CRA activities qualify for consideration, where CRA activities are considered, and how CRA activities are evaluated.
The Drake family operated several banks throughout Central Illinois, and eventually, in 1982, George Drake (M.B.'s son and Fred's father) incorporated the Company as one of the first multi-bank holding companies in Illinois. Since that time, we have grown both organically and through the successful integration of more than a dozen community bank acquisitions.
The Drake family went on to operate several banks throughout Central Illinois, and in 1982, George Drake (M.B.'s son and Fred's father) incorporated the Company as one of the first multi-bank holding companies in Illinois. Since that time, we have grown both organically and through the successful integration of more than a dozen community bank acquisitions.
The contents of this website are not a part of this report. All periodic and current reports of the Company and amendments to these reports filed with the Securities and Exchange Commission (“SEC”) can be accessed, free of charge, through this website and at www.sec.gov as soon as reasonably practicable after these materials are filed with the SEC.
All periodic and current reports of the Company and amendments to these reports filed with the Securities and Exchange Commission (“SEC”) can be accessed, free of charge, through this website and at www.sec.gov as soon as reasonably practicable after these materials are filed with the SEC.
Our employees are not represented by a collective bargaining unit, and we consider our working relationship with our employees to be good. At December 31, 2022, our average tenure was 8.5 years. Employee Engagement and Retention We recognize that the fulfillment of our mission requires attracting, developing, and retaining a diverse group of highly qualified employees.
Our employees are not represented by a collective bargaining unit, and we consider our working relationship with our employees to be good. At December 31, 2023, our average tenure was 7.1 years. Employee Engagement and Retention We recognize that the fulfillment of our mission requires attracting, developing, and retaining a diverse group of highly qualified employees.
Furthermore, taxation laws administered by the Internal Revenue Service (the “IRS”) and state taxing authorities, accounting rules developed by the Financial Accounting Standards Board (the “FASB”), securities laws administered by the SEC and state securities authorities, and anti-money laundering laws enforced by the U.S. Department of the Treasury (the “Treasury”) have an impact on our business.
Furthermore, taxation laws administered by the Internal Revenue Service (the “IRS”) and state taxing authorities, accounting rules developed by the FASB, securities laws administered by the SEC and state securities authorities, and anti-money laundering laws enforced by the U.S. Department of the Treasury (the “Treasury”) have an impact on our business.
These examinations consider not only compliance with applicable laws and regulations, but also capital levels, asset 10 Table of Contents quality and risk, management ability and performance, earnings, liquidity, and various other factors.
These examinations consider not only compliance with applicable laws and regulations, but also capital levels, asset quality and risk, management ability and performance, earnings, liquidity, and various other factors.
The Dodd-Frank Act significantly expanded underwriting requirements applicable to loans secured by 1-4 family residential real property and augmented federal law combating predatory lending practices.
The Dodd-Frank Act significantly expanded underwriting requirements applicable to loans secured by one-to-four family residential real property and augmented federal law combating predatory lending practices.
Based upon the closing price of HBT Financial common stock of $21.12 on February 1, 2023, the aggregate consideration was approximately $109.4 million. 5 Table of Contents NXT BANCORPORATION, INC. ACQUISITION On October 1, 2021, HBT Financial completed its acquisition of NXT Bancorporation, Inc. (“NXT”), the holding company for NXT Bank.
Based upon the closing price of HBT Financial common stock of $21.12 on February 1, 2023, the aggregate consideration was approximately $109.4 million. Goodwill of $30.5 million was recorded in the acquisition. NXT BANCORPORATION, INC. ACQUISITION On October 1, 2021, HBT Financial completed its acquisition of NXT Bancorporation, Inc. (“NXT”), the holding company for NXT Bank.
We continue to opportunistically seek acquisitions that are either located within our market footprint, in adjacent markets or provide a new growth opportunity that is strategically and financially compelling and consistent with our culture. 8 Table of Contents HUMAN CAPITAL RESOURCES Employees At December 31, 2022, we had 711 full-time equivalent employees.
We continue to opportunistically seek acquisitions that are either located within our market footprint, in adjacent markets or provide a new growth opportunity that is strategically and financially compelling and consistent with our culture. HUMAN CAPITAL RESOURCES Employees At December 31, 2023, we had 844 full-time equivalent employees.
Incentive Compensation There have been a number of developments in recent years focused on incentive compensation plans sponsored by bank holding companies and banks, reflecting recognition by the bank regulatory agencies and Congress that flawed incentive compensation practices in the financial industry were one of many factors contributing to the global financial crisis.
See “—The Role of Capital” above. 11 Table of Contents Incentive Compensation There have been a number of developments in recent years focused on incentive compensation plans sponsored by bank holding companies and banks, reflecting recognition by the bank regulatory agencies and Congress that flawed incentive compensation practices in the financial industry were one of many factors contributing to the global financial crisis.
Financial technology companies are becoming a more direct threat to traditional financial institutions as they begin to offer deposit accounts insured by the Federal Deposit Insurance Corporation (the “FDIC”) alongside their core product offerings. 9 Table of Contents We seek to meet this competition by emphasizing personalized service, efficient decision-making tailored to individual needs, and offering robust digital functionality.
Financial technology companies are becoming a more direct threat to traditional financial institutions as they begin to offer deposit accounts insured by the Federal Deposit Insurance Corporation (the “FDIC”) and online lending platforms alongside their core product offerings. We seek to meet this competition by emphasizing relationship-based service, efficient decision-making tailored to individual needs, and offering robust digital functionality.
We consider ourselves to be well positioned to meet the needs of commercial and retail customers through our branch network, comprehensive suite of banking and wealth management products, and our commitment to high-touch customer service.
We consider ourselves to be well positioned to meet the needs of commercial and retail customers through our branch network, our comprehensive suite of banking and wealth management products, and our commitment to building and maintaining customer relationships.
In addition, under the Basel III Rule, institutions that seek the freedom to pay dividends have to maintain 2.5% in Common Equity Tier 1 Capital attributable to the capital conservation buffer. See “—The Role of Capital” above.
In addition, under the Basel III Rule, institutions that seek the freedom to pay dividends have to maintain 2.5% in Common Equity Tier 1 Capital attributable to the capital conservation buffer.
The federal bank agencies reminded FDIC-insured institutions to maintain underwriting discipline and exercise prudent risk-management practices to identify, measure, monitor, and manage the risks arising from CRE lending. In addition, FDIC-insured institutions must maintain capital commensurate with the level and nature of their CRE concentration risk. As of December 31, 2022, the Bank did not exceed these guidelines.
The federal bank agencies reminded FDIC-insured institutions to maintain underwriting discipline and exercise prudent risk-management practices to identify, measure, monitor, and manage the risks arising from CRE lending. In addition, FDIC-insured institutions must maintain capital commensurate with the level and nature of their CRE concentration risk.
Although these rules do not, and will not, apply to the Bank, it continues to review its liquidity risk management policies in light of developments. Dividend Payments Our primary source of funds is dividends from the Bank. Under Illinois banking law, Illinois-chartered banks generally may pay dividends only out of undivided profits.
Although these tests do not, and will not, apply to the Bank, we continue to review our liquidity risk management policies in light of regulatory requirements and industry developments. Dividend Payments Our primary source of funds is dividends from the Bank. Under Illinois banking law, Illinois-chartered banks generally may pay dividends only out of undivided profits.
Regulatory CRE We provide financing for a wide variety of property types including multi-family, retail, warehouse, office, senior living, and hotel/motel. Our C&D portfolio includes both ground up construction projects and renovation projects in addition to some developed and undeveloped land.
Regulatory CRE We provide financing for a wide variety of property types including multi-family, retail, warehouse, office, senior living, and hotel/motel. Our C&D portfolio includes both ground up construction projects and renovation projects in addition to some developed and undeveloped land. We focus on borrowers with successful backgrounds in owning, managing, and developing real estate projects.
BUSINESS STRATEGY We intend to pursue the following strategies that we believe will continue to drive growth while maintaining our high levels of asset quality and profitability: Preserve Strong Ties to our Communities Our community banking approach stems from our Midwestern values—hard work; perseverance; and doing the right things for our customers, staff, stockholders, and communities.
BUSINESS STRATEGY We intend to pursue the following strategies that we believe will continue to drive growth while maintaining our high levels of asset quality and profitability: Preserve Strong Ties to our Communities Our community banking approach stems from our Midwestern values—hard work and perseverance. We attentively serve our customers and provide development opportunities and rewards to our staff.
The other test, known as the net stable funding ratio (“NSFR”) is designed to promote more medium- and long-term funding of the assets and activities of FDIC-insured institutions over a one-year horizon.
The other test, known as the Net Stable Funding Ratio, or NSFR, is designed to promote more intermediate and long-term funding of the assets and activities of FDIC-insured institutions over a 13 Table of Contents one-year horizon.
For a discussion of the capital requirements, see “-The Role of Capital” above. 13 Table of Contents The BHCA generally prohibits us from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company that is not a bank, and from engaging in any business other than that of banking, managing and controlling banks, or furnishing services to banks and their subsidiaries.
The BHCA generally prohibits us from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company that is not a bank, and from engaging in any business other than that of banking, managing and controlling banks, or furnishing services to banks and their subsidiaries.
Total consideration consisted of 1.8 million shares of HBT Financial’s common stock and $10.6 million in cash. Based upon the closing price of HBT Financial common stock of $16.27 on October 1, 2021, the aggregate consideration was approximately $39.9 million. Goodwill of $5.7 million was recorded in the acquisition.
Based upon the closing price of HBT Financial common stock of $16.27 on October 1, 2021, the aggregate consideration was approximately $39.9 million. Goodwill of $5.7 million was recorded in the acquisition.
We convey the values of the Midwest through hard work, perseverance and doing the right things. We serve our customers well; provide employment, development opportunities, and rewards for our staff; and generate good returns for our stockholders.
We convey the values of the Midwest through hard work and perseverance. We serve our customers attentively; provide development opportunities and rewards for our staff; and generate positive returns for our stockholders.
Effective incentive plans should: (i) provide employees incentives that appropriately balance risk and reward; (ii) be compatible with effective controls and risk-management; and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.
The result is interagency guidance on sound incentive compensation practices. The interagency guidance recognized three core principles. Effective incentive plans should: (i) provide employees incentives that appropriately balance risk and reward; (ii) be compatible with effective controls and risk-management; and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.
During the year ended December 31, 2022, the Bank paid supervisory assessments to the IDFPR totaling $0.4 million. Capital Requirements Banks are generally required to maintain capital levels in excess of other businesses. For a discussion of capital requirements, see “—The Role of Capital” above.
The amount of the assessment is calculated on the basis of the Bank’s total assets. During the year ended December 31, 2023, the Bank paid supervisory assessments to the IDFPR totaling $0.3 million. Capital Requirements Banks are generally required to maintain capital levels in excess of other businesses. For a discussion of capital requirements, see “—The Role of Capital” above.
Anti-Money Laundering The USA PATRIOT Act, the Bank Secrecy Act ( “BSA”) and other similar laws are designed to deny terrorists and criminals the ability to obtain access to the U.S. financial system and have significant implications for FDIC-insured institutions and other businesses involved in the transfer of money.
They are designed to deny terrorists and criminals the ability to obtain access to the U.S. financial system and have significant implications for FDIC-insured institutions and other businesses involved in the transfer of money.
We face increasing competition for deposits from online financial institutions and non-depository competitors such as the mutual fund industry, securities and brokerage firms and insurance companies.
Our most direct competition for deposits has historically come from commercial banks and credit unions. We face increasing competition for deposits from online financial institutions and non-depository competitors such as the mutual fund industry, securities and brokerage firms, and insurance companies.
Furthermore, in accordance with the Dodd-Frank Act, bank holding companies must be well-capitalized and well-managed in order to effect interstate mergers or acquisitions.
Furthermore, in accordance with the Dodd-Frank Act, bank holding companies must be well-capitalized and well-managed in order to effect interstate mergers or acquisitions. For a discussion of the capital requirements, see “—The Role of Capital” above.
Among the tools available to the Federal Reserve to affect the money supply are open market transactions in U.S. government securities, and changes in the discount rate on bank borrowings.
Monetary Policy The monetary policy of the Federal Reserve has a significant effect on the operating results of financial or bank holding companies and their subsidiaries. Among the tools available to the Federal Reserve to affect the money supply are open market transactions in U.S. government securities, and changes in the discount rate on bank borrowings.
This means that, in addition to the federal CRA review, Bank will be reviewed by the IDFPR to assess the Bank’s record of meeting the credit needs of its communities. Like the potential impact under the federal CRA, applications for additional acquisitions or activities would be affected by the evaluation of the Bank’s effectiveness in meeting its Illinois CRA requirements.
Like the potential impact under the federal CRA, applications for additional acquisitions or activities would be affected by the evaluation of the Bank’s effectiveness in meeting its Illinois CRA requirements.
The Dodd-Frank Act permits well-capitalized and well-managed banks to establish new interstate branches or acquire individual branches of a bank in another state (rather than the acquisition of an out-of-state bank in its entirety) without impediments. 18 Table of Contents Federal law permits state and national banks to merge with banks in other states subject to: (i) regulatory approval; (ii) federal and state deposit concentration limits; and (iii) state law limitations requiring the merging bank to have been in existence for a minimum period of time (not to exceed five years) prior to the merger.
Federal law permits state and national banks to merge with banks in other states subject to: (i) regulatory approval; (ii) federal and state deposit concentration limits; and (iii) state law limitations requiring the merging bank to have been in existence for a minimum period of time (not to exceed five years) prior to the merger.
We focus on borrowers with successful backgrounds in owning, managing, and developing real estate projects. 6 Table of Contents C&I and Owner-occupied CRE We make loans to a wide variety of businesses with no material concentration in any one industry. C&I loans primarily include loans for working capital and equipment needs.
C&I and Owner-Occupied CRE We make loans to a wide variety of businesses with no material concentration in any one industry. C&I loans primarily include loans for working capital and equipment needs. Owner-occupied CRE primarily includes amortizing first mortgage loans on properties occupied by our C&I customers.
Basel III established capital standards for banks and bank holding companies that are meaningfully more stringent than those in place previously - it increased the required quantity and quality of capital; and it required a more complex, detailed, and calibrated assessment of risk in the calculation of risk weightings.
The Basel III reforms established capital standards for banks and bank holding companies that are meaningfully more stringent than those in place previously.
A final rule has not yet been issued. In 2022, the Bank, like all Illinois chartered banks, became subject to state level CRA standards, following passage of the Illinois Community Reinvestment Act (the “Illinois CRA”).
Management of the Bank is assessing the impact of the CRA Rule on its CRA lending and investment activities in its markets. In 2022, the Bank, like all Illinois chartered banks, became subject to state level CRA standards, following passage of the Illinois Community Reinvestment Act (the “Illinois CRA”).
Many competitors in this market are money center or super-regional banks, and we believe our responsive, local decision-making provides a competitive advantage over these larger, more bureaucratic institutions. Further, we expect to continue to benefit from continued market disruption in the Chicago MSA, caused by recent significant bank acquisitions, by acquiring talent and customers experiencing displacement.
Many competitors in this market are money center or super-regional banks, and we believe our responsive, local decision-making provides a competitive advantage over these larger, more bureaucratic institutions.
The quality of our comprehensive suite of products and services coupled with our relationship-based approach to banking contribute meaningfully to our growth and success. Deploy Excess Deposit Funding into Loan Growth Opportunities Our strong market share in our core mid-sized markets provides a stable source of attractive funding.
Deploy Excess Deposit Funding into Loan Growth Opportunities Our strong market share in our core mid-sized markets provides a stable source of attractive funding.
In response to the global financial crisis, the Dodd-Frank Act increased the minimum reserve ratio from 1.15% to 1.35% of the estimated amount of total insured deposits.
In response to the global financial crisis, the Dodd-Frank Act increased the minimum reserve ratio from 1.15% to 1.35% of the estimated amount of total insured deposits. In the semiannual update in June 2022, the FDIC projected that the reserve ratio was at risk of not reaching the statutory minimum of 1.35% by September 30, 2028, the statutory deadline.
Our deposit accounts consist of noninterest-bearing demand deposits, interest-bearing transaction accounts, money market accounts, savings accounts, certificates of deposits, HSA, and IRA accounts. Our digital banking services include online banking, mobile banking, digital payments, and personal financial management tools. We also provide commercial checking accounts and related services such as treasury management.
Our digital banking services include online banking, mobile banking, digital payments, and personal 4 Table of Contents financial management tools. We also provide small business and commercial checking accounts and related services such as treasury management.
Residential Mortgage Origination and Servicing We originate one-to-four family residential mortgage loans and generally sell those loans in the secondary market. Loans are originated by our mortgage lenders within our branch network. To a lesser extent, we purchase loans originated by other banks that are in turn sold into the secondary market.
Residential Mortgage Origination and Servicing We originate one-to-four family residential mortgage loans primarily through our mortgage lenders within our branch network. To a lesser extent, we purchase loans originated by smaller, rural market banks in Illinois. We sell conventional loans to both Freddie Mac and Fannie Mae and retain the servicing for substantially all those loans.
Competition for deposit customers was minimal in 2020 and 2021, given the excess liquidity at most financial institutions, but increased substantially during 2022, as the Federal Reserve started to raise short-term interest rates. Continued loan and deposit pricing pressure may affect our financial results in the future. COMPANY WEBSITE The Company maintains a website at ir.hbtfinancial.com.
We continue to see strong competition for new loan production, including competitive pressures on loan rates and terms. Competition for deposit customers was minimal in 2020 and 2021, given the excess liquidity at most financial institutions, but increased substantially during 2022 and 2023, as the Federal Reserve started to raise short-term interest rates.
Through our bank subsidiary, Heartland Bank and Trust Company (“Heartland Bank” or the “Bank”), we provide a comprehensive suite of business, commercial and retail banking products and services to consumers, businesses, and municipal entities throughout Central and Northeastern Illinois and Eastern Iowa.
As of December 31, 2023, we had total assets of $5.1 billion, loans held for investment of $3.4 billion, and total deposits of $4.4 billion. Through our bank subsidiary, Heartland Bank and Trust Company (“Heartland Bank” or the “Bank”), we provide a comprehensive suite of financial products and services to consumers, businesses, and municipal entities throughout Illinois and Eastern Iowa.
At the time of acquisition, Town and Country Bank operated ten full-service branch locations which began operating as branches of Heartland Bank. The core system conversion is expected to occur in April 2023. As of December 31, 2022, Town and Country Bank had total assets of $923.1 million, total loans of $662.0 million, and total deposits of $762.2 million.
At the time of acquisition, Town and Country Bank operated ten full-service branch locations which began operating as branches of Heartland Bank. The core system conversion was successfully completed in April 2023.
We compete with community banks in all of 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. Our competition for loans comes principally from commercial banks, savings banks, mortgage banking companies, the U.S.
Additionally, we compete with non-bank financial services companies and other financial institutions operating within the areas we serve. 6 Table of Contents Our competition for loans comes principally from commercial banks, savings banks, mortgage banking companies, the U.S. Government, credit unions, leasing companies, insurance companies, real estate conduits and other companies that provide financial services to businesses and individuals.
Because the global financial crisis was in part a liquidity crisis, Basel III also includes a liquidity 16 Table of Contents framework that requires FDIC-insured institutions to measure their liquidity against specific liquidity tests.
Basel III includes a liquidity framework that requires the largest insured institutions to measure their liquidity against specific liquidity tests.
We believe this track record will position the Company to be an attractive acquirer for many potential partners.
Pursue Strategic Acquisitions Our management team has a history of successfully integrating strategic acquisitions over several decades. We believe this track record will position the Company to be an attractive acquirer for many potential partners.
Applications for acquisitions also would be affected by the evaluation of the Bank’s effectiveness in meeting its CRA requirements. In May 2022, the bank regulatory agencies issued a notice of proposed rulemaking called the Joint Proposal to Strengthen and Modernize Community Reinvestment Act Regulations (the “CRA Proposal”).
Applications for acquisitions would be affected by the evaluation of the Bank’s effectiveness in meeting its CRA requirements. On October 24, 2023, the bank regulatory agencies issued a final rule to strengthen and modernize the CRA regulations (the “CRA Rule”), some of which is effective on April 1, 2024.
We originate loans to agriculture producers for input costs, equipment, and land. Most of our agriculture loans are to family farms growing corn and soybeans. One-to-Four Family Residential These loans include both owner-occupied and non-owner occupied one-to-four family homes and condominiums. They consist of first mortgage amortizing loans, second mortgage amortizing loans, and home equity lines of credit.
One-to-Four Family Residential These loans include both owner-occupied and non-owner occupied one-to-four family homes and condominiums. They consist of first mortgage amortizing loans, second mortgage amortizing loans, and home equity lines of credit, primarily originated by our lenders through our branch network on properties in the communities that we serve.
We sell conventional loans to both Freddie Mac and Fannie Mae and retain the servicing for substantially all those loans. We also originate FHA, VA, and Rural Development loans, which are typically sold servicing released. MARKET AREA As of December 31, 2022, our branch network included 54 full-service branch locations in Central and Northeastern Illinois and four in Eastern Iowa.
We also originate FHA, VA, and Rural Development loans. MARKET AREA As of December 31, 2023, our branch network included 67 full-service branch locations in throughout Illinois and Eastern Iowa.
The merger was consummated on December 31, 2020, resulting in Heartland Bank being our sole bank subsidiary, with the branch locations in Lincoln, Illinois operating as “State Bank of Lincoln, a division of Heartland Bank and Trust Company.” PRODUCTS AND SERVICES Our products and services are primarily deposit, lending, and ancillary products that offer a broad range of options to meet the needs of consumers, businesses, and municipal entities.
PRODUCTS AND SERVICES Our products and services are primarily deposit, lending, and ancillary products that offer a broad range of options to meet the financial needs of consumers, businesses, and municipal entities.
Owner-occupied CRE primarily includes amortizing first mortgage loans on properties occupied by our C&I customers. We focus on small and middle market businesses in the communities that we serve. Agriculture and Farmland With our roots in smaller communities throughout Central Illinois and Eastern Iowa, we have a long history of financing agriculture production and land.
We focus on small and middle market businesses in the communities that we serve. Agriculture and Farmland With our roots in rural Illinois communities, we have a long history of financing agriculture production and land. We originate loans to agriculture producers for input costs, equipment, and land. Most of our agriculture loans are to family farms growing corn and soybeans.
Maintain a Prudent Approach to Credit Underwriting Robust underwriting and pricing standards have been a hallmark of the Company and continue to serve as a central tenet of our banking strategy even as we grow our loan portfolio in newer markets. We intend to prudently deploy our excess funding and liquidity into assets that optimize risk-adjusted returns with minimal losses.
Further, we could benefit from continued market disruption in the Chicago MSA, caused by recent significant bank acquisitions, by acquiring talent and customers experiencing displacement. 5 Table of Contents Maintain a Prudent Approach to Credit Underwriting Robust underwriting and pricing standards have been a hallmark of the Company and continue to serve as a central tenet of our banking strategy even as we grow our loan portfolio in newer markets.
These loans primarily consist of loans originated by our lenders through our branch network on properties in the communities that we serve. Deposit Products and Services We offer traditional bank deposit account services as well as digital banking services tailored to meet the needs of today's deposit consumers.
Deposit Products and Services We offer traditional bank deposit account services as well as digital banking services tailored to meet the needs of today's deposit consumers. Our deposit accounts consist of noninterest-bearing demand deposits, interest-bearing transaction accounts, money market accounts, savings accounts, certificates of deposits, HSA, and IRA accounts.
The acquisition expanded our footprint into Eastern Iowa with four locations that began operating as branches of Heartland Bank following the merger and systems conversion of NXT Bank into Heartland Bank in December 2021. After considering business combination accounting adjustments, NXT added total assets of $234 million, total loans of $195 million, and total deposits of $182 million.
The acquisition expanded our footprint into Eastern Iowa and provided an opportunity to utilize our excess liquidity at the time to replace NXT’s higher cost funding. The four locations acquired from NXT began operating as branches of Heartland Bank following the merger and systems conversion of NXT Bank into Heartland Bank in December 2021.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeHigher interest rates can also negatively affect our customers’ businesses and financial condition, and the value of collateral securing loans in our portfolio. 27 Table of Contents Given the complex factors affecting the strength of the U.S. economy, including uncertainties regarding the persistence of inflation, geopolitical developments such as the war in Ukraine and resulting disruptions in the global energy market, the effects of the pandemic in China, and tight labor market conditions and supply chain issues, there is a meaningful risk that the Federal Reserve and other central banks may raise interest rates too much, thereby limiting economic growth and potentially causing an economic recession.
Biggest changeGiven the complex factors affecting the strength of the U.S. economy, including uncertainties regarding the persistence of inflation; record-high U.S. credit card debt; increasing delinquencies in mortgages, auto loans, and credit cards; geopolitical developments, such as Russia's invasion of Ukraine and the Israeli-Palestinian conflict; tight labor market conditions; and supply chain issues, there is a meaningful risk that the Federal Reserve and other central banks may continue to raise interest rates or maintain them at elevated levels, which may negatively impact the entire national economy.
If customers move money out of bank deposits and into other investments, we could lose a relatively low cost source of funds, which would require us to seek wholesale funding alternatives in order to continue to grow, thereby increasing our funding costs and reducing our net interest income and net income.
If customers move money out of bank deposits and into other investments, we could lose a relatively low-cost source of funds, which could require us to seek wholesale funding alternatives in order to continue to grow, thereby increasing our funding costs and reducing our net interest income and net income.
A capital injection may be required at times when the Company may not have the resources to provide it and therefore may be required to borrow the funds or raise capital. Any loans by a holding company to its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank.
A capital injection may be required at times when the Company may not have the resources to provide it and therefore may be required to borrow the funds or raise capital. Any loans by a holding company to its subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank.
In addition, we may determine to sell securities in our available-for-sale investment securities portfolio, and any such sale could cause us to realize currently unrealized losses that resulted from the recent increases in the prevailing interest rates.
In addition, we may sell securities in our available-for-sale investment securities portfolio, and any such sale could cause us to realize currently unrealized losses that resulted from the recent increases in the prevailing interest rates.
Voting Trust U/A/D 5/4/2016, has significant influence over us, and its interests could conflict with those of our other stockholders. ● External Risks Adverse changes in the economic conditions, particularly such changes in the Illinois and Iowa markets we operate, may adversely impact our borrowers and our business. ​ ​ 22 Table of Contents CREDIT RISKS We may not be able to adequately measure and limit our credit risk, which could lead to unexpected losses.
Voting Trust U/A/D 5/4/2016, has significant influence over us, and its interests could conflict with those of our other stockholders. • External Risks Adverse changes in the economic conditions, particularly such changes in the Illinois and Iowa markets we operate, may adversely impact our borrowers and our business. 18 Table of Contents CREDIT RISKS We may not be able to adequately measure and limit our credit risk, which could lead to unexpected losses.
The value of the financial instruments we own may decline in the future. An increase in market interest rates may affect the fair value of our securities portfolio, potentially reducing accumulated other comprehensive income and/or earnings.
The value of the financial instruments we own may decline in the future. An increase in market interest rates may affect the fair value of our securities portfolio, potentially reducing accumulated other comprehensive income or earnings.
If the actual results fall short or exceed our estimates, our earnings, capital and financial condition may be materially and adversely affected; ● the ability to finance an acquisition and possible dilution to existing stockholders; ● the failure to realize some or all of the anticipated transaction benefits within the expected time frame, or ever; ● compliance and legal risks associated with acquiring unfamiliar customers, products and services, and branches in new geographical markets; and ● risks associated with integrating the operations and personnel of the acquired business in a manner that permits growth opportunities and does not materially disrupt existing customer relationships or result in decreased revenues resulting from any loss of customers.
If the actual results fall short or exceed our estimates, our earnings, capital and financial condition may be materially and adversely affected; • the ability to finance an acquisition and possible dilution to existing stockholders; • the failure to realize some or all of the anticipated transaction benefits within the expected time frame, or ever; 31 Table of Contents • compliance and legal risks associated with acquiring unfamiliar customers, products and services, and branches in new geographical markets; and • risks associated with integrating the operations and personnel of the acquired business in a manner that permits growth opportunities and does not materially disrupt existing customer relationships or result in decreased revenues resulting from any loss of customers.
This has helped drive a significant increase in prevailing interest rates and, while this increased our net interest income, it also lead to $105.5 million of unrealized losses in the available-for-sale debt securities portfolio during the year ended December 31, 2022, which has negatively affected our tangible book value per share.
This has helped drive a significant increase in prevailing interest rates and, while this increased our net interest income, it also led to $105.5 million of unrealized losses in the available-for-sale debt securities portfolio during the year ended December 31, 2022, which negatively affected our tangible book value per share.
Accordingly, a downturn in the real estate market or a challenging business and economic environment may increase our risk related to commercial loans, particularly commercial real estate loans.
Accordingly, a downturn in the real estate market or a challenging business and economic environment may increase our risk related to commercial and commercial real estate loans.
Furthermore, banking laws impose notice, approval and ongoing regulatory requirements on any stockholder or other party that seeks to acquire direct or indirect "control," as defined under applicable law, of an FDIC- 41 Table of Contents insured depository institution. These laws include the BHCA and the CBCA.
Furthermore, banking laws impose notice, approval and ongoing regulatory requirements on any stockholder or other party that seeks to acquire direct or indirect "control," as defined under applicable law, of an FDIC- insured 34 Table of Contents depository institution. These laws include the BHCA and the CBCA.
In addition, if interest rates continue to rise in response to elevated levels of inflation, the value of our securities and loan portfolios may be negatively impacted. Continued elevated levels of inflation could also cause increased volatility and uncertainty in the business environment, which could adversely affect loan demand and our clients’ ability to repay indebtedness.
In addition, if interest rates were to rise in response to elevated levels of inflation, the value of our securities and loan portfolios may be negatively impacted. Continued elevated levels of inflation could also cause increased volatility and uncertainty in the business environment, which could adversely affect loan demand and our clients’ ability to repay indebtedness.
If our reputation is negatively affected, by the intentional, inadvertent or unsubstantiated misconduct of our employees, directors, customers, third parties, or otherwise, our business and, therefore, our operating results and the value of our stock may be materially adversely affected. 45 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
If our reputation is negatively affected, by the intentional, inadvertent or unsubstantiated misconduct of our employees, directors, customers, third parties, or otherwise, our business and, therefore, our operating results and the value of our stock may be materially adversely affected. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 38 Table of Contents
Maintenance of our reputation depends not only on our success in maintaining our service-focused culture, but also on our success in identifying and appropriately addressing issues that may arise in areas such as potential conflicts of interest, anti-money laundering, customer personal information and privacy issues, employee, customer and other third-party fraud, recordkeeping, regulatory investigations, and any litigation that may arise from the failure or perceived failure of us to comply with legal and regulatory requirements.
Maintenance of our reputation depends not only on our success in maintaining our service-focused 37 Table of Contents culture, but also on our success in identifying and appropriately addressing issues that may arise in areas such as potential conflicts of interest, anti-money laundering, customer personal information and privacy issues, employee, customer and other third-party fraud, recordkeeping, regulatory investigations, and any litigation that may arise from the failure or perceived failure of us to comply with legal and regulatory requirements.
In addition, the success of a small and medium-sized business often depends on the management talents and efforts of one or two people or a small group of people, and the death, disability or resignation of one or more of these people could have a material adverse impact on the business and its ability to repay its loan.
In addition, the success of a small or medium-sized business often depends on the management talents and efforts of one person or a small group of people, and the death, disability or resignation of one or more of these people could have a material adverse impact on the business and its ability to repay its loan.
As a result, if our regulators conclude that we have not exercised adequate oversight and control over our third-party vendors or other ongoing third-party business relationships or that such third parties have not performed appropriately, we could be subject to enforcement actions, including civil money penalties or other administrative or judicial penalties or fines as well as requirements for customer remediation, any of which could have a material adverse effect our business, financial condition or results of operations.
If our regulators conclude that we have not exercised adequate oversight and control over our third-party business relationships or that such third parties have not performed appropriately, we could be subject to enforcement actions, including civil money penalties or other administrative or judicial penalties or fines as well as requirements for customer remediation, any of which could have a material adverse effect our business, financial condition or results of operations.
Under the Nasdaq Listing Rules, a company of which more than 50% of the outstanding voting power is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain stock exchange corporate governance requirements, including: ● the requirement that a majority of the board of directors consists of independent directors; ● the requirement that nominating and corporate governance matters be decided solely by independent directors; and 39 Table of Contents ● the requirement that executive and officer compensation matters be decided solely by independent directors.
Under the Nasdaq Listing Rules, a company of which more than 50% of the outstanding voting power is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain stock exchange corporate governance requirements, including: • the requirement that a majority of the board of directors consists of independent directors; • the requirement that nominating and corporate governance matters be decided solely by independent directors; and • the requirement that executive and officer compensation matters be decided solely by independent directors.
The Company could experience increased expenses resulting from strategic planning, litigation, and technology and market changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due to the Company’s response to climate change and its climate change strategy, which, in turn, could have a material negative impact on business, results of operations, and financial condition.
The Company could experience increased expenses resulting from strategic planning, litigation, technology and market changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due 36 Table of Contents to the Company’s response to climate change and its climate change strategy, which, in turn, could have a material negative impact on business, results of operations, and financial condition.
If, as a result of an examination, a banking agency were to determine that our financial condition, capital resources, asset quality, lending practices, investment practices, earnings prospects, management, liquidity or other aspects of any of our operations had become unsatisfactory, or that we were in violation of any law or regulation, it may take a 32 Table of Contents number of different remedial actions as it deems appropriate.
If, as a result of an examination, a banking agency were to determine that our financial condition, capital resources, asset quality, lending practices, investment practices, earnings prospects, management, liquidity or other aspects of any of our operations had become unsatisfactory, or that we were in violation of any law or regulation, it may take a number of different remedial actions as it deems appropriate.
These issues could also result in delays in the payment of accounts receivable owed to borrowers that conduct business with the State of Illinois and Medicaid payments to nursing homes and other healthcare providers in Illinois and impair their ability to repay their loans when due. ​ 43 Table of Contents Climate change could have a material negative impact on the Company and our customers.
These issues could also result in delays in the payment of accounts receivable owed to borrowers that conduct business with the State of Illinois and Medicaid payments to nursing homes and other healthcare providers in Illinois and impair their ability to repay their loans when due. Climate change could have a material negative impact on the Company and our customers.
When needed, additional liquidity is sometimes provided by our ability to borrow from the Federal Reserve Bank of Chicago and the Federal Home Loan Bank of Chicago (the "FHLB"), through federal funds lines with 28 Table of Contents our correspondent banks, and through other wholesale funding sources including brokered certificates of deposits or deposits placed with the Certificate of Deposit Account Registry Service.
When needed, additional liquidity is sometimes provided by our ability to borrow from the Federal Reserve Bank of Chicago and the Federal Home Loan Bank of Chicago (the "FHLB"), through federal funds lines with our correspondent banks, and through other wholesale funding sources including brokered certificates of deposits or deposits placed with the Certificate of Deposit Account Registry Service.
The majority of our loan portfolio consists of commercial and regulatory CRE loans, which have a higher degree of risk than other types of loans. Commercial and regulatory CRE loans are often larger and involve greater risks than other types of lending.
The majority of our loan portfolio consists of commercial and regulatory CRE loans, which may have a higher degree of risk than some other types of loans. Commercial and regulatory CRE loans are often larger and involve greater risks than other types of lending.
The number of shares of our common stock issued in connection with an acquisition or investment could constitute a material portion of our then-outstanding shares of our common stock. 40 Table of Contents We are an “emerging growth company” and may elect to comply with reduced public company reporting requirements which could make our common stock less attractive to investors.
The number of shares of our common stock issued in connection with an acquisition or investment could constitute a material portion of our then-outstanding shares of our common stock. We are an “emerging growth company” and may elect to comply with reduced public company reporting requirements which could make our common stock less attractive to investors.
Failure to maintain the Capital Conservation Buffer would result in increasingly stringent restrictions on our ability to make dividend payments and other capital distributions and to pay discretionary bonuses to 33 Table of Contents our executive officers. See "Supervision and Regulation—The Role of Capital" for more information on the capital adequacy standards that we must meet and maintain.
Failure to maintain the Capital Conservation Buffer would result in increasingly stringent restrictions on our ability to make dividend payments and other capital distributions and to pay discretionary bonuses to our executive officers. See "Supervision and Regulation—The Role of Capital" for more information on the capital adequacy standards that we must meet and maintain.
Moreover, several large corporations, including financial institutions and retail companies, have suffered major data breaches, in some cases exposing not only confidential and proprietary corporate information, but also sensitive financial and other personal information of their customers and employees and subjecting them to potential fraudulent activity.
Moreover, several large corporations, including financial institutions and retail companies, have suffered major data breaches, in some cases exposing not only confidential and proprietary corporate information, but also 24 Table of Contents sensitive financial and other personal information of their customers and employees and subjecting them to potential fraudulent activity.
Even if the Voting Trust’s ownership of our shares falls below a majority, the Voting Trust may continue to be able to influence or effectively control out decisions. We are classified as a "controlled company" for purposes of the Nasdaq Listing Rules and, as a result, we qualify for certain exemptions from certain corporate governance requirements.
Even if the Voting Trust’s ownership of our shares falls below a majority, the Voting Trust may continue to be able to influence or effectively control our decisions. 32 Table of Contents We are classified as a "controlled company" for purposes of the Nasdaq Listing Rules and, as a result, we qualify for certain exemptions from certain corporate governance requirements.
We may also, from time to time, be the subject of subpoenas, requests for information, reviews, investigations and proceedings (both formal and informal) by governmental agencies regarding our current and/or prior business activities.
We may also, from time to time, be the subject of subpoenas, requests for information, reviews, investigations and proceedings (both formal and informal) by governmental agencies regarding our business activities.
In addition, we may be required to fund additional 25 Table of Contents amounts to complete the project and may have to hold the property for an unspecified period of time while we attempt to dispose of it.
In addition, we may be required to fund additional amounts to complete the project and may have to hold the property for an unspecified period of time while we attempt to dispose of it.
The FDIC has the primarily responsibility for supervising and examining the Bank’s compliance with 34 Table of Contents federal consumer financial laws and regulations, including CFPB regulations. See "Supervision and Regulation—Supervision and Regulation of the Bank—Consumer Financial Services" for additional information.
The FDIC has the primarily responsibility for supervising and examining the Bank’s compliance with federal consumer financial laws and regulations, including CFPB regulations. See "Supervision and Regulation—Supervision and Regulation of the Bank—Consumer Financial Services" for additional information.
These regulatory approvals and the factors considered in reviewing such applications are described in greater detail in "Supervision and Regulation—Acquisitions and Branching." 38 Table of Contents We cannot assure you that we will be successful in overcoming these risks or any other problems encountered in connection with acquisitions.
These regulatory approvals and the factors considered in reviewing such applications are described in greater detail in "Supervision and Regulation—Acquisitions and Branching." We cannot assure you that we will be successful in overcoming these risks or any other problems encountered in connection with acquisitions.
In addition, even if suitable targets are identified, we expect to compete for such businesses with other potential bidders, which may have greater financial resources than we have, which may 37 Table of Contents adversely affect our ability to make acquisitions at attractive prices.
In addition, even if suitable targets are identified, we expect to compete for such businesses with other potential bidders, which may have greater financial resources than we have, which may adversely affect our ability to make acquisitions at attractive prices.
In addition, increased competition with the largest banks and Fintechs for retail deposits may impact our ability to raise funds through deposits and could have a negative effect on our liquidity.
In addition, increased competition with other banks and FinTechs for retail deposits may impact our ability to raise funds through deposits and could have a negative effect on our liquidity.
For example, as customer deposit levels have decreased over the past year, we have observed that the sensitivity of market deposit rates to changes in prevailing interest rates has increased.
For example, as customer deposit levels have decreased over the past two years, we have observed that the sensitivity of market deposit rates to changes in prevailing interest rates has increased.
These requirements may constrain our operations or require us to obtain approval from our regulators before engaging in certain activities, with no assurance that such approvals may be obtained, either in a timely manner or at all.
These requirements may constrain our operations or require us to 26 Table of Contents obtain approval from our regulators before engaging in certain activities, with no assurance that such approvals may be obtained, either in a timely manner or at all.
Customers can now maintain funds in prepaid debit cards or digital currencies and pay bills and transfer funds directly without the direct assistance 44 Table of Contents of banks.
Customers can now maintain funds in prepaid debit cards or digital currencies and pay bills and transfer funds directly without the direct assistance of banks.
It may also be difficult for us to replace some of our third-party vendors, particularly vendors providing our core banking, debit card and credit card services and information services, in a timely manner if they are unwilling or unable to provide us with these services in the future for any reason and even if we are able to replace them, 30 Table of Contents it may be at higher cost or result in the loss of customers.
It may also be difficult for us to replace some of our third-party vendors, particularly vendors providing our core banking and card processing services, in a timely manner if they are unwilling or unable to provide us with these services in the future for any reason and even if we are able to replace them, it may be at higher cost or result in the loss of customers.
Any of these outcomes could materially and adversely affect us. 35 Table of Contents Non-compliance with the USA PATRIOT Act, the Bank Secrecy Act (the "BSA"), or other laws and regulations could result in fines or sanctions.
Any of these outcomes could materially and adversely affect us. Non-compliance with the USA PATRIOT Act, the Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.
In addition, we expect that new technologies and business processes applicable to the banking industry will continue to emerge, and these new technologies and business processes may be better than those we currently 31 Table of Contents use.
In addition, we expect that new technologies and business processes applicable to the banking industry will continue to emerge, and these new technologies and business processes may be better than those we currently use.
The Community Reinvestment Act of 1977 ("CRA") requires the Bank, consistent with safe and sound operations, to ascertain and meet the credit needs of their entire communities, including low and moderate income areas.
The CRA requires the Bank, consistent with safe and sound operations, to ascertain and meet the credit needs of their entire communities, including low and moderate income areas.
When interest-bearing liabilities mature or reprice more quickly, or to a greater degree than interest-earning assets in a period, an increase in interest rates could reduce net interest income. Similarly, when interest-earning assets mature or reprice more quickly, or to a greater degree than interest-bearing liabilities, falling interest rates could reduce net interest income.
Similarly, when interest-earning assets mature or reprice more quickly, or to a greater degree than interest-bearing liabilities, falling interest rates could reduce net interest income.
A decrease in the general level of interest rates may, among other things, decrease 26 Table of Contents our net interest margin and increase prepayments on our loan and securities portfolios.
Conversely, a decrease in the general level of interest rates may, among other things, decrease our net interest margin and increase prepayments on our loan and securities portfolios.
In general, these risks have increased as a result of the recent increases in prevailing interest rates and uncertainties associated with inflation, which have potentially increased the risk of a near-term decline in growth or an economic downturn.
In general, these risks have increased as a result of the recent increases in prevailing interest rates, which have potentially increased the risk of a near-term decline in growth or an economic downturn.
Among the instruments used by the Federal Reserve to implement these objectives are open market purchases and sales of U.S. government securities, adjustments to the federal funds target rate, and changes in banks’ reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits.
Among the instruments used by the Federal Reserve to implement these objectives are open market purchases and sales of U.S. government securities, adjustments to the federal funds target rate, and changes in banks’ reserve requirements against bank deposits.
The Federal Reserve may require us to commit capital resources to support the Bank. Federal law requires a bank holding company to act as a source of financial and managerial strength to its subsidiary banks, and to commit resources to support such subsidiary banks.
Federal law requires a bank holding company to act as a source of financial and managerial strength to its subsidiary bank, and to commit resources to support such subsidiary bank.
Due to the larger average size of each commercial loan as compared with other loans such as residential loans, as well as collateral that is generally less readily-marketable, losses incurred on a small number of commercial or regulatory CRE loans could have a material adverse impact on our financial condition and results of operations.
Due to the larger average size of each commercial loan as compared with other loans such as residential loans, as well as collateral that is generally less readily-marketable, losses incurred on a small number of commercial or regulatory CRE loans could have a material adverse impact on our financial condition and results of operations. 20 Table of Contents Real estate construction loans are based upon estimates of costs and values associated with the complete project.
Also, federal legislators and regulators are increasingly pursuing new guidelines, laws and regulations that, if adopted, could further restrict how we collect, use, share and secure consumer information, which could impact some of our current or planned business initiatives.
Also, federal legislators and regulators are increasingly pursuing new guidelines, laws and regulations, including with respect to the use of artificial intelligence by financial institutions and service providers, that, if adopted, could further restrict how we collect, use, share and secure consumer information, which could impact some of our current or planned business initiatives.
Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations. In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve. An important function of the Federal Reserve is to regulate the money supply and credit conditions.
The effects of such policies upon our business, financial condition and results of operations cannot be predicted. In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve. An important function of the Federal Reserve is to regulate the money supply and credit conditions.
Higher funding costs could reduce our net interest margin and net interest income and could have a material adverse effect on our business, financial condition, and results of operations. 29 Table of Contents TECHNOLOGY AND CYBERSECURITY RISKS The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents could have a material adverse effect on our business, financial condition or results of operations.
TECHNOLOGY AND CYBERSECURITY RISKS The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents could have a material adverse effect on our business, financial condition or results of operations.
Any decline in available funding could adversely impact our ability to continue to implement our business plan, including originating loans, investing in securities, meeting our expenses or fulfilling obligations such as repaying our borrowings and meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, financial condition and results of operations.
Any decline in available funding could adversely impact our ability to continue to implement our business plan, including originating loans, investing in securities, meeting our expenses or fulfilling obligations such as repaying our borrowings and meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, financial condition and results of operations. 23 Table of Contents We may need to raise additional capital in the future, and such capital may not be available when needed or at all.
Each of these third parties may be targets of the same types of fraudulent activity, computer break-ins and other cybersecurity breaches described above or herein, and the cybersecurity measures that they maintain to mitigate the risk of such activity may be different than our own and may be inadequate.
Each of these third parties may be targets of the same types of fraudulent activity, computer break-ins and other cybersecurity breaches described above or herein, including as a result of increasingly sophisticated methods of conducting cyber-attacks, including those employing artificial intelligence, and the cybersecurity measures that they maintain to mitigate the risk of such activity may be different than our own and may be inadequate.
Our use of third-party vendors and our other ongoing third-party business relationships is subject to increasing regulatory requirements and attention. Our use of third-party vendors for certain information systems is subject to increasingly demanding regulatory requirements and attention by our bank regulators.
Our use of third-party vendors for certain information systems is subject to increasingly demanding regulatory requirements and attention by our bank regulators. Regulatory guidance requires us to enhance our due diligence, ongoing monitoring and control over our third-party vendors and other ongoing third-party business relationships.
Unfavorable or uncertain economic and market conditions can be caused by, among other factors, declines in economic growth, business activity or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; changes in inflation or interest rates; increases in real estate and other state and local taxes; high unemployment; natural disasters; pandemics, such as COVID-19; climate change; acts of terrorism or war; or a combination of these or other factors. 42 Table of Contents The COVID-19 pandemic could continue to have adverse effects on our business.
Unfavorable or uncertain economic and market conditions can be caused by, among other factors, declines in economic growth, business activity or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; changes in inflation or interest rates; increases in real estate and other state and local taxes; high unemployment; natural disasters; pandemics; climate change; acts of terrorism or war (including the Israeli-Palestinian conflict and the Russian invasion of Ukraine); or a combination of these or other factors.
The effects of such policies upon our business, financial condition and results of operations cannot be predicted. In the current environment, economic and business conditions are significantly affected by U.S. monetary policy, particularly the actions of the Federal Reserve in its effort to fight elevated levels of inflation.
In the current environment, economic and business conditions are significantly affected by U.S. monetary policy, particularly the actions of the Federal Reserve in its effort to fight elevated levels of inflation.
A failure to effectively measure and limit the credit risk associated with our loan portfolio may result in loan defaults, foreclosures and additional charge-offs, and may necessitate that we significantly increase our allowance for credit losses, each of which could adversely affect our net income.
Moreover, default risk may arise from events or circumstances that are difficult to detect, such as fraud, or difficult to predict, such as the impact of catastrophic events on certain industries.A failure to effectively measure and limit the credit risk associated with our loan portfolio may result in loan defaults, foreclosures and additional charge-offs, and may necessitate that we significantly increase our allowance for credit losses, each of which could adversely affect our net income.
As a result, the outcome of legal and regulatory actions could be material to our business, results of operations, financial condition and cash flows depending on, among other factors, the level of our earnings for that period, and could have a material adverse effect on our business, financial condition or results of operations.
As a result, the outcome of legal and regulatory actions could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Continued levels of inflation could have complex effects on our business and results of operations, some of which could be materially adverse. For example, elevated inflation harms consumer purchasing power, which could negatively affect our retail customers and the economic environment and, ultimately, many of our business customers, and could also negatively affect our levels of non-interest expense.
For example, elevated inflation harms consumer purchasing power, which could negatively affect our retail 35 Table of Contents customers and the economic environment and, ultimately, many of our business customers, and could also negatively affect our levels of non-interest expense.
As a result, our inability to successfully manage credit risk could have an adverse effect on our business, financial condition and results of operations. Our allowance for credit losses may prove to be insufficient to absorb potential losses in our loan portfolio.
As a result, our inability to successfully manage credit risk could have an adverse effect on our business, financial condition and results of operations.
If we violate these laws and regulations, or our policies, procedures and systems are deemed deficient, we could face severe consequences, including sanctions, fines, regulatory actions and reputational consequences. Any of these results could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
If we violate these laws and regulations, or our policies, procedures and systems are deemed deficient, we could face severe consequences, including sanctions, fines, regulatory actions and reputational consequences.
As of December 31, 2022, our principal stockholder, Heartland Bancorp, Inc. Voting Trust U/A/D 5/4/2016 (“the Voting Trust”), owned approximately 59.9% of the outstanding shares of our common stock and its trustee is our Chairman and Chief Executive Officer.
Voting Trust U/A/D 5/4/2016, has significant influence over us, and its interests could conflict with those of our other stockholders. As of December 31, 2023, our principal stockholder, Heartland Bancorp, Inc. Voting Trust U/A/D 5/4/2016 (“the Voting Trust”), owned approximately 54.3% of the outstanding shares of our common stock and its trustee is our Executive Chairman.
Additionally, we provide farm management advice, engage in farmland sale services, and arrange for crop insurance as part of our wealth management services. Decreases in commodity prices or lower crop yields may result in a decrease in wealth management fees collected for our agricultural services.
Additionally, we provide farm management advice, engage in farmland sale services, and arrange for crop insurance as part of our wealth management services.
However, an appraisal is only an estimate of the value of the property at the time the appraisal is made, and real estate values may change significantly in relatively short periods of time (especially in periods of heightened economic uncertainty). Therefore, this estimate may not accurately describe the fair value of the real property collateral after the loan is made.
In considering whether to make a loan secured by real property, we generally require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is made, and real estate values may change significantly in relatively short periods of time (especially in periods of heightened economic uncertainty).
As a result, we may not be able to realize the full amount of any remaining indebtedness when we foreclose on and sell the relevant property. We also rely on appraisals and other valuation techniques to establish the value of real estate and personal property that we acquire through foreclosure proceedings and to determine certain loan impairments.
We also rely on appraisals and other valuation techniques to establish the value of real estate and personal property that we acquire through foreclosure proceedings and to determine certain loan impairments.
Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and/or investment securities and from other sources could have a substantial negative effect on our liquidity. Our most important source of funds consists of our customer deposits.
An inability to raise funds through deposits, borrowings, the sale of loans and/or investment securities and from other sources could have a substantial negative effect on our liquidity. Our most important source of funds consists of our customer deposits. Such deposit balances can decrease when customers perceive alternative investments, such as the stock market, as providing a better risk/return tradeoff.
Future legislative or regulatory change could impose higher capital standards on us or the Bank. The Federal Reserve may also set higher capital requirements for holding companies whose circumstances warrant it. For example, holding companies experiencing internal growth or making acquisitions are expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets.
For 27 Table of Contents example, holding companies experiencing internal growth or making acquisitions are expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets. The Federal Reserve may require us to commit capital resources to support the Bank.
See “Note 23 – Commitments and Contingencies – Legal Contingencies” to the consolidated financial statements for additional information regarding certain legal actions and litigation to which we are subject, including a discussion of potential losses and related accruals.
See “Note 22 – Commitments and Contingencies – Legal Contingencies” to the consolidated financial statements for additional information regarding certain legal actions and litigation to which we are subject, including a discussion of potential losses and related accruals. 30 Table of Contents The preparation of our consolidated financial statements requires us to make estimates and judgments, which are subject to an inherent degree of uncertainty and which may differ from actual results.
Reliance on inaccurate, incomplete, fraudulent or misleading financial statements, credit reports or other financial or business information, or the failure to receive such information on a timely basis, could result in credit losses, reputational damage or other effects that could have a material adverse effect on our business, financial condition or results of operations.
Reliance on inaccurate, incomplete, fraudulent or misleading financial statements, credit reports or other financial or business information, or the failure to receive such information on a timely basis, could result in credit losses, reputational damage or other effects that could have a material adverse effect on our business, financial condition or results of operations. 19 Table of Contents The appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property, foreclosed real estate and other repossessed assets may not accurately describe the fair value of the asset.
Their use also affects interest rates charged on loans or paid on deposits. The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future.
Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations. The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future.
This focus has intensified in recent years, with regulators and prosecutors focusing on a variety of financial institution practices and requirements, including foreclosure, overdraft fees, compliance with applicable consumer protection laws, and compliance with anti-money laundering statutes, the BSA and sanctions administered by the Office of Foreign Assets Control of the Treasury. 36 Table of Contents In the normal course of business, from time to time, we have in the past and may in the future be named as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with our current and/or prior business activities.
This focus has intensified in recent years, with regulators and prosecutors focusing on a variety of financial institution practices and requirements, including foreclosure, overdraft fees, compliance with applicable consumer protection laws, and compliance with anti-money laundering statutes, the BSA and sanctions administered by the Office of Foreign Assets Control of the Treasury.
Failure to comply with the laws and regulations to which we are subject, or changes in them, may adversely impact us. ● Business Strategy Our strategy of pursuing growth via suitable acquisitions exposes us to heightened operational risks and could have a material adverse impact on our financial condition, results of operations, and growth prospects. ● Ownership of Our Common Stock Our principal stockholder, Heartland Bancorp, Inc.
Failure to comply with regulatory capital requirements, changes in the United States’ monetary policy, legislative and regulatory actions taken now or in the future regarding the financial services industry, financial reform legislation and increased regulatory rigor around consumer protection mortgage-related issues, or federal, state and local consumer lending laws may adversely impact us. • Business Strategy Our strategy of pursuing growth via suitable acquisitions exposes us to heightened operational risks and could have a material adverse impact on our financial condition, results of operations, and growth prospects. • Ownership of Our Common Stock Our principal stockholder, Heartland Bancorp, Inc.
Regulatory guidance requires us to enhance our due diligence, ongoing monitoring and control over our third-party vendors and other ongoing third-party business relationships. In certain cases we may be required to renegotiate our agreements with these vendors to meet these enhanced requirements, which could increase our costs.
In certain cases we may be required to renegotiate our agreements with these vendors to meet these enhanced requirements, which could increase our costs.
Any regulatory action against us could have an adverse effect on our business, financial condition, results of operations and growth prospects. Prior to October 11, 2019, we were treated as an S Corp, and claims of taxing authorities related to our prior status as an S Corp could harm us.
Any regulatory action against us could have an adverse effect on our business, financial condition, results of operations and growth prospects.
The phase-out of LIBOR may adversely impact the value of, return on, and market for our LIBOR-based financial instruments or lead to disputes or litigation with counterparties. ● Liquidity Risks An inability to obtain liquid funds at a reasonable price to timely meet our financial obligations may have a material adverse impact on our operations and jeopardize our business. ● Technology and Cybersecurity Risks Our business is highly dependent upon secure and uninterrupted information technology systems.
SUMMARY Risk Factor Description • Credit Risks Borrowers or counterparties may be unable or unwilling to repay their obligations to us in accordance with the underlying contractual terms which could lead to unexpected losses. • Interest Rate Risks Fluctuations in interest rates may reduce our earnings or the value of our financial instruments. • Liquidity Risks An inability to obtain liquid funds at a reasonable price to timely meet our financial obligations may have a material adverse impact on our operations and jeopardize our business. • Technology and Cybersecurity Risks Our business is highly dependent upon secure and uninterrupted information technology systems.
Although we review business continuity and backup plans for our vendors and take other safeguards to support our operations, such plans or safeguards may be inadequate. As a result of the foregoing, our ability to conduct business may be adversely affected by any significant disruptions to us or to third parties with whom we interact.
As a result of the foregoing, our ability to conduct business may be adversely affected by any significant disruptions to us or to third parties with whom we interact. 25 Table of Contents Our use of third-party vendors and our other ongoing third-party business relationships is subject to increasing regulatory requirements and attention.
Our inability to overcome risks associated with acquisitions could have an adverse effect on our ability to successfully implement our acquisition growth strategy and grow our business and profitability. Attractive acquisition opportunities may not be available to us in the future.
Our inability to overcome risks associated with acquisitions could have an adverse effect on our ability to successfully implement our acquisition growth strategy and grow our business and profitability. RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK Our principal stockholder, Heartland Bancorp, Inc.
If any of these valuations are inaccurate, our consolidated financial statements may not reflect the correct value of our foreclosed assets, and our allowance for credit losses may not be accurate.
If any of these valuations are inaccurate, our consolidated financial statements may not reflect the correct value of our foreclosed assets, and our allowance for credit losses may not be accurate. This could have a material adverse effect on our business, financial condition or results of operations. We are subject to environmental liability risk associated with lending activities.
We are subject to numerous laws and regulations designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.
We cannot predict whether new legislation or regulation will be enacted and, if enacted, the effect that it would have on our activities, financial condition, or results of operations. 28 Table of Contents We are subject to numerous laws and regulations designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.
Like most financial institutions, our earnings and cash flows depend to a great extent upon the level of our net interest income. Changes in interest rates can increase or decrease our net interest income, because different types of assets and liabilities may react differently, and at different times, to market interest rate changes.
The majority of our banking assets are monetary in nature and are subject to risk from changes in interest rates. Like most financial institutions, our earnings and cash flows depend to a great extent upon the level of our net interest income.
We may be required to add additional compliance personnel or incur other significant compliance-related expenses to meet the demands of these consumer protection laws. We cannot predict whether new legislation or regulation will be enacted and, if enacted, the effect that it would have on our activities, financial condition, or results of operations.
We may be required to add additional compliance personnel or incur other significant compliance-related expenses to meet the demands of these consumer protection laws.
As noted above, this could decrease loan demand, harm the credit characteristics of our existing loan portfolio and decrease the value of collateral securing loans in the portfolio. RISKS RELATED TO REFERENCE RATE REFORM We may be adversely impacted by the transition from LIBOR as a reference rate.
As noted above, this could decrease loan demand, harm the credit characteristics of our existing loan portfolio and decrease the value of collateral securing loans in the portfolio. LIQUIDITY RISKS Liquidity risks could affect operations and jeopardize our business, financial condition and results of operations. Liquidity is essential to our business.
Any such developments could have a complex and negative effect on our business, including with respect to the prevailing economic environment, our lending and investment activities, and our business operations. Continued elevated levels of inflation could adversely impact our business and results of operations. The United States has recently experienced elevated levels of inflation.
Continued elevated levels of inflation could adversely impact our business and results of operations. The United States has recently experienced elevated levels of inflation. Continued levels of inflation could have complex effects on our business and results of operations, some of which could be materially adverse.
There continues to be a rise in electronic fraudulent activity, security breaches and cyber-attacks within the financial services industry, especially in the commercial banking sector due to cyber criminals targeting commercial bank accounts.
There continues to be a rise in electronic fraudulent activity, security breaches and cyber-attacks within the financial services industry, including as a result of increasingly sophisticated methods of conducting cyber-attacks, including those employing artificial intelligence.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES HBT Financial and Heartland Bank’s headquarters are located at 401 North Hershey Road, Bloomington, Illinois. The Company owns these headquarters, and it also owns or leases other facilities, such as banking centers of Heartland Bank, for business operations.
Biggest changeITEM 2. PROPERTIES HBT Financial and Heartland Bank’s headquarters are located at 401 North Hershey Road, Bloomington, Illinois. The Company owns these headquarters, and it also owns or leases other facilities, such as banking centers of Heartland Bank, for business operations. The Company considers its properties to be suitable and adequate for its present needs. 39 Table of Contents
Removed
HBT Financial and its subsidiaries own or lease all of the real property and/or buildings on which each respective entity is located. The Company considers its properties to be suitable and adequate for its present needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMINE SAFETY DISCLOSURES Not applicable. ​ 46 Table of Contents PART II.
Biggest changeMINE SAFETY DISCLOSURES Not applicable. 40 Table of Contents PART II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table sets forth information about the Company’s purchases of its common stock during the fourth quarter of 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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) ​ October 1 - 31, 2022 ​ — ​ $ — ​ — ​ $ 10,217 ​ November 1 - 30, 2022 ​ — ​ ​ — ​ — ​ ​ 10,217 ​ December 1 - 31, 2022 ​ — ​ ​ — ​ — ​ ​ 10,217 ​ Total ​ — ​ $ — ​ — ​ $ 10,217 (1) ​ (1) As of December 31, 2022, there was $10,217,000 left under the 2022 Repurchase Plan, which expired on January 1, 2023.
Biggest changeThe following table sets forth information about the Company’s purchases of its common stock during the fourth quarter of 2023: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (in thousands) October 1 - 31, 2023 78,312 $ 17.94 78,312 $ 6,171 November 1 - 30, 2023 — — — 6,171 December 1 - 31, 2023 — — — 6,171 Total 78,312 $ 17.94 78,312 $ 6,171 (1) __________________________________ (1) As of December 31, 2023, there was $6.2 million left under the 2023 Repurchase Plan, which expired on January 1, 2024.
The information in the preceding paragraph, stock performance graph, and table shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, other than as provided in Item 201 of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act. ​ ITEM 6. [RESERVED] ​ 48 Table of Contents
The information in the preceding paragraph, stock performance graph, and table shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, other than as provided in Item 201 of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.
A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held by banks, brokers and other financial institutions. Dividends During 2022, we paid quarterly cash dividends of $0.16 per share on our common stock. The quarterly cash dividend was increased to $0.17 per share on January 24, 2023.
A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held by banks, brokers and other financial institutions. Dividends During 2023, we paid quarterly cash dividends of $0.17 per share on our common stock. The quarterly cash dividend was increased to $0.19 per share on January 23, 2024.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Holders of Record HBT Financial, Inc.’s common stock is listed on the Nasdaq Global Select Market under the symbol “HBT.” As of February 15, 2023, HBT Financial, Inc. had approximately 123 shareholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Holders of Record HBT Financial, Inc.’s common stock is listed on the Nasdaq Global Select Market under the symbol “HBT.” As of February 23, 2024, HBT Financial, Inc. had approximately 122 shareholders of record.
On December 21, 2022, the Company’s board of directors approved a new stock repurchase program that took effect upon the expiration of the old stock repurchase program and expires on January 1, 2024 (the “2023 Repurchase Plan”). The 2023 Repurchase Plan authorizes the Company to repurchase up to $15 million of its common stock.
On December 19, 2023, the Company’s board of directors approved a new stock repurchase program that took effect upon the expiration of the old stock repurchase program and expires on January 1, 2025 (the “2024 Repurchase Plan”). The 2024 Repurchase Plan authorizes the Company to repurchase up to $15 million of its common stock.
Returns are presented on a total return basis. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ October 11, ​ December 31, ​ December 31, ​ December 31, ​ December 31, Index 2019 2019 2020 2021 2022 HBT Financial, Inc. ​ $ 100.00 ​ $ 122.20 ​ $ 101.97 ​ $ 130.55 ​ $ 141.07 Russell 2000 Index ​ ​ 100.00 ​ ​ 110.74 ​ ​ 132.84 ​ ​ 152.53 ​ ​ 121.36 S&P 600 Small Cap Bank Index ​ ​ 100.00 ​ ​ 111.20 ​ ​ 97.80 ​ ​ 132.76 ​ ​ 122.30 ​ The performance graph and table represent past performance and should not be considered to be an indication of future performance.
COMPARISON OF CUMULATIVE TOTAL RETURN Index October 11, 2019 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 HBT Financial, Inc. $ 100.00 $ 122.20 $ 101.97 $ 130.55 $ 141.07 $ 157.53 Russell 2000 100.00 110.74 132.84 152.53 121.36 141.90 S&P 600 Small Cap Bank Index 100.00 111.20 97.80 132.76 122.30 120.21 The performance graph and table represent past performance and should not be considered to be an indication of future performance.
Issuer Purchases of Equity Securities On December 14, 2021, the Company’s board of directors approved a stock repurchase program that authorized the Company to repurchase up to $15 million of its common stock which expired on January 1, 2023 (the “2022 Repurchase Plan”).
Issuer Purchases of Equity Securities On December 21, 2022, the Company’s board of directors approved a stock repurchase program that authorized the Company to repurchase up to $15 million of its common stock which expired on January 1, 2024 (the “2023 Repurchase Plan”).
The 2023 Repurchase Plan took effect upon the expiration of the 2022 Repurchase Plan, and there remains $15 million in common stock subject to repurchase thereunder. ​ Unregistered Sales of Equity Securities None. 47 Table of Contents Stock Performance Graph The performance graph and table below compares the cumulative total return on the Company’s common stock from October 11, 2019 (the date of the Company’s IPO and listing on the Nasdaq Global Select Market) through December 31, 2022, with the cumulative total return of: (a) the Russell 2000 Index which reflects a broad equity market index and (b) the S&P 600 Small Cap Bank Index.
Unregistered Sales of Equity Securities None. 41 Table of Contents Stock Performance Graph The performance graph and table below compares the cumulative total return on the Company’s common stock from October 11, 2019 (the date of the Company’s IPO and listing on the Nasdaq Global Select Market) through December 31, 2023, with the cumulative total return of: (a) the Russell 2000 Index which reflects a broad equity market index and (b) the S&P 600 Small Cap Bank Index.
The performance graph and table assume an initial investment of $100 and reinvestment of dividends.
The performance graph and table assume an initial investment of $100 and reinvestment of dividends. Returns are presented on a total return basis.
There are no longer any shares subject to repurchase under the 2022 Repurchase Plan.
There are no longer any shares subject to repurchase under the 2023 Repurchase Plan. The 2024 Repurchase Plan took effect upon the expiration of the 2023 Repurchase Plan, and there remains $15.0 million in common stock subject to repurchase thereunder.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe yields set forth below include the effect of deferred fees and costs, discounts and premiums, and purchase accounting adjustments that are accreted or amortized to interest income or expense. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ December 31, 2022 ​ December 31, 2021 December 31, 2020 ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ ​ ​ Balance ​ Interest Yield/Cost ​ Balance ​ Interest ​ Yield/Cost Balance ​ Interest Yield/Cost ​ ​ (dollars in thousands) ​ ASSETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ 2,514,549 ​ $ 123,478 4.91 % $ 2,271,544 ​ $ 106,284 4.68 % $ 2,245,093 ​ $ 105,196 4.69 % Securities ​ 1,403,016 ​ 27,937 1.99 ​ ​ 1,148,900 ​ 21,348 1.86 ​ 789,062 ​ 17,875 2.27 ​ Deposits with banks ​ 197,030 ​ 1,541 0.78 ​ ​ 422,828 ​ 527 0.12 ​ 282,130 ​ 938 0.33 ​ Other ​ 3,529 ​ 98 2.77 ​ ​ 3,201 ​ 64 2.01 ​ 2,479 ​ 56 2.28 ​ Total interest-earning assets ​ 4,118,124 ​ $ 153,054 3.72 % ​ 3,846,473 ​ $ 128,223 3.33 % 3,318,764 ​ $ 124,065 3.74 % Allowance for loan losses ​ (24,703) ​ ​ ​ ​ ​ ​ ​ (27,999) ​ ​ ​ ​ ​ ​ (27,661) ​ ​ ​ ​ ​ ​ Noninterest-earning assets ​ 176,452 ​ ​ ​ ​ ​ ​ ​ 162,064 ​ ​ ​ ​ ​ ​ 156,397 ​ ​ ​ ​ ​ ​ Total assets ​ $ 4,269,873 ​ ​ ​ ​ ​ ​ $ 3,980,538 ​ ​ ​ ​ ​ ​ $ 3,447,500 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS' EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand ​ $ 1,141,402 ​ $ 607 0.05 % $ 1,024,888 ​ $ 518 0.05 % $ 873,060 ​ $ 647 0.07 % Money market ​ 582,514 ​ 813 0.14 ​ ​ 521,366 ​ 437 0.08 ​ 474,033 ​ 697 0.15 ​ Savings ​ 650,385 ​ 208 0.03 ​ ​ 595,887 ​ 188 0.03 ​ 477,260 ​ 196 0.04 ​ Time ​ 283,232 ​ 883 0.31 ​ ​ 295,788 ​ 1,329 0.45 ​ 317,308 ​ 2,681 0.84 ​ Total interest-bearing deposits ​ 2,657,533 ​ 2,511 0.09 ​ ​ 2,437,929 ​ 2,472 0.10 ​ 2,141,661 ​ 4,221 0.20 ​ Securities sold under agreements to repurchase ​ 51,554 ​ 36 0.07 ​ ​ 50,104 ​ 34 0.07 ​ 49,714 ​ 48 0.10 ​ Borrowings ​ 26,468 ​ 967 3.65 ​ ​ 1,653 ​ 9 0.54 ​ 1,080 ​ 2 0.22 ​ Subordinated notes ​ ​ 39,355 ​ ​ 1,879 ​ 4.77 ​ ​ 39,275 ​ ​ 1,879 ​ 4.78 ​ ​ 12,869 ​ ​ 616 ​ 4.79 ​ Junior subordinated debentures issued to capital trusts ​ 37,746 ​ 1,787 4.73 ​ ​ 37,680 ​ 1,426 3.79 ​ 37,613 ​ 1,573 4.18 ​ Total interest-bearing liabilities ​ 2,812,656 ​ $ 7,180 0.26 % ​ 2,566,641 ​ $ 5,820 0.23 % 2,242,937 ​ $ 6,460 0.29 % Noninterest-bearing deposits ​ 1,051,187 ​ ​ ​ ​ ​ 1,004,757 ​ ​ ​ ​ 807,864 ​ ​ ​ ​ Noninterest-bearing liabilities ​ 22,724 ​ ​ ​ ​ ​ 29,060 ​ ​ ​ ​ 45,996 ​ ​ ​ ​ Total liabilities ​ 3,886,567 ​ ​ ​ ​ ​ 3,600,458 ​ ​ ​ ​ 3,096,797 ​ ​ ​ ​ Stockholders' Equity ​ 383,306 ​ ​ ​ ​ ​ 380,080 ​ ​ ​ ​ 350,703 ​ ​ ​ ​ Total liabilities and stockholders’ equity ​ $ 4,269,873 ​ ​ ​ ​ $ 3,980,538 ​ ​ ​ ​ $ 3,447,500 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income/Net interest margin (1) ​ ​ ​ ​ $ 145,874 ​ 3.54 % ​ ​ ​ $ 122,403 ​ 3.18 % ​ ​ ​ $ 117,605 ​ 3.54 % Tax-equivalent adjustment (2) ​ ​ ​ ​ 2,499 ​ 0.06 ​ ​ ​ ​ 2,028 ​ 0.05 ​ ​ ​ ​ 1,943 ​ 0.06 ​ Net interest income (tax-equivalent basis)/ Net interest margin (tax-equivalent basis) (2) (3) ​ ​ ​ ​ $ 148,373 ​ 3.60 % ​ ​ ​ $ 124,431 ​ 3.23 % ​ ​ $ 119,548 ​ 3.60 % Net interest rate spread (4) ​ ​ ​ ​ ​ 3.46 % ​ ​ ​ ​ ​ 3.10 % ​ ​ ​ ​ 3.45 % Net interest-earning assets (5) ​ $ 1,305,468 ​ ​ ​ ​ ​ $ 1,279,832 ​ ​ ​ ​ ​ $ 1,075,827 ​ ​ ​ ​ ​ Ratio of interest-earning assets to interest-bearing liabilities ​ 1.46 ​ ​ ​ ​ ​ 1.50 ​ ​ ​ ​ 1.48 ​ ​ ​ ​ Cost of total deposits ​ ​ ​ ​ ​ 0.07 % ​ ​ ​ ​ ​ 0.07 % ​ ​ ​ ​ 0.14 % Cost of funds ​ ​ ​ ​ ​ ​ ​ 0.19 ​ ​ ​ ​ ​ ​ ​ 0.16 ​ ​ ​ ​ ​ ​ ​ 0.21 ​ (1) Net interest margin represents net interest income divided by average total interest-earning assets.
Biggest changeThe 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. 48 Table of Contents Year Ended December 31, 2023 December 31, 2022 December 31, 2021 (dollars in thousands) Average Balance Interest Yield/Cost Average Balance Interest Yield/Cost Average Balance Interest Yield/Cost ASSETS Loans $ 3,231,736 $ 195,197 6.04 % $ 2,514,549 $ 123,478 4.91 % $ 2,271,544 $ 106,284 4.68 % Securities 1,350,528 30,187 2.24 1,403,016 27,937 1.99 1,148,900 21,348 1.86 Deposits with banks 84,544 3,020 3.57 197,030 1,541 0.78 422,828 527 0.12 Other 8,217 595 7.24 3,529 98 2.77 3,201 64 2.01 Total interest-earning assets 4,675,025 $ 228,999 4.90 % 4,118,124 $ 153,054 3.72 % 3,846,473 $ 128,223 3.33 % Allowance for credit losses (37,504) (24,703) (27,999) Noninterest-earning assets 290,383 176,452 162,064 Total assets $ 4,927,904 $ 4,269,873 $ 3,980,538 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Interest-bearing deposits: Interest-bearing demand $ 1,188,680 $ 3,130 0.26 % $ 1,141,402 $ 607 0.05 % $ 1,024,888 $ 518 0.05 % Money market 669,118 7,352 1.10 582,514 813 0.14 521,366 437 0.08 Savings 661,424 1,033 0.16 650,385 208 0.03 595,887 188 0.03 Time 481,466 10,784 2.24 283,232 883 0.31 295,788 1,329 0.45 Brokered 52,724 2,836 5.38 — — — — — — Total interest-bearing deposits 3,053,412 25,135 0.82 2,657,533 2,511 0.09 2,437,929 2,472 0.10 Securities sold under agreements to repurchase 35,450 255 0.72 51,554 36 0.07 50,104 34 0.07 Borrowings 139,817 7,128 5.10 26,468 967 3.65 1,653 9 0.54 Subordinated notes 39,434 1,879 4.76 39,355 1,879 4.77 39,275 1,879 4.78 Junior subordinated debentures issued to capital trusts 51,489 3,530 6.86 37,746 1,787 4.73 37,680 1,426 3.79 Total interest-bearing liabilities 3,319,602 $ 37,927 1.14 % 2,812,656 $ 7,180 0.26 % 2,566,641 $ 5,820 0.23 % Noninterest-bearing deposits 1,113,300 1,051,187 1,004,757 Noninterest-bearing liabilities 44,074 22,724 29,060 Total liabilities 4,476,976 3,886,567 3,600,458 Stockholders' Equity 450,928 383,306 380,080 Total liabilities and stockholders’ equity $ 4,927,904 4,269,873 3,980,538 Net interest income/Net interest margin (1) $ 191,072 4.09 % $ 145,874 3.54 % $ 122,403 3.18 % Tax-equivalent adjustment (2) 2,758 0.06 2,499 0.06 2,028 0.05 Net interest income (tax-equivalent basis)/ Net interest margin (tax-equivalent basis) (2) (3) $ 193,830 4.15 % $ 148,373 3.60 % $ 124,431 3.23 % Net interest rate spread (4) 3.76 % 3.46 % 3.10 % Net interest-earning assets (5) $ 1,355,423 $ 1,305,468 $ 1,279,832 Ratio of interest-earning assets to interest-bearing liabilities 1.41 1.46 1.50 Cost of total deposits 0.60 % 0.07 % 0.07 % Cost of funds 0.86 0.19 0.16 _________________________________________________ (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 measures 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.
(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.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Unless the context requires otherwise, references in this report to the “Company,” “we,” “us” and “our” refer to HBT Financial, Inc. and its consolidated subsidiaries.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Unless the context requires otherwise, references in this report to the “Company,” “we,” “us” and “our” refer to HBT Financial, Inc. and its subsidiaries.
In addition, dividends paid by the Bank to the Holding 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 Holding Company’s ability to meet its ongoing short-term and intermediate-term cash obligations.
In addition, dividends paid by the Bank to the Holding 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 Holding Company’s ability to meet its ongoing short-term cash obligations.
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.
Nonaccrual loans are included in the computation of average balances but have been reflected in the table as loans carrying a zero yield.
(2) The prompt corrective action provisions are not applicable to bank holding companies. N/A Not applicable. ​ As of December 31 , 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.
(2) The prompt corrective action provisions are not applicable to bank holding companies. N/A Not applicable. As of December 31, 2023, 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.
Detailed discussion and analysis of the financial condition and results of operation for 2022 as compared to 2021 can be found below. OVERVIEW HBT Financial, Inc., headquartered in Bloomington, Illinois, is the holding company for Heartland Bank and Trust Company, and has banking roots that can be traced back to 1920.
Detailed discussion and analysis of the financial condition and results of operation for 2023 as compared to 2022 can be found below. OVERVIEW HBT Financial, Inc., headquartered in Bloomington, Illinois, is the holding company for Heartland Bank and Trust Company, and has banking roots that can be traced back to 1920.
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 and market interest rates.
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.
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.
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. 59 Table of Contents 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.
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.
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. 45 Table of Contents 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.
(2) See "Non-GAAP Financial Information" for reconciliation of non-GAAP measures to their most closely comparable GAAP measures. ​ 57 Table of Contents Rate/Volume Analysis The following table sets forth the dollar amount of changes in interest income and interest expense for the major categories of our interest-earning assets and interest-bearing liabilities.
(2) See "Non-GAAP Financial Information" for reconciliation of non-GAAP measure to their most closely comparable GAAP measures. 50 Table of Contents Rate/Volume Analysis The following table sets forth the dollar amount of changes in interest income and interest expense for the major categories of our interest-earning assets and interest-bearing liabilities.
The cost of our deposits and short-term wholesale borrowings is largely based on short-term interest rates, which are primarily driven by the Federal Reserve’s actions. The yields generated by our loans and securities are typically driven by short-term and long-term interest rates, which are set by the market and, to some degree, by the Federal Reserve’s actions.
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.
Repurchases were conducted in compliance with Rule 10b-18 and in compliance with Regulation M under the Exchange Act. On December 21, 2022, the Company’s Board of Directors approved a new stock repurchase program which authorizes the Company to repurchase up to $15.0 million of its common stock.
Repurchases were conducted in compliance with Rule 10b-18 and in compliance with Regulation M under the Exchange Act. On December 19, 2023, the Company’s Board of Directors approved a new stock repurchase program which authorizes the Company to repurchase up to $15.0 million of its common stock.
The 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. ​ 73 Table of Contents Regulatory Capital Requirements The Company and Bank are each subject to various regulatory capital requirements administered by federal and state banking agencies.
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.
Market Area As of December 31, 2022, our branch network included 58 full-service branch locations in Central and Northeastern Illinois and Eastern Iowa. We hold a leading deposit share in many of our markets in Central Illinois, which we define as a top three deposit share rank, providing the foundation for our strong deposit base.
Market Area As of December 31, 2023, our branch network included 67 full-service branch locations throughout Illinois and Eastern Iowa. 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.
(1) Tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%. ​ 77 Table of Contents Non-GAAP Financial Measure Definition How the Measure Provides Useful Information to Investors Tangible Common Equity to Tangible Assets ● Tangible Common Equity is total stockholders’ equity less goodwill and other intangible assets. ● Tangible Assets is total assets less goodwill and other intangible assets. ● Generally used by investors, our management, and banking regulators to evaluate capital adequacy. ● Facilitates comparison of our earnings with the earnings of other banking organization with significant amounts of goodwill or intangible assets. ● We also sometimes refer to ratios that include Tangible Common Equity, such as: - Tangible Book Value Per Share, which is Tangible Common Equity divided by shares of common stock outstanding. - Return on Average Tangible Common Equity, which is net income divided by average Tangible Common Equity. - Adjusted Return on Average Tangible Common Equity, which is Adjusted Net Income divided by average Tangible Common Equity.
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%. 67 Table of Contents Non-GAAP Financial Measure Definition How the Measure Provides Useful Information to Investors Tangible Common Equity to Tangible Assets • Tangible Common Equity is total stockholders’ equity less goodwill and other intangible assets. • Tangible Assets is total assets less goodwill and other intangible assets. • Generally used by investors, our management, and banking regulators to evaluate capital adequacy. • Facilitates comparison of our earnings with the earnings of other banking organization with significant amounts of goodwill or intangible assets. • We also sometimes refer to ratios that include Tangible Common Equity, such as: - Tangible Book Value Per Share, which is Tangible Common Equity divided by shares of common stock outstanding. - Return on Average Tangible Common Equity, which is net income divided by average Tangible Common Equity. - Adjusted Return on Average Tangible Common Equity, which is Adjusted Net Income divided by average Tangible Common Equity.
As of December 31, 2022, the Bank had no material commitments for capital expenditures. Holding Company Liquidity The Holding Company, or HBT Financial, Inc. on an unconsolidated basis, is a corporation separate and apart from the Bank and, therefore, it must provide for its own liquidity.
As of December 31, 2023, the Bank had no material commitments for capital expenditures. 63 Table of Contents Holding Company Liquidity The Holding Company, or HBT Financial on an unconsolidated basis, is a corporation separate and apart from the Bank and, therefore, it must provide for its own liquidity.
The acquisition of Town and Country further enhanced HBT Financial’s footprint in Central Illinois and expanded our footprint into metro-east St. Louis. At the time of acquisition, Town and Country Bank operated ten full-service branch locations which began operating as branches of Heartland Bank. The core system conversion is expected to occur in April 2023.
The acquisition of Town and Country further enhanced HBT Financial’s footprint in Central Illinois and expanded our footprint into metro-east St. Louis. At the time of acquisition, Town and Country Bank operated ten full-service branch locations which began operating as branches of Heartland Bank. The core system conversion was successfully completed in April 2023.
During the years ended December 31, 2022, 2021, and 2020, holding company operating expenses consisted of interest expense of $3.7 million, $3.3 million, and $2.2 million, respectively, and other operating expenses of $5.3 million, $3.7 million, and $2.5 million, respectively.
During the years ended December 31, 2023, 2022, and 2021, holding company operating expenses consisted of interest expense of $5.4 million, $3.7 million, and $3.3 million, respectively, and other operating expenses of $5.5 million, $5.3 million, and $3.7 million, respectively.
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.
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, including the day 2 provision for credit losses on non-PCD loans and unfunded commitments, - excludes branch closure expenses, - 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.
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.
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 significant competitive pressure on loan rates and terms, as well as deposit pricing, which may affect our financial results in the future.
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. ​ 79 Table of Contents Reconciliation of Non-GAAP Financial Measure - Net Interest Margin (Tax Equivalent Basis) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 2020 ​ ​ (dollars in thousands) ​ Net interest income (tax equivalent basis) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ $ 145,874 ​ $ 122,403 ​ $ 117,605 ​ Tax-equivalent adjustment (1) ​ 2,499 ​ 2,028 ​ 1,943 ​ Net interest income (tax equivalent basis) (1) ​ $ 148,373 ​ $ 124,431 ​ $ 119,548 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest margin (tax equivalent basis) ​ ​ ​ ​ Net interest margin ​ 3.54 % 3.18 % 3.54 % Tax-equivalent adjustment (1) ​ 0.06 ​ 0.05 ​ 0.06 ​ Net interest margin (tax equivalent basis) (1) ​ 3.60 % 3.23 % 3.60 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average interest-earning assets ​ $ 4,118,124 ​ $ 3,846,473 ​ $ 3,318,764 ​ (1) On a tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%.
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. 70 Table of Contents Reconciliation of Non-GAAP Financial Measure – Net Interest Income and Net Interest Margin (Tax Equivalent Basis) Year Ended December 31, (dollars in thousands) 2023 2022 2021 Net interest income (tax-equivalent basis) Net interest income $ 191,072 $ 145,874 $ 122,403 Tax-equivalent adjustment (1) 2,758 2,499 2,028 Net interest income (tax-equivalent basis) (1) $ 193,830 $ 148,373 $ 124,431 Net interest margin (tax-equivalent basis) Net interest margin 4.09 % 3.54 % 3.18 % Tax-equivalent adjustment (1) 0.06 0.06 0.05 Net interest margin (tax-equivalent basis) (1) 4.15 % 3.60 % 3.23 % Average interest-earning assets $ 4,675,025 $ 4,118,124 $ 3,846,473 _________________________________________________ (1) On a tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%.
As of December 31, 2022, the Holding Company had cash and cash equivalents of $24.3 million. The Holding Company’s main source of funding is dividends declared and paid to it by the Bank.
As of December 31, 2023, the Holding Company had cash and cash equivalents of $17.2 million. The Holding Company’s main source of funding is dividends declared and paid to it by the Bank.
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.
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. For additional information, see “Note 22 – Commitments and Contingencies” to the consolidated financial statements.
As of December 31, 2022, the Holding Company’s liquidity and available sources of liquidity were adequate to meet all of the reasonably foreseeable short-term and intermediate-term demands of the Holding Company . As of December 31, 2022, the Holding Company had no material commitments for capital expenditures.
As of December 31, 2023, management believed the current liquidity and available sources of liquidity are adequate to meet all of the reasonably foreseeable short-term and intermediate-term demands of the Holding Company . As of December 31, 2023, the Holding Company had no material commitments for capital expenditures.
As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies. 53 Table of Contents RESULTS OF OPERATIONS Overview of Recent Financial Results The following table presents selected financial results and measures for the years ended December 31. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of or for the Year Ended December 31, ​ ​ 2022 2021 2020 ​ ​ (dollars in thousands, except per share amounts) ​ Total interest and dividend income ​ $ 153,054 ​ $ 128,223 ​ $ 124,065 ​ Total interest expense ​ ​ 7,180 ​ ​ 5,820 ​ ​ 6,460 ​ Net interest income ​ ​ 145,874 ​ ​ 122,403 ​ ​ 117,605 ​ Provision for loan losses ​ ​ (706) ​ ​ (8,077) ​ ​ 10,532 ​ Net interest income after provision for loan losses ​ ​ 146,580 ​ ​ 130,480 ​ ​ 107,073 ​ Total noninterest income ​ ​ 34,717 ​ ​ 37,328 ​ ​ 34,456 ​ Total noninterest expense ​ ​ 105,107 ​ ​ 91,246 ​ ​ 91,956 ​ Income before income tax expense ​ ​ 76,190 ​ ​ 76,562 ​ ​ 49,573 ​ Income tax expense ​ ​ 19,734 ​ ​ 20,291 ​ ​ 12,728 ​ Net income ​ $ 56,456 ​ $ 56,271 ​ $ 36,845 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted net income (1) ​ 55,805 ​ 56,840 ​ 39,734 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income (tax-equivalent basis) (1) (2) ​ $ 148,373 ​ $ 124,431 ​ $ 119,548 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share and Per Share Information ​ ​ ​ ​ Earnings per share - Diluted ​ $ 1.95 ​ $ 2.02 ​ $ 1.34 ​ Adjusted earnings per share - Diluted (1) ​ 1.93 ​ 2.04 ​ 1.44 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares of common stock outstanding ​ 28,853,697 ​ 27,795,806 ​ 27,457,306 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Summary Ratios ​ ​ ​ ​ Net interest margin ​ 3.54 % 3.18 % 3.54 % Net interest margin (tax-equivalent basis) (1) (2) ​ 3.60 ​ 3.23 ​ 3.60 ​ Yield on loans ​ ​ 4.91 ​ ​ 4.68 ​ ​ 4.69 ​ Yield on interest-earning assets ​ ​ 3.72 ​ ​ 3.33 ​ ​ 3.74 ​ Cost of interest-bearing liabilities ​ ​ 0.26 ​ ​ 0.23 ​ ​ 0.29 ​ Cost of total deposits ​ 0.07 ​ 0.07 ​ 0.14 ​ Cost of funds ​ ​ 0.19 ​ ​ 0.16 ​ ​ 0.21 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Efficiency ratio ​ 57.72 % 56.46 % 59.66 % Efficiency ratio (tax-equivalent basis) (1) (2) ​ 56.93 ​ 55.76 ​ 58.91 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average assets ​ 1.32 % 1.41 % 1.07 % Return on average stockholders' equity ​ 14.73 ​ 14.81 ​ 10.51 ​ Return on average tangible common equity (1) ​ 16.02 ​ 15.95 ​ 11.38 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted return on average assets (1) ​ 1.31 % 1.43 % 1.15 % Adjusted return on average stockholders' equity (1) ​ 14.56 ​ 14.95 ​ 11.33 ​ Adjusted return on average tangible common equity (1) ​ 15.83 ​ 16.12 ​ 12.28 ​ (1) See "Non-GAAP Financial Information" for reconciliation of non-GAAP measures to their most closely comparable GAAP measures.
As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies. 46 Table of Contents RESULTS OF OPERATIONS Overview of Recent Financial Results The following table presents selected financial results and measures: Year Ended December 31, (dollars in thousands, except per share amounts) 2023 2022 2021 Total interest and dividend income $ 228,999 $ 153,054 $ 128,223 Total interest expense 37,927 7,180 5,820 Net interest income 191,072 145,874 122,403 Provision for credit losses 7,573 (706) (8,077) Net interest income after provision for credit losses 183,499 146,580 130,480 Total noninterest income 36,046 34,717 37,328 Total noninterest expense 130,964 105,107 91,246 Income before income tax expense 88,581 76,190 76,562 Income tax expense 22,739 19,734 20,291 Net income $ 65,842 $ 56,456 $ 56,271 Adjusted net income (1) $ 78,182 $ 55,805 $ 56,840 Net interest income (tax-equivalent basis) (1) (2) $ 193,830 $ 148,373 $ 124,431 Share and Per Share Information Earnings per share - Diluted $ 2.07 $ 1.95 $ 2.02 Adjusted earnings per share - Diluted (1) 2.46 1.93 2.04 Weighted average shares of common stock outstanding 31,626,308 28,853,697 27,795,806 Summary Ratios Net interest margin 4.09 % 3.54 % 3.18 % Net interest margin (tax-equivalent basis) (1) (2) 4.15 3.60 3.23 Yield on loans 6.04 4.91 4.68 Yield on interest-earning assets 4.90 3.72 3.33 Cost of interest-bearing liabilities 1.14 0.26 0.23 Cost of total deposits 0.60 0.07 0.07 Cost of funds 0.86 0.19 0.16 Efficiency ratio 56.49 % 57.72 % 56.46 % Efficiency ratio (tax-equivalent basis) (1) (2) 55.81 56.93 55.76 Return on average assets 1.34 % 1.32 % 1.41 % Return on average stockholders' equity 14.60 14.73 14.81 Return on average tangible common equity (1) 17.63 16.02 15.95 Adjusted return on average assets (1) 1.59 % 1.31 % 1.43 % Adjusted return on average stockholders' equity (1) 17.34 14.56 14.95 Adjusted return on average tangible common equity (1) 20.94 15.83 16.12 _________________________________________________ (1) See "Non-GAAP Financial Information" for reconciliation of non-GAAP measures 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%. 54 Table of Contents Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021 For the year ended December 31, 2022, net income was $56.5 million increasing by $0.2 million, or 0.3%, when compared to net income for the year ended December 31, 2021.
(2) On a tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%. 47 Table of Contents Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022 For the year ended December 31, 2023, net income was $65.8 million, increasing by $9.4 million, or 16.6%, when compared to net income for the year ended December 31, 2022.
During the years ended December 31, 2022, 2021, and 2020, the Bank paid dividends of $28.0 million, $20.0 million, and $17.6 million to the Holding Company, respectively.
During the years ended December 31, 2023, 2022, 2021, the Bank paid $64.0 million, $28.0 million, and $20.0 million in dividends to the Holding Company, respectively.
Securities Sold Under Agreements to Repurchase All securities sold under agreements to repurchase are sweep instruments, maturing daily. The securities underlying the agreements are held under our control in safekeeping at third-party financial institutions, and include debt securities.
Securities Sold Under Agreements to Repurchase All securities sold under agreements to repurchase are sweep instruments, maturing daily. The securities underlying the agreements are held under our control in safekeeping at third-party financial institutions, and include debt securities. The following table sets forth information concerning balances and interest rates on our securities sold under agreements to repurchase.
The composition and maturities of the debt securities portfolio as of December 31, 2022 is summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur.
The composition and maturities of the debt securities portfolio as of December 31, 2023, 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.
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 December 31, 2022, the Company had total assets of $4.3 billion, loans held for investment of $2.6 billion and total deposits of $3.6 billion.
We provide a comprehensive suite of financial products and services to businesses, families, and local governments throughout Illinois and Eastern Iowa. As of December 31, 2023, the Company had total assets of $5.1 billion, loans held for investment of $3.4 billion, and total deposits of $4.4 billion.
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. ​ 55 Table of Contents The following tables set forth average balances, average yields and costs, and certain other information for the years ended December 31, 2022, 2021, and 2020.
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. The following table sets forth average balances, average yields and costs, and certain other information. Average balances are daily average balances.
In addition to meeting minimum capital requirements, the Company and the Bank must also maintain a “capital conservation buffer” to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. As of December 31, 2022 and 2021, the capital conservation buffer requirement was 2.5% of risk-weighted assets.
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.
OFF-BALANCE SHEET ARRANGEMENTS As a financial services provider, the Bank is routinely a party to various financial instruments with off-balance sheet risks, such as commitments to extend credit, standby letters of credit, unused lines of credit, commitments to sell loans, and interest rate swaps.
The new stock repurchase program took effect upon the expiration of the prior stock repurchase program and expires on January 1, 2025. 65 Table of Contents 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.
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. ​ 78 Table of Contents Reconciliation of Non-GAAP Financial Measure - Adjusted Net Income and Adjusted Return on Average Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 2020 ​ ​ (dollars in thousands) ​ Net income ​ $ 56,456 ​ $ 56,271 ​ $ 36,845 ​ Adjustments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Acquisition expenses ​ ​ (1,092) ​ ​ (1,416) ​ ​ — ​ Branch closure expenses ​ ​ — ​ ​ (748) ​ ​ — ​ Gains (losses) on sales of closed branch premises ​ ​ 141 ​ ​ — ​ ​ — ​ Charges related to termination of certain employee benefit plans ​ — ​ — ​ (1,457) ​ Mortgage servicing rights fair value adjustment ​ 2,153 ​ 1,690 ​ (2,584) ​ Total adjustments ​ 1,202 ​ (474) ​ (4,041) ​ Tax effect of adjustments ​ (551) ​ (95) ​ 1,152 ​ Less adjustments after tax effect ​ 651 ​ (569) ​ (2,889) ​ Adjusted net income ​ $ 55,805 ​ $ 56,840 ​ $ 39,734 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average assets ​ $ 4,269,873 ​ $ 3,980,538 ​ $ 3,447,500 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average assets ​ 1.32 % 1.41 % 1.07 % Adjusted return on average assets ​ 1.31 ​ 1.43 ​ 1.15 ​ ​ Reconciliation of Non-GAAP Financial Measure - Adjusted Earnings Per Share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 2021 2020 ​ ​ (dollars in thousands, except per share amounts) Numerator: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 56,456 ​ $ 56,271 ​ $ 36,845 Earnings allocated to participating securities (1) ​ ​ (66) ​ ​ (104) ​ ​ (93) Numerator for earnings per share - basic and diluted ​ $ 56,390 ​ $ 56,167 ​ $ 36,752 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted net income ​ $ 55,805 ​ $ 56,840 ​ $ 39,734 Earnings allocated to participating securities (1) ​ ​ (65) ​ ​ (105) ​ ​ (101) Numerator for adjusted earnings per share - basic and diluted ​ $ 55,740 ​ $ 56,735 ​ $ 39,633 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Denominator: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common shares outstanding ​ ​ 28,853,697 ​ ​ 27,795,806 ​ ​ 27,457,306 Dilutive effect of outstanding restricted stock units ​ ​ 65,619 ​ ​ 15,487 ​ ​ — Weighted average common shares outstanding, including all dilutive potential shares ​ ​ 28,919,316 ​ ​ 27,811,293 ​ ​ 27,457,306 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share - Basic ​ $ 1.95 ​ $ 2.02 ​ $ 1.34 Earnings per share - Diluted ​ $ 1.95 ​ $ 2.02 ​ $ 1.34 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted earnings per share - Basic ​ $ 1.93 ​ $ 2.04 ​ $ 1.44 Adjusted earnings per share - Diluted ​ $ 1.93 ​ $ 2.04 ​ $ 1.44 (1) The Company has granted certain restricted stock units that contain non-forfeitable rights to dividend equivalents.
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. 68 Table of Contents Reconciliation of Non-GAAP Financial Measure - Adjusted Net Income and Adjusted Return on Average Assets Year Ended December 31, (dollars in thousands) 2023 2022 2021 Net income $ 65,842 $ 56,456 $ 56,271 Adjustments: Acquisition expenses (1) (13,691) (1,092) (1,416) Branch closure expenses — — (748) Gains (losses) on sales of closed branch premises 75 141 — Realized gains (losses) on sales of securities (1,820) — — Mortgage servicing rights fair value adjustment (1,615) 2,153 1,690 Total adjustments (17,051) 1,202 (474) Tax effect of adjustments 4,711 (551) (95) Total adjustments after tax effect (12,340) 651 (569) Adjusted net income $ 78,182 $ 55,805 $ 56,840 Average assets $ 4,927,904 $ 4,269,873 $ 3,980,538 Return on average assets 1.34 % 1.32 % 1.41 % Adjusted return on average assets 1.59 1.31 1.43 _________________________________________________ (1) Includes recognition of 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 in connection with the Town and Country merger during the first quarter of 2023 in accordance with ASC 326 which was adopted on January 1, 2023. 69 Table of Contents Reconciliation of Non-GAAP Financial Measure - Adjusted Earnings Per Share Year Ended December 31, (dollars in thousands, except per share amounts) 2023 2022 2021 Numerator: Net income $ 65,842 $ 56,456 $ 56,271 Earnings allocated to participating securities (1) (36) (66) (104) Numerator for earnings per share - basic and diluted $ 65,806 $ 56,390 $ 56,167 Adjusted net income $ 78,182 $ 55,805 $ 56,840 Earnings allocated to participating securities (1) (42) (65) (105) Numerator for adjusted earnings per share - basic and diluted $ 78,140 $ 55,740 $ 56,735 Denominator: Weighted average common shares outstanding 31,626,308 28,853,697 27,795,806 Dilutive effect of outstanding restricted stock units 111,839 65,619 15,487 Weighted average common shares outstanding, including all dilutive potential shares 31,738,147 28,919,316 27,811,293 Earnings per share - Basic $ 2.08 $ 1.95 $ 2.02 Earnings per share - Diluted $ 2.07 $ 1.95 $ 2.02 Adjusted earnings per share - Basic $ 2.47 $ 1.93 $ 2.04 Adjusted earnings per share - Diluted $ 2.46 $ 1.93 $ 2.04 _________________________________________________ (1) The Company has granted certain restricted stock units that contain non-forfeitable rights to dividend equivalents.
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.
Additional sources of liquidity include unpledged securities, federal funds purchased, borrowings from the FHLB and Federal Reserve, and brokered deposits. Unpledged securities may be sold or pledged as collateral for borrowings to meet liquidity needs. Interest is charged at the prevailing market rate.
This decrease was more than offset by an increase in contractual interest on loans, driven by recent increases in benchmark interest rates. ​ 58 Table of Contents The quarterly net interest margins were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Three months ended: ​ ​ ​ ​ ​ ​ ​ March 31 3.08 % 3.25 % 4.03 % June 30 3.34 ​ 3.14 ​ 3.51 ​ September 30 3.65 ​ 3.18 ​ 3.39 ​ December 31 4.10 ​ 3.17 ​ 3.31 ​ ​ 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 Federal Reserve would substantially increase its Treasury and agency mortgage-backed securities holdings.
Additionally, the contribution of acquired loan discount accretion to net interest margin increased to 9 basis points during the year ended December 31, 2023, from 2 basis points during the year ended December 31, 2022. 51 Table of Contents The quarterly net interest margins were as follows: 2023 2022 2021 Three months ended: March 31 4.20 % 3.08 % 3.25 % June 30 4.16 3.34 3.14 September 30 4.07 3.65 3.18 December 31 3.93 4.10 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 Federal Reserve would substantially increase its Treasury and agency mortgage-backed securities holdings.
Total consideration consisted of 3.4 million shares of HBT Financial’s common stock and $38.0 million in cash. Based upon the closing price of HBT Financial common stock of $21.12 on February 1, 2023, the aggregate consideration was approximately $109.4 million. NXT Bancorporation, Inc. On October 1, 2021, HBT Financial completed its acquisition of NXT Bancorporation, Inc.
Based upon the closing price of HBT Financial common stock of $21.12 on February 1, 2023, the aggregate consideration was approximately $109.4 million. Goodwill of $30.5 million was recorded in the acquisition. NXT Bancorporation, Inc. On October 1, 2021, HBT Financial completed its acquisition of NXT Bancorporation, Inc. (“NXT”), the holding company for NXT Bank.
Reconciliation of Non-GAAP Financial Measure - Efficiency Ratio (Tax Equivalent Basis) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 2020 ​ ​ (dollars in thousands) ​ Efficiency ratio (tax equivalent basis) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total noninterest expense ​ $ 105,107 ​ $ 91,246 ​ $ 91,956 ​ Less: amortization of intangible assets ​ 873 ​ 1,054 ​ 1,232 ​ Adjusted noninterest expense ​ $ 104,234 ​ $ 90,192 ​ $ 90,724 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ $ 145,874 ​ $ 122,403 ​ $ 117,605 ​ Total noninterest income ​ 34,717 ​ 37,328 ​ 34,456 ​ Operating revenue ​ 180,591 ​ 159,731 ​ 152,061 ​ Tax-equivalent adjustment (1) ​ 2,499 ​ 2,028 ​ 1,943 ​ Operating revenue (tax-equivalent basis) (1) ​ $ 183,090 ​ $ 161,759 ​ $ 154,004 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Efficiency ratio ​ 57.72 % 56.46 % 59.66 % Efficiency ratio (tax equivalent basis) (1) ​ 56.93 ​ 55.76 ​ 58.91 ​ (1) On a tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%. ​ 80 Table of Contents Reconciliation of Non-GAAP Financial Measure - Tangible Common Equity to Tangible Assets and Tangible Book Value Per Share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 December 31, 2021 ​ ​ (dollars in thousands, except per share data) ​ Tangible Common Equity ​ ​ ​ ​ ​ ​ ​ Total stockholders' equity ​ $ 373,632 ​ $ 411,881 ​ Less: Goodwill ​ ​ 29,322 ​ ​ 29,322 ​ Less: Core deposit intangible assets, net ​ ​ 1,070 ​ ​ 1,943 ​ Tangible common equity ​ $ 343,240 ​ $ 380,616 ​ ​ ​ ​ ​ ​ ​ ​ ​ Tangible Assets ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 4,286,734 ​ $ 4,314,254 ​ Less: Goodwill ​ ​ 29,322 ​ ​ 29,322 ​ Less: Core deposit intangible assets, net ​ ​ 1,070 ​ ​ 1,943 ​ Tangible assets ​ $ 4,256,342 ​ $ 4,282,989 ​ ​ ​ ​ ​ ​ ​ ​ ​ Total stockholders' equity to total assets ​ ​ 8.72 % ​ 9.55 % Tangible common equity to tangible assets ​ ​ 8.06 ​ ​ 8.89 ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares of common stock outstanding ​ ​ 28,752,626 ​ 28,986,061 ​ ​ ​ ​ ​ ​ ​ ​ ​ Book value per share ​ $ 12.99 ​ $ 14.21 ​ Tangible book value per share ​ ​ 11.94 ​ ​ 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 2021 2020 ​ ​ ​ (dollars in thousands) ​ Average Tangible Common Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total stockholders' equity ​ $ 383,306 ​ $ 380,080 ​ $ 350,703 ​ Less: Goodwill ​ 29,322 ​ 25,057 ​ 23,620 ​ Less: Core deposit intangible assets, net ​ 1,480 ​ 2,333 ​ 3,436 ​ Average tangible common equity ​ $ 352,504 ​ $ 352,690 ​ $ 323,647 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 56,456 ​ $ 56,271 ​ $ 36,845 ​ Adjusted net income ​ 55,805 ​ 56,840 ​ ​ 39,734 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average stockholders' equity ​ 14.73 % 14.81 % ​ 10.51 % Return on average tangible common equity ​ 16.02 ​ 15.95 ​ ​ 11.38 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted return on average stockholders' equity ​ 14.56 % 14.95 % ​ 11.33 % Adjusted return on average tangible common equity ​ 15.83 ​ 16.12 ​ ​ 12.28 ​ ​ Reconciliation of Non-GAAP Financial Measure - Core Deposits ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ December 31, 2021 ​ ​ (dollars in thousands) ​ Core Deposits ​ ​ ​ ​ ​ ​ ​ Total deposits ​ $ 3,587,024 ​ $ 3,738,185 ​ Less: time deposits of $250,000 or more ​ 27,158 ​ ​ 59,512 ​ Less: brokered deposits ​ — ​ ​ 4,238 ​ Core deposits ​ $ 3,559,866 ​ $ 3,674,435 ​ ​ ​ ​ ​ ​ ​ ​ ​ Core deposits to total deposits ​ 99.24 % ​ 98.29 % ​ ​ 81 Table of Contents
Reconciliation of Non-GAAP Financial Measure - Efficiency Ratio (Tax Equivalent Basis) Year Ended December 31, (dollars in thousands) 2023 2022 2021 Efficiency ratio (tax-equivalent basis) Total noninterest expense $ 130,964 $ 105,107 $ 91,246 Less: amortization of intangible assets 2,670 873 1,054 Noninterest expense excluding amortization of intangible assets $ 128,294 $ 104,234 $ 90,192 Net interest income $ 191,072 $ 145,874 $ 122,403 Total noninterest income 36,046 34,717 37,328 Operating revenue 227,118 180,591 159,731 Tax-equivalent adjustment (1) 2,758 2,499 2,028 Operating revenue (tax-equivalent basis) (1) $ 229,876 $ 183,090 $ 161,759 Efficiency ratio 56.49 % 57.72 % 56.46 % Efficiency ratio (tax-equivalent basis) (1) 55.81 56.93 55.76 _________________________________________________ (1) On a tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%. 71 Table of Contents Reconciliation of Non-GAAP Financial Measure - Tangible Common Equity to Tangible Assets and Tangible Book Value Per Share (dollars in thousands, except per share data) December 31, 2023 December 31, 2022 Tangible Common Equity Total stockholders' equity $ 489,496 $ 373,632 Less: Goodwill 59,820 29,322 Less: Intangible assets, net 20,682 1,070 Tangible common equity $ 408,994 $ 343,240 Tangible Assets Total assets $ 5,073,170 $ 4,286,734 Less: Goodwill 59,820 29,322 Less: Intangible assets, net 20,682 1,070 Tangible assets $ 4,992,668 $ 4,256,342 Total stockholders' equity to total assets 9.65 % 8.72 % Tangible common equity to tangible assets 8.19 8.06 Shares of common stock outstanding 31,695,828 28,752,626 Book value per share $ 15.44 $ 12.99 Tangible book value per share 12.90 11.94 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 Year Ended December 31, (dollars in thousands) 2023 2022 2021 Average Tangible Common Equity Total stockholders' equity $ 450,928 $ 383,306 $ 380,080 Less: Goodwill 57,266 29,322 25,057 Less: Intangible assets, net 20,272 1,480 2,333 Average tangible common equity $ 373,390 $ 352,504 $ 352,690 Net income $ 65,842 $ 56,456 $ 56,271 Adjusted net income 78,182 55,805 56,840 Return on average stockholders' equity 14.60 % 14.73 % 14.81 % Return on average tangible common equity 17.63 16.02 15.95 Adjusted return on average stockholders' equity 17.34 % 14.56 % 14.95 % Adjusted return on average tangible common equity 20.94 15.83 16.12 72 Table of Contents Reconciliation of Non-GAAP Financial Measure - Core Deposits (dollars in thousands) December 31, 2023 December 31, 2022 Core Deposits Total deposits $ 4,401,437 $ 3,587,024 Less: time deposits of $250,000 or more 130,183 27,158 Less: brokered deposits 144,880 — Core deposits $ 4,126,374 $ 3,559,866 Core deposits to total deposits 93.75 % 99.24 % 73 Table of Contents
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 estimated annual pre-tax cost savings, net of associated revenue impacts, related to the branch rationalization plan to be approximately $1.1 million.
The Company estimated annual pre-tax cost savings, net of associated revenue impacts, related to the branch rationalization plan to be approximately $1.1 million.
Income Taxes Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021 We recorded income tax expense of $19.7 million, or a 25.9% effective tax rate, during the year ended December 31, 2022 compared to $20.3 million, or a 26.5% effective tax rate during the year ended December 31, 2021.
Income Taxes During the year ended December 31, 2023 and 2022, we recorded income tax expense of $22.7 million, or an effective tax rate of 25.7%, and $19.7 million, or an effective tax rate of 25.9%, respectively.
Additions to the allowance are expected to maintain the adequacy of the total allowance. Loan losses are charged off against the allowance when the Company determines the loan balance to be uncollectible. Cash received on previously charged off amounts is recorded as a recovery to the allowance.
The allowance for credit losses is established through a provision for credit losses which is charged to expense. Additions to the allowance for credit losses are expected to maintain the adequacy of the total allowance for credit losses. Loan losses are charged off against the allowance for credit losses when the Company determines the loan balance to be uncollectible.
Security yields have not been adjusted to a tax-equivalent basis. 68 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 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.
December 31, 2023 Available-for-Sale Held-to-Maturity Total (dollars in thousands) Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Due in 1 year or less U.S.
Additionally, the Holding Company paid $18.6 million, $16.8 million, and $16.5 million of dividends to stockholders during the years ended December 31, 2022, 2021, and 2020, respectively. As of December 31, 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 Holding Company’s liquidity.
As of December 31, 2023, management was not aware of any known trends, events or uncertainties that had or were reasonably likely to have a material impact on the Holding Company’s liquidity.
On January 24, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.17 per share. ​ ​ 74 Table of Contents Stock Repurchase Program The Company repurchased 265,379 shares of its common stock at a weighted average price of $18.02 during 2022 and 290,486 shares at a weighted average price of $16.89 during 2021.
Stock Repurchase Program The Company repurchased 479,005 shares of its common stock at a weighted average price of $18.43 during 2023, 265,379 shares at a weighted average price of $18.02 during 2022, and 290,486 shares at a weighted average price of $16.89 during 2021.
We may also use these sources of funds as part of our asset liability management process to control our long-term interest rate risk exposure, even if it may increase our short-term cost of funds. Our level of short-term borrowing can fluctuate on a daily basis depending on funding needs and the source of funds to satisfy the needs.
However, we may also obtain advances from the FHLB, purchase federal funds, and engage in overnight borrowing from the Federal Reserve. We may also use these sources of funds as part of our asset liability management process to control our long-term interest rate risk exposure, even if it may increase our short-term cost of funds.
(“NXT”), the holding company for NXT Bank. The acquisition expanded our 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.
The acquisition expanded our 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 $239.9 million, total loans of $194.6 million, and total deposits of $181.6 million.
Our use of FHLB advances and other borrowings was nominal during 2020 and 2021, but increased during the second half of 2022 to fund increases in loan demand and to offset a decrease in deposits. ​ 71 Table of Contents The following table sets forth information concerning balances and interest rates on our borrowings. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of or for the Years Ended December 31, ​ 2022 2021 2020 ​ ​ (dollars in thousands) Balance at end of year ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ FHLB advances ​ $ 160,000 ​ $ — ​ $ — ​ Federal funds purchased ​ ​ — ​ ​ — ​ ​ — ​ Total borrowings ​ $ 160,000 ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average balance during year ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ FHLB advances ​ $ 25,934 ​ $ 1,310 ​ $ 656 ​ Federal funds purchased ​ ​ 534 ​ ​ 343 ​ ​ 424 ​ Total borrowings ​ $ 26,468 ​ $ 1,653 ​ $ 1,080 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maximum outstanding at any month end ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ FHLB advances ​ $ 160,000 ​ $ — ​ $ 4,000 ​ Federal funds purchased ​ ​ — ​ ​ — ​ ​ — ​ Total borrowings ​ $ 160,000 ​ $ — ​ $ 4,000 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average interest rate at end of year ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ FHLB advances ​ ​ 4.29 % — % — % Federal funds purchased ​ ​ — ​ — ​ — ​ Total borrowings ​ ​ 4.29 ​ — ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average interest rate during year ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ FHLB advances ​ ​ 3.68 % 0.56 % 0.02 % Federal funds purchased ​ ​ 2.11 ​ 0.48 ​ 0.52 ​ Total borrowings ​ ​ 3.65 ​ 0.54 ​ 0.22 ​ ​ 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.
As of or for the Years Ended December 31, (dollars in thousands) 2023 2022 2021 Balance at end of year FHLB advances $ 12,623 $ 160,000 $ — Federal Reserve discount window — — — Federal funds purchased — — — Total borrowings $ 12,623 $ 160,000 $ — Average balance during year FHLB advances $ 139,554 $ 25,934 $ 1,310 Federal Reserve discount window 3 — — Federal funds purchased 260 534 343 Total borrowings $ 139,817 $ 26,468 $ 1,653 Average interest rate during year FHLB advances 5.10 % 3.68 % 0.56 % Federal Reserve discount window 5.25 — — Federal funds purchased 5.56 2.11 0.48 Total borrowings 5.10 3.65 0.54 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.
As of December 31, 2022 and 2021, our risk classifications of loans were as follows: ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 December 31, 2021 ​ (dollars in thousands) Pass ​ $ 2,479,488 ​ $ 2,269,228 Pass-watch ​ 66,934 ​ 148,285 Substandard ​ 73,831 ​ 82,176 Doubtful ​ — ​ — Total ​ $ 2,620,253 ​ $ 2,499,689 ​ Pass-watch loans decreased $81.4 million, or 54.9% from December 31, 2021 to December 31, 2022.
Risk Classification of Loans Our risk classifications of loans were as follows: (dollars in thousands) December 31, 2023 December 31, 2022 Pass $ 3,241,889 $ 2,479,488 Pass-watch 98,206 66,934 Substandard 64,322 73,831 Doubtful — — Total $ 3,404,417 $ 2,620,253 Pass-watch loans increased $31.3 million, or 46.7%, and substandard loans decreased $9.5 million, or 12.9%, from December 31, 2022 to December 31, 2023.
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 to 0.25% to 0.50%.
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 over the same period.
Based upon the closing price of HBT Financial common stock of $16.27 on October 1, 2021, the aggregate consideration was approximately $39.9 million. Goodwill of $5.7 million was recorded in the acquisition. The acquisition of NXT provided an opportunity to utilize our excess liquidity at the time to replace NXT’s higher cost funding.
Total consideration consisted of 1.8 million shares of HBT Financial’s common stock and $10.6 million in cash. Based upon the closing price of HBT Financial common stock of $16.27 on October 1, 2021, the aggregate consideration was approximately $39.9 million. Goodwill of $5.7 million was recorded in the acquisition.
These overall improvements were primarily driven by better economic conditions, relative to 2021, which resulted in both risk rating upgrades and paydowns. ​ ​ 67 Table of Contents Net Charge-offs and Recoveries The following table summarizes net charge-offs (recoveries) to average loans, before allowance for loan losses by loan category. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ ​ (dollars in thousands) ​ Net charge-offs (recoveries) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ (751) ​ $ 15 ​ $ 1,189 ​ Agricultural and farmland ​ ​ — ​ ​ — ​ ​ 27 ​ Commercial real estate - owner occupied ​ ​ (1,006) ​ ​ 21 ​ ​ (401) ​ Commercial real estate - non-owner occupied ​ ​ (283) ​ ​ (24) ​ ​ 274 ​ Multi-family ​ ​ — ​ ​ — ​ ​ — ​ Construction and land development ​ ​ (1) ​ ​ (342) ​ ​ (223) ​ One-to-four family residential ​ ​ (302) ​ ​ 18 ​ ​ (155) ​ Municipal, consumer, and other ​ ​ 240 ​ ​ 137 ​ ​ 282 ​ Total ​ $ (2,103) ​ $ (175) ​ $ 993 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average loans, before allowance for loan losses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 268,765 ​ $ 347,547 ​ $ 372,927 ​ Agricultural and farmland ​ ​ 233,349 ​ ​ 230,364 ​ ​ 223,381 ​ Commercial real estate - owner occupied ​ ​ 219,127 ​ ​ 204,148 ​ ​ 222,593 ​ Commercial real estate - non-owner occupied ​ ​ 695,230 ​ ​ 583,084 ​ ​ 543,227 ​ Multi-family ​ ​ 258,490 ​ ​ 227,736 ​ ​ 196,632 ​ Construction and land development ​ ​ 340,831 ​ ​ 226,035 ​ ​ 242,800 ​ One-to-four family residential ​ ​ 328,656 ​ ​ 314,871 ​ ​ 324,645 ​ Municipal, consumer, and other ​ ​ 170,101 ​ ​ 137,759 ​ ​ 118,888 ​ Total ​ $ 2,514,549 ​ $ 2,271,544 ​ $ 2,245,093 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs (recoveries) to average loans, before allowance for loan losses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ ​ (0.28) % ​ — % ​ 0.32 % Agricultural and farmland ​ ​ — ​ ​ — ​ ​ 0.01 ​ Commercial real estate - owner occupied ​ ​ (0.46) ​ ​ 0.01 ​ ​ (0.18) ​ Commercial real estate - non-owner occupied ​ ​ (0.04) ​ ​ — ​ ​ 0.05 ​ Multi-family ​ ​ — ​ ​ — ​ ​ — ​ Construction and land development ​ ​ — ​ ​ (0.15) ​ ​ (0.09) ​ One-to-four family residential ​ ​ (0.09) ​ ​ 0.01 ​ ​ (0.05) ​ Municipal, consumer, and other ​ ​ 0.14 ​ ​ 0.10 ​ ​ 0.24 ​ Total ​ ​ (0.08) % ​ (0.01) % ​ 0.04 % ​ Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021 Our net charge-offs (recoveries) percentage has remained low for several years, including each of the years ended December 31, 2022, 2021, and 2020.
Year Ended December 31, (dollars in thousands) 2023 2022 2021 Net charge-offs (recoveries) Commercial and industrial $ 369 $ (751) $ 15 Commercial real estate - owner occupied (13) (1,006) 21 Commercial real estate - non-owner occupied (66) (283) (24) Construction and land development (53) (1) (342) Multi-family (281) — — One-to-four family residential (152) (302) 18 Agricultural and farmland (6) — — Municipal, consumer, and other 382 240 137 Total $ 180 $ (2,103) $ (175) Average loans Commercial and industrial $ 370,255 $ 268,765 $ 347,547 Commercial real estate - owner occupied 290,489 219,127 204,148 Commercial real estate - non-owner occupied 874,661 695,230 583,084 Construction and land development 368,111 340,831 226,035 Multi-family 372,201 258,490 227,736 One-to-four family residential 476,856 328,656 314,871 Agricultural and farmland 254,106 233,349 230,364 Municipal, consumer, and other 225,057 170,101 137,759 Total $ 3,231,736 $ 2,514,549 $ 2,271,544 Charge-offs (recoveries) to average loans Commercial and industrial 0.10 % (0.28) % — % Commercial real estate - owner occupied — (0.46) 0.01 Commercial real estate - non-owner occupied (0.01) (0.04) — Construction and land development (0.01) — (0.15) Multi-family (0.08) — — One-to-four family residential (0.03) (0.09) 0.01 Agricultural and farmland — — — Municipal, consumer, and other 0.17 0.14 0.10 Total 0.01 % (0.08) % (0.01) % The net charge-offs (recoveries) to average total loans ratio has remained low for several years.
The following table sets forth information concerning balances and interest rates on our securities sold under agreements to repurchase. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of or for the Years Ended December 31, ​ 2022 2021 2020 ​ ​ (dollars in thousands) Balance at end of year ​ $ 43,081 ​ $ 61,256 ​ $ 45,736 ​ Average balance during year ​ 51,554 ​ 50,104 ​ 49,714 ​ Maximum outstanding at any month end ​ 55,698 ​ 61,256 ​ 58,839 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average interest rate at end of year ​ 0.28 % 0.07 % 0.06 % Average interest rate during year ​ 0.07 ​ 0.07 ​ 0.10 ​ ​ Borrowings Deposits are the primary source of funds for our lending activities and general business purposes.
As of or for the Years Ended December 31, (dollars in thousands) 2023 2022 2021 Balance at end of year $ 42,442 $ 43,081 $ 61,256 Average balance during year 35,450 51,554 50,104 Average interest rate during year 0.72 % 0.07 % 0.07 % Borrowings Deposits are the Bank's primary source of funds for our lending activities and general business purposes.
The total remaining credit available to the Bank from the FHLB at December 31, 2022 was $409.9 million. As of December 31, 2022, the Bank’s liquidity and available sources of liquidity were adequate to meet all of the reasonably foreseeable short-term and intermediate-term demands of the Bank .
As of December 31, 2023, management believed the current liquidity and available sources of liquidity are adequate to meet all of the reasonably foreseeable short-term and intermediate-term demands of the Bank .
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. Total consideration consisted of 1.8 million shares of HBT Financial’s common stock and $10.6 million in cash.
After considering business combination accounting adjustments, Town and Country added total assets of $937.2 million, total loans held for investment of $635.4 million, and total deposits of $720.4 million. Total consideration consisted of 3.4 million shares of HBT Financial’s common stock and $38.0 million in cash.
The COVID-19 pandemic 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.
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 accelerated this transition, and in-person branch traffic is not expected to return to pre-pandemic levels.
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 ​ ​ December 31, ​ December 31, ​ With Capital ​ Prompt Corrective ​ 2022 2021 Conversation Buffer (1) Action Provisions (2) Total Capital (to Risk Weighted Assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated HBT Financial, Inc. ​ 16.27 % ​ 16.88 % ​ 10.50 % ​ N/A ​ Heartland Bank and Trust Company ​ 15.43 ​ ​ 15.94 ​ ​ 10.50 ​ ​ 10.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tier 1 Capital (to Risk Weighted Assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated HBT Financial, Inc. ​ 14.23 % ​ 14.66 % ​ 8.50 % ​ N/A ​ Heartland Bank and Trust Company ​ 14.63 ​ ​ 15.09 ​ ​ 8.50 ​ ​ 8.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Equity Tier 1 Capital (to Risk Weighted Assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated HBT Financial, Inc. ​ 13.07 % ​ 13.37 % ​ 7.00 % ​ N/A ​ Heartland Bank and Trust Company ​ 14.63 ​ ​ 15.09 ​ ​ 7.00 ​ ​ 6.50 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tier 1 Capital (to Average Assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated HBT Financial, Inc. ​ 10.48 % ​ 9.84 % ​ 4.00 ​ ​ N/A ​ Heartland Bank and Trust Company ​ 10.78 ​ ​ 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.
Total Capital (to Risk Weighted Assets) 15.33 % 16.27 % 10.50 % N/A Tier 1 Capital (to Risk Weighted Assets) 13.42 14.23 8.50 N/A Common Equity Tier 1 Capital (to Risk Weighted Assets) 12.12 13.07 7.00 N/A Tier 1 Capital (to Average Assets) 10.49 10.48 4.00 N/A Heartland Bank and Trust Company Total Capital (to Risk Weighted Assets) 14.92 % 15.43 % 10.50 % 10.00 % Tier 1 Capital (to Risk Weighted Assets) 14.01 14.63 8.50 8.00 Common Equity Tier 1 Capital (to Risk Weighted Assets) 14.01 14.63 7.00 6.50 Tier 1 Capital (to Average Assets) 10.96 10.78 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.
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.
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. 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.
For purposes of this table, changes attributable to both volume and rate that cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2022 ​ Year Ended December 31, 2021 ​ vs. vs. ​ Year Ended December 31, 2021 Year Ended December 31, 2020 ​ Increase (Decrease) Due to ​ ​ ​ Increase (Decrease) Due to ​ ​ ​ ​ Volume Rate Total Volume Rate Total ​ (dollars in thousands) Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ 11,755 ​ $ 5,439 ​ $ 17,194 ​ $ 1,238 ​ $ (150) ​ $ 1,088 Securities ​ 4,977 ​ 1,612 ​ 6,589 ​ 7,100 ​ (3,627) ​ 3,473 Deposits with banks ​ (418) ​ 1,432 ​ 1,014 ​ 338 ​ (749) ​ (411) Other ​ 7 ​ 27 ​ 34 ​ 15 ​ (7) ​ 8 Total interest-earning assets ​ 16,321 ​ 8,510 ​ 24,831 ​ 8,691 ​ (4,533) ​ 4,158 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ Interest-bearing deposits: ​ ​ ​ ​ ​ ​ Interest-bearing demand ​ 61 ​ 28 ​ 89 ​ 100 ​ (229) ​ (129) Money market ​ 56 ​ 320 ​ 376 ​ 64 ​ (324) ​ (260) Savings ​ 17 ​ 3 ​ 20 ​ 43 ​ (51) ​ (8) Time ​ (54) ​ (392) ​ (446) ​ (171) ​ (1,181) ​ (1,352) Total interest-bearing deposits ​ 80 ​ (41) ​ 39 ​ 36 ​ (1,785) ​ (1,749) Securities sold under agreements to repurchase ​ 1 ​ 1 ​ 2 ​ — ​ (14) ​ (14) Borrowings ​ 694 ​ 264 ​ 958 ​ 1 ​ 6 ​ 7 Subordinated notes ​ ​ 4 ​ ​ (4) ​ ​ — ​ ​ 1,264 ​ ​ (1) ​ ​ 1,263 Junior subordinated debentures issued to capital trusts ​ 3 ​ 358 ​ 361 ​ 3 ​ (150) ​ (147) Total interest-bearing liabilities ​ 782 ​ 578 ​ 1,360 ​ 1,304 ​ (1,944) ​ (640) Change in net interest income ​ $ 15,539 ​ $ 7,932 ​ $ 23,471 ​ $ 7,387 ​ $ (2,589) ​ $ 4,798 ​ Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021 For the year ended December 31, 2022, net interest income was $145.9 million, increasing $23.5 million, or 19.2%, when compared to the year ended December 31, 2021.
Year Ended December 31, 2021 Increase (Decrease) Due to Total Increase (Decrease) Due to Total (dollars in thousands) Volume Rate Volume Rate Interest-earning assets: Loans $ 39,701 $ 32,018 $ 71,719 $ 11,755 $ 5,439 $ 17,194 Securities (1,075) 3,325 2,250 4,977 1,612 6,589 Deposits with banks (1,312) 2,791 1,479 (418) 1,432 1,014 Other 224 273 497 7 27 34 Total interest-earning assets 37,538 38,407 75,945 16,321 8,510 24,831 Interest-bearing liabilities: Interest-bearing deposits: Interest-bearing demand 26 2,497 2,523 61 28 89 Money market 139 6,400 6,539 56 320 376 Savings 4 821 825 17 3 20 Time 1,007 8,894 9,901 (54) (392) (446) Brokered 2,836 — 2,836 — — — Total interest-bearing deposits 4,012 18,612 22,624 80 (41) 39 Securities sold under agreements to repurchase (15) 234 219 1 1 2 Borrowings 5,640 521 6,161 694 264 958 Subordinated notes 4 (4) — 4 (4) — Junior subordinated debentures issued to capital trusts 781 962 1,743 3 358 361 Total interest-bearing liabilities 10,422 20,325 30,747 782 578 1,360 Change in net interest income $ 27,116 $ 18,082 $ 45,198 $ 15,539 $ 7,932 $ 23,471 Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022 Net interest income for the year ended December 31, 2023 was $191.1 million, increasing $45.2 million, or 31.0%, from the year ended December 31, 2022.
(5) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities. ​ ​ 56 Table of Contents The following table sets forth the components of loan interest income and their contributions to the total yield on loans. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ ​ ​ ​ ​ Yield ​ ​ ​ ​ Yield ​ ​ ​ ​ Yield ​ ​ ​ Interest ​ Contribution ​ Interest ​ Contribution ​ Interest ​ Contribution ​ ​ ​ (dollars in thousands) ​ Contractual interest ​ $ 113,775 ​ 4.52 % $ 90,647 ​ 3.99 % $ 96,543 ​ 4.30 % Loan fees (excluding PPP loans) ​ ​ 4,454 ​ 0.18 ​ ​ 3,840 ​ 0.17 ​ ​ 3,926 ​ 0.19 ​ PPP loan fees ​ ​ 1,488 ​ 0.06 ​ ​ 9,181 ​ 0.40 ​ ​ 2,953 ​ 0.13 ​ Accretion of acquired loan discounts ​ ​ 933 ​ 0.04 ​ ​ 1,102 ​ 0.05 ​ ​ 724 ​ 0.03 ​ Nonaccrual interest recoveries ​ ​ 2,828 ​ 0.11 ​ ​ 1,514 ​ 0.07 ​ ​ 986 ​ 0.04 ​ Net cash flow hedge earnings ​ ​ — ​ — ​ ​ — ​ — ​ ​ 64 ​ — ​ Total loan interest income ​ $ 123,478 ​ 4.91 % $ 106,284 ​ 4.68 % $ 105,196 ​ 4.69 % ​ The following table sets forth the components of net interest income and their contributions to the net interest margin. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 2021 ​ 2020 ​ ​ ​ ​ ​ Net Interest ​ ​ ​ Net Interest ​ ​ ​ Net Interest ​ ​ ​ ​ ​ Margin ​ ​ ​ ​ Margin ​ ​ ​ Margin ​ ​ ​ Interest Contribution ​ Interest ​ Contribution ​ Interest Contribution ​ ​ ​ (dollars in thousands) ​ Interest income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contractual interest on loans ​ $ 113,775 2.76 % $ 90,647 2.35 % $ 96,543 2.91 % Contractual interest on securities ​ 34,896 0.85 ​ ​ 28,426 0.74 ​ 22,920 0.69 ​ Contractual interest on deposits with banks ​ 1,541 0.04 ​ ​ 530 0.01 ​ 938 0.03 ​ Loan fees (excluding PPP loans) ​ 4,454 0.11 ​ ​ 3,840 0.10 ​ 3,926 0.12 ​ PPP loan fees ​ ​ 1,488 ​ 0.04 ​ ​ 9,181 ​ 0.24 ​ ​ 2,953 ​ 0.09 ​ Accretion of acquired loan discounts ​ 933 0.02 ​ ​ 1,102 0.03 ​ 724 0.02 ​ Nonaccrual interest recoveries ​ ​ 2,828 0.07 ​ ​ 1,514 0.04 ​ 986 0.03 ​ Securities amortization, net ​ (6,959) (0.17) ​ ​ (7,066) (0.18) ​ (5,045) (0.15) ​ Other ​ 98 — ​ ​ 49 — ​ 120 — ​ Total interest income ​ 153,054 3.72 ​ ​ 128,223 3.33 ​ 124,065 3.74 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense: ​ ​ ​ ​ ​ Contractual interest on deposits ​ 2,687 0.07 ​ ​ 2,541 0.07 ​ 4,201 0.13 ​ Contractual interest on other interest-bearing liabilities ​ 4,398 0.11 ​ ​ 2,903 0.07 ​ 1,846 0.06 ​ Other ​ 95 — ​ ​ 376 0.01 ​ 413 0.01 ​ Total interest expense ​ 7,180 0.18 ​ ​ 5,820 0.15 ​ 6,460 0.20 ​ Net interest income ​ 145,874 3.54 ​ ​ 122,403 3.18 ​ 117,605 3.54 ​ Tax equivalent adjustment (1) ​ 2,499 0.06 ​ ​ 2,028 0.05 ​ 1,943 0.06 ​ Net interest income (tax equivalent) (1) (2) ​ $ 148,373 3.60 % $ 124,431 3.23 % $ 119,548 3.60 % (1) On a tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%.
Year Ended December 31, 2023 2022 2021 (dollars in thousands) Interest Net Interest Margin Contribution Interest Net Interest Margin Contribution Interest Net Interest Margin Contribution Interest income: Contractual interest on loans $ 185,772 3.97 % $ 113,775 2.76 % $ 90,647 2.35 % Loan fees (excluding PPP loans) 4,584 0.10 4,454 0.11 3,840 0.10 PPP loan fees 2 — 1,488 0.04 9,181 0.24 Accretion of acquired loan discounts 4,136 0.09 933 0.02 1,102 0.03 Nonaccrual interest recoveries 703 0.02 2,828 0.07 1,514 0.04 Securities 30,187 0.65 27,937 0.68 21,348 0.56 Interest-bearing deposits in bank 3,020 0.06 1,541 0.04 527 0.01 Other 595 0.01 98 — 64 — Total interest income 228,999 4.90 153,054 3.72 128,223 3.33 Interest expense: Deposits 25,135 0.54 2,511 0.07 2,472 0.06 Other interest-bearing liabilities 12,792 0.27 4,669 0.11 3,348 0.09 Total interest expense 37,927 0.81 7,180 0.18 5,820 0.15 Net interest income 191,072 4.09 145,874 3.54 122,403 3.18 Tax-equivalent adjustment (1) 2,758 0.06 2,499 0.06 2,028 0.05 Net interest income (tax-equivalent) (1) (2) $ 193,830 4.15 % $ 148,373 3.60 % $ 124,431 3.23 % _________________________________________________ (1) On a tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%.
The following tables set forth the distribution of average deposits, by account type. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percent ​ ​ ​ Year Ended December 31, 2022 Change in ​ ​ ​ Average Percent of Weighted Average Balance ​ ​ ​ Balance Total Deposits Average Cost 2022 vs. 2021 ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ Noninterest-bearing ​ $ 1,051,187 28.4 % — % ​ 4.6 % Interest-bearing demand ​ 1,141,402 30.8 ​ 0.05 ​ ​ 11.4 ​ Money market ​ 582,514 15.7 ​ 0.14 ​ ​ 11.7 ​ Savings ​ 650,385 17.5 ​ 0.03 ​ ​ 9.1 ​ Total non-maturity deposits ​ 3,425,488 92.4 ​ 0.05 ​ ​ 8.9 ​ Time ​ 283,232 7.6 ​ 0.31 ​ ​ (4.2) ​ Total deposits ​ $ 3,708,720 100.0 % 0.07 % ​ 7.7 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percent ​ ​ ​ Year Ended December 31, 2021 Change in ​ ​ ​ Average Percent of Weighted Average Balance ​ ​ ​ Balance Total Deposits Average Cost 2021 vs. 2020 ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ Noninterest-bearing ​ $ 1,004,757 29.2 % — % ​ 24.4 % Interest-bearing demand ​ 1,024,888 29.8 ​ 0.05 ​ ​ 17.4 ​ Money market ​ 521,366 15.1 ​ 0.08 ​ ​ 10.0 ​ Savings ​ 595,887 17.3 ​ 0.03 ​ ​ 24.9 ​ Total non-maturity deposits ​ 3,146,898 91.4 ​ 0.04 ​ ​ 19.6 ​ Time ​ 295,788 8.6 ​ 0.45 ​ ​ (6.8) ​ Total deposits ​ $ 3,442,686 100.0 % 0.07 % ​ 16.7 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2020 ​ ​ ​ ​ ​ Average Percent of Weighted ​ ​ ​ ​ ​ Balance Total Deposits Average Cost ​ ​ ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ Noninterest-bearing ​ $ 807,864 27.4 % — % ​ ​ ​ Interest-bearing demand ​ 873,060 29.6 ​ 0.07 ​ ​ ​ ​ Money market ​ 474,033 16.1 ​ 0.15 ​ ​ ​ ​ Savings ​ 477,260 16.2 ​ 0.04 ​ ​ ​ ​ Total non-maturity deposits ​ 2,632,217 89.3 ​ 0.06 ​ ​ ​ ​ Time ​ 317,308 10.7 ​ 0.84 ​ ​ ​ ​ Total deposits ​ $ 2,949,525 100.0 % 0.14 % ​ ​ ​ ​ Comparison of the Year Ended December 31 , 2022 to the Year Ended December 31 , 2021 The average balances of non-maturity deposits increased 8.9% from the year ended December 31, 2021 to the year ended December 31, 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 began to reverse in the second quarter of 2022.
The following table sets forth the distribution of average deposits, by account type: Year Ended December 31, 2023 Percent Change in Average Balance 2023 vs. 2022 (dollars in thousands) Average Balance Percent of Total Deposits Weighted Average Cost Noninterest-bearing $ 1,113,300 26.7 % — % 5.9 % Interest-bearing demand 1,188,680 28.5 0.26 4.1 Money market 669,118 16.1 1.10 14.9 Savings 661,424 15.9 0.16 1.7 Time 481,466 11.5 2.24 70.0 Brokered 52,724 1.3 5.38 100.0 Total deposits $ 4,166,712 100.0 % 0.60 % 12.3 % Year Ended December 31, 2022 Percent Change in Average Balance 2022 vs. 2021 (dollars in thousands) Average Balance Percent of Total Deposits Weighted Average Cost Noninterest-bearing $ 1,051,187 28.4 % — % 4.6 % Interest-bearing demand 1,141,402 30.8 0.05 11.4 Money market 582,514 15.7 0.14 11.7 Savings 650,385 17.5 0.03 9.1 Time 283,232 7.6 0.31 (4.2) Brokered — — — — Total deposits $ 3,708,720 100.0 % 0.07 % 7.7 % Year Ended December 31, 2021 (dollars in thousands) Average Balance Percent of Total Deposits Weighted Average Cost Noninterest-bearing $ 1,004,757 29.2 % — % Interest-bearing demand 1,024,888 29.8 0.05 Money market 521,366 15.1 0.08 Savings 595,887 17.3 0.03 Time 295,788 8.6 0.45 Brokered — — — Total deposits $ 3,442,686 100.0 % 0.07 % The increase in average deposit balances in 2023 compared to 2022 was primarily attributable to the Town and Country merger which added $720.4 million of deposits on February 1, 2023.
Cash Dividends The Company paid quarterly cash dividends of $0.16 during 2022 and $0.15 per share during 2021 and 2020.
Cash Dividends The Company paid quarterly cash dividends of $0.17 per share during 2023, $0.16 per share during 2022, and $0.15 per share during 2021. On January 23, 2024, the Company’s Board of Directors increased the quarterly cash dividend by $0.02 per share to $0.19 per share.
Noninterest Income The following table outlines the amount of and changes to the various noninterest income line items as of the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 $ Change 2021 $ Change ​ 2020 ​ ​ (dollars in thousands) Card income ​ $ 10,329 ​ $ 595 ​ $ 9,734 ​ $ 1,647 ​ $ 8,087 Wealth management fees ​ ​ 9,155 ​ ​ 771 ​ ​ 8,384 ​ 1,147 ​ 7,237 Service charges on deposit accounts ​ ​ 7,072 ​ ​ 992 ​ ​ 6,080 ​ 93 ​ 5,987 Mortgage servicing ​ ​ 2,609 ​ ​ (216) ​ ​ 2,825 ​ (153) ​ 2,978 Mortgage servicing rights fair value adjustment ​ ​ 2,153 ​ ​ 463 ​ ​ 1,690 ​ 4,274 ​ (2,584) Gains on sale of mortgage loans ​ ​ 1,461 ​ ​ (4,385) ​ ​ 5,846 ​ (2,989) ​ 8,835 Unrealized gains (losses) on equity securities ​ ​ (414) ​ ​ (521) ​ ​ 107 ​ 74 ​ 33 Gains (losses) on foreclosed assets ​ ​ (314) ​ ​ (624) ​ ​ 310 ​ 168 ​ 142 Gains (losses) on other assets ​ ​ 136 ​ ​ 859 ​ ​ (723) ​ (652) ​ (71) Income on bank owned life insurance ​ ​ 164 ​ ​ 123 ​ ​ 41 ​ 41 ​ — Other noninterest income ​ ​ 2,366 ​ ​ (668) ​ ​ 3,034 ​ (778) ​ 3,812 Total noninterest income ​ $ 34,717 ​ $ (2,611) ​ $ 37,328 ​ $ 2,872 ​ $ 34,456 ​ Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021 Total noninterest income for the year ended December 31, 2022, was $34.7 million, a decrease of $2.6 million, or 7.0%, from the year ended December 31, 2021.
The economic forecasts utilized in estimating the allowance for credit losses on loans and lending-related unfunded commitments include the unemployment rate and changes in GDP as macroeconomic variables, although other economic metrics are considered on a qualitative basis. 52 Table of Contents Noninterest Income The following table sets forth the major categories of noninterest income for the periods indicated: Year Ended December 31, Year Ended December 31, (dollars in thousands) 2023 2022 $ Change % Change 2022 2021 $ Change % Change Card income $ 11,043 $ 10,329 $ 714 6.9 % $ 10,329 $ 9,734 $ 595 6.1 % Wealth management fees 9,883 9,155 728 8.0 9,155 8,384 771 9.2 Service charges on deposit accounts 7,846 7,072 774 10.9 7,072 6,080 992 16.3 Mortgage servicing 4,678 2,609 2,069 79.3 2,609 2,825 (216) (7.6) Mortgage servicing rights fair value adjustment (1,615) 2,153 (3,768) NM 2,153 1,690 463 27.4 Gains on sale of mortgage loans 1,526 1,461 65 4.4 1,461 5,846 (4,385) (75.0) Realized gains (losses) on sales of securities (1,820) — (1,820) NM — — — — Unrealized gains (losses) on equity securities 160 (414) 574 NM (414) 107 (521) NM Gains (losses) on foreclosed assets 501 (314) 815 NM (314) 310 (624) NM Gains (losses) on other assets 166 136 30 22.1 136 (723) 859 NM Income on bank owned life insurance 573 164 409 249.4 164 41 123 300.0 Other noninterest income 3,105 2,366 739 31.2 2,366 3,034 (668) (22.0) Total $ 36,046 $ 34,717 $ 1,329 3.8 % $ 34,717 $ 37,328 $ (2,611) (7.0) % _________________________________________________ NM Not meaningful.
As of December 31, 2022 and 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.
As of those dates, the Bank was “well capitalized” under the regulatory prompt corrective action provisions.
The Company incurred the following pre-tax branch closure costs during the year ended December 31, 2021 (dollars in thousands): ​ ​ ​ ​ NONINTEREST INCOME ​ ​ ​ Gains (losses) on other assets ​ $ (682) ​ ​ ​ ​ NONINTEREST EXPENSE ​ ​ ​ Salaries ​ ​ 53 Marketing and customer relations ​ ​ 6 Legal fees and other noninterest expense ​ ​ 7 Total noninterest expense ​ ​ 66 Total branch closure costs ​ $ 748 ​ Additionally, the Company recognized a net gain on sales of closed branch premises of $0.1 million during the year ended December 31, 2022. ​ Paycheck Protection Program Loans During 2021 and 2020, we funded a total of $290.1 million of Paycheck Protection Program (“PPP”) loans.
The Company incurred the following pre-tax branch closure costs during the year ended December 31, 2021 (dollars in thousands): NONINTEREST INCOME Gains (losses) on other assets $ (682) NONINTEREST EXPENSE Salaries 53 Marketing and customer relations 6 Legal fees and other noninterest expense 7 Total noninterest expense 66 Total branch closure costs $ 748 44 Table of Contents FACTORS AFFECTING OUR RESULTS OF OPERATIONS Economic Conditions The Company's business and financial performance are affected by economic conditions generally in the U.S. and more directly in the Illinois and Iowa markets where we primarily operate.
The slight decrease in effective tax rate was primarily due to slightly higher federally tax exempt interest income and slightly lower state income taxes. 61 Table of Contents FINANCIAL CONDITION ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ ​ ​ ​ ​ ​ 2022 2021 $ Change % Change ​ Consolidated Balance Sheet Information ​ (dollars in thousands, except per share data) ​ Cash and cash equivalents ​ $ 114,159 ​ $ 409,268 ​ $ (295,109) ​ (72.1) % Debt securities available-for-sale, at fair value ​ 843,524 ​ 942,168 ​ (98,644) ​ (10.5) ​ Debt securities held-to-maturity ​ 541,600 ​ 336,185 ​ 205,415 ​ 61.1 ​ Loans held for sale ​ ​ 615 ​ ​ 4,942 ​ ​ (4,327) ​ (87.6) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans, before allowance for loan losses ​ ​ 2,620,253 ​ ​ 2,499,689 ​ ​ 120,564 ​ 4.8 ​ Less: allowance for loan losses ​ ​ 25,333 ​ ​ 23,936 ​ ​ 1,397 ​ 5.8 ​ Loans, net of allowance for loan losses ​ ​ 2,594,920 ​ ​ 2,475,753 ​ ​ 119,167 ​ 4.8 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Goodwill ​ ​ 29,322 ​ ​ 29,322 ​ ​ — ​ — ​ Core deposit intangible assets, net ​ ​ 1,070 ​ ​ 1,943 ​ ​ (873) ​ (44.9) ​ Other assets ​ ​ 161,524 ​ ​ 114,673 ​ ​ 46,851 ​ 40.9 ​ Total assets ​ $ 4,286,734 ​ $ 4,314,254 ​ $ (27,520) ​ (0.6) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total deposits ​ $ 3,587,024 ​ $ 3,738,185 ​ $ (151,161) ​ (4.0) % Securities sold under agreements to repurchase ​ ​ 43,081 ​ ​ 61,256 ​ ​ (18,175) ​ (29.7) ​ Borrowings ​ ​ 160,000 ​ ​ — ​ ​ 160,000 ​ NM ​ Subordinated notes ​ ​ 39,395 ​ ​ 39,316 ​ ​ 79 ​ 0.2 ​ Junior subordinated debentures ​ ​ 37,780 ​ ​ 37,714 ​ ​ 66 ​ 0.2 ​ Other liabilities ​ ​ 45,822 ​ ​ 25,902 ​ ​ 19,920 ​ 76.9 ​ Total liabilities ​ ​ 3,913,102 ​ ​ 3,902,373 ​ ​ 10,729 ​ 0.3 ​ Total stockholders' equity ​ ​ 373,632 ​ ​ 411,881 ​ ​ (38,249) ​ (9.3) ​ Total liabilities and stockholders' equity ​ $ 4,286,734 ​ $ 4,314,254 ​ $ (27,520) ​ (0.6) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tangible assets (1) ​ $ 4,256,342 ​ $ 4,282,989 ​ $ (26,647) ​ (0.6) % Tangible common equity (1) ​ 343,240 ​ 380,616 ​ (37,376) ​ (9.8) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Core deposits (1) ​ $ 3,559,866 ​ $ 3,674,435 ​ $ (114,569) ​ (3.1) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share and Per Share Information ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Book value per share ​ $ 12.99 ​ $ 14.21 ​ ​ ​ ​ ​ ​ Tangible book value per share (1) ​ ​ 11.94 ​ ​ 13.13 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares of common stock outstanding ​ ​ 28,752,626 ​ ​ 28,986,061 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance Sheet Ratios ​ ​ ​ ​ ​ Loan to deposit ratio ​ 73.05 % 66.87 % ​ ​ Core deposits to total deposits (1) ​ 99.24 ​ 98.29 ​ ​ ​ Stockholders' equity to total assets ​ 8.72 ​ 9.55 ​ ​ ​ Tangible common equity to tangible assets (1) ​ 8.06 ​ 8.89 ​ ​ ​ (1) See "Non-GAAP Financial Information" for reconciliation of non-GAAP measures to their most comparable GAAP measures.
The fluctuations in effective tax rate are primarily attributable to changes in state income taxes and changes in the proportion of federally tax-exempt interest income to pre-tax income. 54 Table of Contents FINANCIAL CONDITION (dollars in thousands, except per share data) December 31, 2023 December 31, 2022 $ Change % Change Consolidated Balance Sheet Information Cash and cash equivalents $ 141,252 $ 114,159 $ 27,093 23.7 % Debt securities available-for-sale, at fair value 759,461 843,524 (84,063) (10.0) Debt securities held-to-maturity 521,439 541,600 (20,161) (3.7) Loans held for sale 2,318 615 1,703 276.9 Loans, before allowance for credit losses 3,404,417 2,620,253 784,164 29.9 Less: allowance for credit losses 40,048 25,333 14,715 58.1 Loans, net of allowance for credit losses 3,364,369 2,594,920 769,449 29.7 Goodwill 59,820 29,322 30,498 104.0 Intangible assets, net 20,682 1,070 19,612 1,832.9 Other assets 203,829 161,524 42,305 26.2 Total assets $ 5,073,170 $ 4,286,734 $ 786,436 18.3 % Total deposits $ 4,401,437 $ 3,587,024 $ 814,413 22.7 % Securities sold under agreements to repurchase 42,442 43,081 (639) (1.5) Borrowings 12,623 160,000 (147,377) (92.1) Subordinated notes 39,474 39,395 79 0.2 Junior subordinated debentures 52,789 37,780 15,009 39.7 Other liabilities 34,909 45,822 (10,913) (23.8) Total liabilities 4,583,674 3,913,102 670,572 17.1 Total stockholders' equity 489,496 373,632 115,864 31.0 Total liabilities and stockholders' equity $ 5,073,170 $ 4,286,734 $ 786,436 18.3 % Tangible assets (1) $ 4,992,668 $ 4,256,342 $ 736,326 17.3 % Tangible common equity (1) 408,994 343,240 65,754 19.2 Core deposits (1) $ 4,126,374 $ 3,559,866 $ 566,508 15.9 % Share and Per Share Information Book value per share $ 15.44 $ 12.99 Tangible book value per share (1) 12.90 11.94 Shares of common stock outstanding 31,695,828 28,752,626 Balance Sheet Ratios Loan to deposit ratio 77.35 % 73.05 % Core deposits to total deposits (1) 93.75 99.24 Stockholders' equity to total assets 9.65 8.72 Tangible common equity to tangible assets (1) 8.19 8.06 _________________________________________________ (1) See "Non-GAAP Financial Information" for reconciliation of non-GAAP measure to their most closely comparable GAAP measures. 55 Table of Contents Notable changes in our consolidated balance sheet include the following: • The Town and Country merger added $937.2 million in total assets, $635.4 million in loans held for investment, and $720.4 million in deposits; • Excluding the impact of the Town and Country merger, loan growth since December 31, 2022 was broad-based with total loans increasing $148.8 million; • Following the Town and Country merger, the vast majority of the securities acquired from Town and Country were sold and an additional $39.4 million of municipal securities sold during the third quarter of 2023.
Notable changes in noninterest income include the following: ● A $4.4 million decrease in gains on sale of mortgage loans, primarily attributable to a lower level of mortgage refinancing activity due to interest rate increases; ● A $1.0 million increase in service charges on deposit accounts; ● A $0.9 million improvement in gains (losses) on other assets, as the 2021 results include impairment losses of $0.7 million related to branches closed pursuant to our 2021 branch rationalization plan; ● A $0.8 million increase in wealth management fees, reflecting a $1.0 million increase in farm management and farmland brokerage fees; ● A $0.6 million increase in card income primarily due to increased debit and credit card transaction volume; and ● A $0.5 million increase in the mortgage servicing rights fair value adjustment, primarily resulting from slower mortgage prepayment speed assumptions. 60 Table of Contents Noninterest Expense The following table outlines the amount of and changes to the various noninterest expense line items as of the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 $ Change 2021 $ Change ​ 2020 ​ ​ (dollars in thousands) Salaries ​ $ 51,767 ​ $ 2,795 ​ $ 48,972 ​ $ (1,253) ​ $ 50,225 Employee benefits ​ ​ 8,325 ​ ​ 1,812 ​ ​ 6,513 ​ (1,392) ​ ​ 7,905 Occupancy of bank premises ​ ​ 7,673 ​ ​ 885 ​ ​ 6,788 ​ 208 ​ ​ 6,580 Furniture and equipment ​ ​ 2,476 ​ ​ (200) ​ ​ 2,676 ​ 229 ​ ​ 2,447 Data processing ​ ​ 7,441 ​ ​ 112 ​ ​ 7,329 ​ 587 ​ ​ 6,742 Marketing and customer relations ​ ​ 3,803 ​ ​ 427 ​ ​ 3,376 ​ (100) ​ ​ 3,476 Amortization of intangible assets ​ ​ 873 ​ ​ (181) ​ ​ 1,054 ​ (178) ​ ​ 1,232 FDIC insurance ​ ​ 1,164 ​ ​ 121 ​ ​ 1,043 ​ 336 ​ ​ 707 Loan collection and servicing ​ ​ 1,049 ​ ​ (268) ​ ​ 1,317 ​ (438) ​ ​ 1,755 Foreclosed assets ​ ​ 293 ​ ​ (615) ​ ​ 908 ​ 351 ​ ​ 557 Other noninterest expense ​ ​ 20,243 ​ ​ 8,973 ​ ​ 11,270 ​ 940 ​ ​ 10,330 Total noninterest expense ​ $ 105,107 ​ $ 13,861 ​ $ 91,246 ​ $ (710) ​ $ 91,956 ​ Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021 Total noninterest expense for the year ended December 31, 2022, was $105.1 million, an increase of $13.9 million, or 15.2%, from the year ended December 31, 2021.
The vast majority of the securities portfolio acquired from Town and Country was sold during the first quarter of 2023 with an additional $39.4 million of municipal debt securities sold during the third quarter of 2023; • The addition of Town and Country's operations in the first quarter of 2023 contributed to a $2.1 million increase in mortgage servicing revenue, with the size of our existing mortgage servicing portfolio nearly doubling, a $0.8 million increase in service charges on deposit accounts, a $0.7 million increase in wealth management fees, and a $0.7 million increase in card income; and • A $0.5 million gain on foreclosed assets was recognized during 2023, primarily related to the sale of one property, compared to a $0.3 million loss on foreclosed assets during 2022. 53 Table of Contents Noninterest Expense The following table sets forth the major categories of noninterest expense for the periods indicated: Year Ended December 31, Year Ended December 31, (dollars in thousands) 2023 2022 $ Change % Change 2022 2021 $ Change % Change Salaries $ 67,453 $ 51,767 $ 15,686 30.3 % $ 51,767 $ 48,972 $ 2,795 5.7 % Employee benefits 10,037 8,325 1,712 20.6 8,325 6,513 1,812 27.8 Occupancy of bank premises 9,918 7,673 2,245 29.3 7,673 6,788 885 13.0 Furniture and equipment 2,790 2,476 314 12.7 2,476 2,676 (200) (7.5) Data processing 12,352 7,441 4,911 66.0 7,441 7,329 112 1.5 Marketing and customer relations 5,043 3,803 1,240 32.6 3,803 3,376 427 12.6 Amortization of intangible assets 2,670 873 1,797 205.8 873 1,054 (181) (17.2) FDIC insurance 2,280 1,164 1,116 95.9 1,164 1,043 121 11.6 Loan collection and servicing 1,402 1,049 353 33.7 1,049 1,317 (268) (20.3) Foreclosed assets 251 293 (42) (14.3) 293 908 (615) (67.7) Other noninterest expense 16,768 20,243 (3,475) (17.2) 20,243 11,270 8,973 79.6 Total $ 130,964 $ 105,107 $ 25,857 24.6 % $ 105,107 $ 91,246 $ 13,861 15.2 % Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022 Total noninterest expense for the year ended December 31, 2023, was $131.0 million, an increase of $25.9 million, or 24.6%, from the year ended December 31, 2022.
Determinations as to the risk classification of loans and the amount of the allowance for loan losses are subject to review by regulatory agencies, which can require that the Company establish additional loss allowances. ​ 76 Table of Contents NON-GAAP FINANCIAL MEASURES This Annual Report on Form 10-K contains certain financial information determined by methods other than in accordance with GAAP.
The probability of default, loss given default, exposure at default, and prepayment assumptions are key factors in this analysis. 66 Table of Contents NON-GAAP FINANCIAL INFORMATION This Annual Report on Form 10-K contains certain financial information determined by methods other than those in accordance with GAAP.
Below is a summary of our loan and deposit balances by geographic region. ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 December 31, 2021 Total loans ​ (dollars in thousands) Illinois by metropolitan and micropolitan statistical areas ​ ​ ​ ​ ​ ​ Bloomington-Normal ​ $ 499,477 ​ $ 527,161 Champaign-Urbana ​ ​ 235,537 ​ ​ 191,646 Chicago ​ ​ 1,294,327 ​ ​ 1,196,605 Lincoln ​ ​ 76,690 ​ ​ 87,153 Ottawa-Peru ​ ​ 94,516 ​ ​ 101,117 Peoria ​ ​ 117,795 ​ ​ 123,143 Total Illinois ​ ​ 2,318,342 ​ ​ 2,226,825 Iowa ​ ​ 301,911 ​ ​ 272,864 Total loans ​ $ 2,620,253 ​ $ 2,499,689 ​ ​ ​ ​ ​ ​ ​ Total deposits ​ ​ ​ ​ ​ ​ Illinois by metropolitan and micropolitan statistical areas ​ ​ ​ ​ ​ ​ Bloomington-Normal ​ $ 857,988 ​ $ 887,587 Champaign-Urbana ​ ​ 218,291 ​ ​ 203,899 Chicago ​ ​ 1,216,423 ​ ​ 1,237,486 Lincoln ​ ​ 179,923 ​ ​ 203,098 Ottawa-Peru ​ ​ 385,117 ​ ​ 407,156 Peoria ​ ​ 597,711 ​ ​ 610,155 Total Illinois ​ ​ 3,455,453 ​ ​ 3,549,381 Iowa ​ ​ 131,571 ​ ​ 188,804 Total deposits ​ $ 3,587,024 ​ $ 3,738,185 ​ ​ 49 Table of Contents Acquisitions The Company incurred the following pre-tax acquisition expenses during the years ended December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ (dollars in thousands) Salaries ​ $ — ​ $ 65 ​ $ — Furniture and equipment ​ ​ — ​ ​ 18 ​ ​ — Data processing ​ ​ 304 ​ ​ 355 ​ ​ — Marketing and customer relations ​ ​ — ​ ​ 12 ​ ​ — Loan collection and servicing ​ ​ — ​ ​ 11 ​ ​ — Legal fees and other noninterest expense ​ ​ 788 ​ ​ 955 ​ ​ — Total acquisition-related expenses ​ $ 1,092 ​ ​ 1,416 ​ $ — ​ Town and Country Financial Corporation On February 1, 2023, HBT Financial completed its acquisition of Town and Country Financial Corporation (“Town and Country”), the holding company for Town and Country Bank.
Below is a summary of our loan and deposit balances by geographic region: December 31, 2023 December 31, 2022 (dollars in thousands) Loans Deposits Loans Deposits Central $ 1,693,794 $ 3,094,305 $ 1,024,015 $ 2,239,030 Chicago MSA 1,406,348 1,197,865 1,294,327 1,216,423 Illinois 3,100,142 4,292,170 2,318,342 3,455,453 Iowa 304,275 109,267 301,911 131,571 Total $ 3,404,417 $ 4,401,437 $ 2,620,253 $ 3,587,024 Acquisitions The Company incurred the following pre-tax acquisition expenses: Year Ended December 31, (dollars in thousands) 2023 2022 2021 PROVISION FOR CREDIT LOSSES (1) $ 5,924 $ — $ — NONINTEREST EXPENSE Salaries 3,584 — 65 Furniture and equipment 39 — 18 Data processing 2,031 304 355 Marketing and customer relations 24 — 12 Loan collection and servicing 125 — 11 Legal fees and other noninterest expense 1,964 788 955 Total noninterest expense 7,767 1,092 1,416 Total acquisition-related expenses $ 13,691 $ 1,092 $ 1,416 _________________________________________________ (1) Includes recognition of an allowance for credit losses on non-purchase credit deteriorated ("non-PCD") loans of $5.2 million and an allowance for credit losses on unfunded commitments of $0.7 million in connection with the Town and Country merger during the first quarter of 2023 in accordance with ASC 326 which was adopted on January 1, 2023. 43 Table of Contents Town and Country Financial Corporation On February 1, 2023, HBT Financial completed its acquisition of Town and Country, the holding company for Town and Country Bank.
Additionally, these recent increases in market interest rates have increased competition for deposits. As a result, we expect deposit costs to increase during 2023 and deposits balances may decrease and be replaced by higher cost funding sources, such as FHLB advances, brokered deposits, or other wholesale funding.
Additionally, core deposits balances may decrease and be replaced by higher cost funding sources, such as FHLB advances and brokered deposits.
The following table sets forth information concerning nonperforming loans and nonperforming assets as of December 31. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 December 31, 2021 ​ (dollars in thousands) ​ NONPERFORMING ASSETS ​ ​ ​ ​ ​ ​ ​ Nonaccrual ​ $ 2,155 ​ $ 2,763 Past due 90 days or more, still accruing (1) ​ 1 ​ 16 Total nonperforming loans ​ 2,156 ​ 2,779 Foreclosed assets ​ 3,030 ​ 3,278 Total nonperforming assets ​ $ 5,186 ​ $ 6,057 ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses ​ $ 25,333 ​ $ 23,936 ​ Loans, before allowance for loan losses ​ ​ 2,620,253 ​ ​ 2,499,689 ​ ​ ​ ​ ​ ​ ​ ​ ​ CREDIT QUALITY RATIOS ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses to loans, before allowance for loan losses ​ 0.97 % 0.96 % Allowance for loan losses to nonaccrual loans ​ ​ 1,175.55 ​ ​ 866.30 ​ Allowance for loan losses to nonperforming loans ​ 1,175.00 ​ 861.32 ​ Nonaccrual loans to loans, before allowance for loan losses ​ ​ 0.08 ​ ​ 0.11 ​ Nonperforming loans to loans, before allowance for loan losses ​ 0.08 ​ 0.11 ​ Nonperforming assets to total assets ​ 0.12 ​ 0.14 ​ Nonperforming assets to loans, before allowance for loan losses, and foreclosed assets ​ 0.20 ​ 0.24 ​ (1) Excludes loans acquired with deteriorated credit quality that are past due 90 or more days totaling $145 thousand and $32 thousand as of December 31, 2022 and 2021, respectively. ​ Comparison of December 31, 2022 to December 31, 2021 Total nonperforming assets were $5.2 million as of December 31, 2022, a decrease of $0.9 million, or 14.4%, from December 31, 2021.
Government $ 2,641 $ 133 Allowance for credit losses $ 40,048 $ 25,333 Loans, before allowance for credit losses 3,404,417 2,620,253 CREDIT QUALITY RATIOS Allowance for credit losses to loans, before allowance for credit losses 1.18 % 0.97 % Allowance for credit losses to nonaccrual loans 512.12 1,175.55 Allowance for credit losses to nonperforming loans 509.71 1,175.00 Nonaccrual loans to loans, before allowance for credit losses 0.23 0.08 Nonperforming loans to loans, before allowance for credit losses 0.23 0.08 Nonperforming assets to total assets 0.17 0.12 Nonperforming assets to loans, before allowance for credit losses, and foreclosed assets 0.26 0.20 _________________________________________________ (1) Prior to 2023, excludes loans acquired with deteriorated credit quality that are past due 90 or more days and accruing.
Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021 The Company recorded a negative provision for loan losses of $0.7 million during the year ended December 31, 2022, compared to a negative provision for loan losses of $8.1 million during the year ended December 31, 2021.
Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022 Total noninterest income for the year ended December 31, 2023, was $36.0 million, an increase of $1.3 million, or 3.8%, from the year ended December 31, 2022.
Notable changes include the following: ● A $23.5 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 more favorable asset mix, and higher yields on interest-earning assets which more than offset a $7.7 million decrease in PPP loan fees recognized as loan interest income; ● A $13.9 million increase in noninterest expense, primarily reflecting accruals totaling $8.2 million related to pending legal matters and a higher base level of noninterest expense following the NXT acquisition; ● A negative provision for loan losses of $0.7 million was recognized during the year ended December 31, 2022, compared to a negative provision for loan losses of $8.1 million during the year ended December 31, 2021; and ● A $4.4 million decrease in gains on sale of mortgage loans, primarily attributable to a lower level of mortgage refinancing activity due to increases in market interest rates.
Notable changes include the following: • A $45.2 million increase in net interest income, primarily attributable to the increase in average interest-earning assets following the Town and Country merger and higher yields on interest-earning assets, partially offset by higher funding costs; • Town and Country acquisition-related expenses totaled $13.7 million during the year ended December 31, 2023, including the recognition of 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 provision for credit losses, compared to $1.1 million of acquisition-related expenses during the year ended December 31, 2022; • Net losses of $1.8 million on the sale of $185.3 million of securities were realized during the year ended December 31, 2023 with the sales proceeds used to reduce FHLB borrowings and fund loan growth; and • Excluding Town and Country acquisition-related expenses, noninterest expense increased by $19.2 million primarily due to the addition of Town and Country’s operations.
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 $106.8 million, and loans held for investment which increased $120.6 million; ● Loans increased by $120.6 million despite a $29.5 million decrease in PPP loans due to forgiveness; ● Total deposits decreased by $151.2 million, primarily due to lower balances maintained in noninterest-bearing business accounts and continued run-off of higher cost time deposits; ● Borrowings, consisting of short-term FHLB advances, increased $160.0 million and were utilized to fund short-term liquidity needs; and ● Increases in market interest rates during 2022 drove a decrease in fair value of debt securities resulting in $105.5 million of unrealized losses in the available-for-sale portfolio and substantially contributing to a total decrease of $73.2 million in accumulated other comprehensive income (loss). ​ Loan Portfolio The following table sets forth the composition of the loan portfolio by category, excluding loans held-for-sale. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ December 31, 2021 ​ ​ Balance Percent ​ Balance Percent ​ ​ ​ (dollars in thousands) ​ Commercial and industrial ​ $ 266,757 10.2 % $ 286,946 11.5 % Agricultural and farmland ​ 237,746 9.1 ​ 247,796 9.9 ​ Commercial real estate - owner occupied ​ 218,503 8.3 ​ 234,544 9.4 ​ Commercial real estate - non-owner occupied ​ 713,202 27.2 ​ 684,023 27.4 ​ Multi-family ​ 287,865 11.0 ​ 263,911 10.5 ​ Construction and land development ​ 360,824 13.8 ​ 298,048 11.9 ​ One-to-four family residential ​ 338,253 12.9 ​ 327,837 13.1 ​ Municipal, consumer, and other ​ 197,103 7.5 ​ 156,584 6.3 ​ Loans, before allowance for loan losses ​ 2,620,253 100.0 % 2,499,689 100.0 % Allowance for loan losses ​ (25,333) ​ ​ (23,936) ​ Loans, net of allowance for loan losses ​ $ 2,594,920 ​ ​ ​ $ 2,475,753 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PPP loans (included above) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 28 ​ — % $ 28,404 ​ 1.1 % Agricultural and farmland ​ — ​ — ​ 913 ​ 0.1 ​ Municipal, consumer, and other ​ — ​ — ​ 171 ​ — ​ Total PPP loans ​ $ 28 ​ — % $ 29,488 ​ 1.2 % ​ Loans, before allowance for loan losses were $2.62 billion at December 31, 2022, an increase of $120.6 million, or 4.8%, from December 31, 2021.
December 31, 2023 December 31, 2022 (dollars in thousands) Balance Percent Balance Percent Commercial and industrial $ 427,800 12.6 % $ 266,757 10.2 % Commercial real estate - owner occupied 295,842 8.7 218,503 8.3 Commercial real estate - non-owner occupied 880,681 25.9 713,202 27.2 Construction and land development 363,983 10.7 360,824 13.8 Multi-family 417,923 12.3 287,865 11.0 One-to-four family residential 491,508 14.4 338,253 12.9 Agricultural and farmland 287,294 8.4 237,746 9.1 Municipal, consumer, and other 239,386 7.0 197,103 7.5 Loans, before allowance for credit losses 3,404,417 100.0 % 2,620,253 100.0 % Allowance for credit losses (40,048) (25,333) Loans, net of allowance for credit losses $ 3,364,369 $ 2,594,920 Loans, before allowance for credit losses were $3.40 billion at December 31, 2023, an increase of $784.2 million, or 29.9%, from December 31, 2022.
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. 59 Table of Contents On January 1, 2023, the Company adopted ASU 2016-13 (Topic 326), Measurement of Credit Losses on Financial Instruments, commonly referenced as the Current Expected Credit Loss (“CECL”) standard.
Credit losses are highly dependent on current and forecast economic conditions. Potential deterioration of economic conditions may lead to higher credit losses and adversely impact our financial condition and results of operations.
Removed
As of December 31, 2022, Town and Country Bank had total assets of $923.1 million, total loans of $662.0 million, and total deposits of $762.2 million. This acquisition is a subsequent event and the financial results of Town and Country are not recognized in this Form 10-K.
Added
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.
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Additionally, Heartland Bank’s broader range of products and services and greater ability to meet larger borrowing needs provides an opportunity to expand NXT customer relationships. ​ 50 Table of Contents Branch Rationalization Plan In April 2021, the Company made plans to close or consolidate six branches.
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Additionally, widespread adoption of faster payment and instant payment technologies could require us to substantially increase our expenditures on technology infrastructure, increase our regulatory compliance costs, and adversely impact the stability of our deposit base. We plan to continue investing in our digital banking platforms, while maintaining an appropriately sized branch network.
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The vast majority of those loans have received full forgiveness, and outstanding PPP loans totaled $28 thousand as of December 31, 2022. Income recognition for the fees collected at origination, net of associated origination costs, is deferred and recognized over the loan term on a level yield basis.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe following table sets forth, as of December 31, 2022 and 2021, 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) ​ December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ +400 ​ $ 96,824 11.9 % $ 14,631 8.7 % $ 22,157 12.7 % +300 ​ 89,504 11.0 ​ 11,587 6.9 ​ ​ 18,225 10.5 ​ +200 ​ 71,015 8.7 ​ 8,152 4.8 ​ ​ 13,266 7.6 ​ +100 ​ 43,269 5.3 ​ 4,308 2.5 ​ ​ 7,307 4.2 ​ -100 ​ (64,289) (7.9) ​ (6,808) (4.0) ​ ​ (10,305) (5.9) ​ -200 ​ ​ (159,079) (19.5) ​ (16,218) (9.6) ​ ​ (23,694) (13.6) ​ -300 ​ ​ (219,755) ​ (27.0) ​ ​ (24,834) ​ (14.7) ​ ​ (35,743) ​ (20.5) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ -100 ​ 34,852 7.5 ​ (4,098) (3.3) ​ ​ (7,746) (6.4) ​ ​ ​ 82 Table of Contents Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements.
Biggest changeChange in Interest Rates (basis points) Estimated Increase (Decrease) in EVE Increase (Decrease) in Estimated Net Interest Income Year 1 Year 2 December 31, 2023 +400 10.7 % 7.5 % 13.0 % +300 9.7 5.8 10.3 +200 7.1 3.4 6.4 +100 4.2 1.4 3.1 -100 (6.3) (4.4) (6.1) -200 (13.2) (7.1) (11.2) -300 (4.5) (9.5) (16.0) -400 5.4 (10.2) (17.3) December 31, 2022 +400 11.9 % 8.7 % 12.7 % +300 11.0 6.9 10.5 +200 8.7 4.8 7.6 +100 5.3 2.5 4.2 -100 (7.9) (4.0) (5.9) -200 (19.5) (9.6) (13.6) -300 (27.0) (14.7) (20.5) 74 Table of Contents Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements.
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. ​ 83 Table of Contents
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. 75 Table of Contents
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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.

Other HBT 10-K year-over-year comparisons