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What changed in HBT Financial, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of HBT Financial, Inc.'s 2023 and 2024 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 2024 report.

+372 added−372 removedSource: 10-K (2025-03-07) vs 10-K (2024-03-06)

Top changes in HBT Financial, Inc.'s 2024 10-K

372 paragraphs added · 372 removed · 275 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

115 edited+35 added−15 removed74 unchanged
Biggest changeThese means are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, and their use may affect interest rates charged on loans or paid on deposits.
Biggest changeThese means are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, and their use may affect interest rates charged on loans or paid on deposits, which may impact the Company's business and operations and that of its subsidiary bank. 12 Table of Contents Federal Securities Regulation The Company’s common stock is registered with the SEC under the Securities Act of 1933, as amended (“Securities Act”), and the Securities Exchange Act of 1934, as amended (“Exchange Act”).
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.
In addition, 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.
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 5% or more of a class 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.
These tests provide an incentive for banks and holding companies to increase their holdings in Treasury securities and other sovereign debt as a component of assets, increase the use of long-term debt as a funding source and rely on stable funding like core deposits (in lieu of brokered deposits).
These tests provide an incentive for banks and bank holding companies to increase their holdings in Treasury securities and other sovereign debt as a component of assets, increase the use of long-term debt as a funding source and rely on stable funding like core deposits (in lieu of brokered deposits).
On December 18, 2023, the FDIC issued a statement to reemphasize the importance of strong capital, appropriate credit loss allowance levels, and robust credit risk-management practices for institutions with CRE concentrations. As of December 31, 2023, the Bank did not exceed these guidelines.
On December 18, 2023, the FDIC issued a statement to reemphasize the importance of strong capital, appropriate credit loss allowance levels, and robust credit risk-management practices for institutions with CRE concentrations. As of December 31, 2024, the Bank did not exceed these guidelines.
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.
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 and sanctions laws enforced by the U.S. Department of the Treasury (the “Treasury”) have an impact on our business.
Privacy and Cybersecurity The Bank is subject to many U.S. federal and state laws and regulations governing requirements for maintaining policies and procedures to protect non-public confidential information of their customers.
Privacy and Cybersecurity The Bank is subject to many U.S. federal and state laws and regulations governing requirements for maintaining policies and procedures to protect non-public personal and confidential information of their customers.
Anti-Money Laundering The Bank Secrecy Act ( “BSA”) is the common name for a series of laws and regulations enacted in the United States to combat money laundering and the financing of terrorism.
Anti-Money Laundering/Sanctions The Bank Secrecy Act ( “BSA”) is the common name for a series of laws and regulations enacted in the United States to combat money laundering and the financing of terrorism.
The Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 (“Regulatory Relief Act”) eliminated questions about the applicability of certain Dodd-Frank Act reforms to community bank systems, including relieving us of any requirement to engage in mandatory stress tests, maintain a risk committee or comply with the Volcker Rule’s complicated prohibitions on proprietary trading and ownership of private funds.
The Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 (“Regulatory Relief Act”) eliminated questions about the applicability of certain Dodd-Frank Act reforms to community banking systems, including relieving us of any requirement to engage in mandatory stress tests, maintain a risk committee or comply with the Volcker Rule’s complicated prohibitions on proprietary trading and ownership of private funds.
These laws, and the regulations of the bank regulatory agencies issued under them, affect, among other things, the scope of our business, the kinds and amounts of investments that the Company and the Bank may make, required capital levels relative to assets, the nature and amount of collateral for loans, the establishment of branches, the ability to merge, consolidate and acquire, dealings with the Company’s and the Bank’s insiders and affiliates, and our payment of dividends.
These laws, and the regulations of the banking agencies issued under them, affect, among other things, the scope of our business, the kinds and amounts of investments that the Company and the Bank may make, required capital levels relative to assets, the nature and amount of collateral for loans, the establishment of branches, the ability of the Company and the Bank to merge, consolidate and acquire, dealings with the Company’s and the Bank’s insiders and affiliates, and our payment of dividends.
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.
One test, referred to as the Liquidity Coverage Ratio, or LCR, is designed to ensure that the banking organization 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 peers. We believe the Chicago MSA provides significant opportunities for loan growth.
We believe 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.
Well-Capitalized Requirements The ratios described above are minimum standards for banking organizations to be considered “adequately capitalized.” Bank regulatory agencies uniformly encourage banks to hold more capital and be “well-capitalized” and, to that end, federal law and regulations provide various incentives for banking organizations to maintain regulatory capital at levels in excess of minimum regulatory requirements.
Well-Capitalized Requirements The capital ratios described above are minimum standards for banking organizations to be considered “adequately capitalized.” Banking agencies uniformly encourage banking organizations to hold more capital and be “well-capitalized” and, to that end, federal law and regulations provide various incentives for banking organizations to maintain regulatory capital at levels in excess of minimum regulatory requirements.
The agencies have identified a spectrum of risks facing a banking institution including, but not limited to, credit, market, liquidity, operational, legal, and reputational risk. The Bank is expected to have active board and senior management oversight; adequate policies, procedures, and limits; adequate risk measurement, monitoring, and management information systems; and comprehensive internal controls.
The agencies have identified a spectrum of risks facing a banking organization including, but not limited to, credit, market, liquidity, operational, legal, and reputational risk. The Bank is expected to have active board and senior management oversight; adequate policies, procedures, and limits; adequate risk measurement, monitoring, and management information systems; and comprehensive internal controls.
The purpose of the conservation buffer is to ensure that banking institutions maintain a buffer of capital that can be used to absorb losses during periods of financial and economic stress. Factoring in the conservation buffer increases the minimum ratios depicted above to 7% for Common Equity Tier 1 Capital, 8.5% for Tier 1 Capital and 10.5% for Total Capital.
The purpose of the conservation buffer is to ensure that banking organizations maintain a buffer of capital that can be used to absorb losses during periods of financial and economic stress. Factoring in the conservation buffer increases the minimum ratios depicted above to 7% for Common Equity Tier 1 Capital, 8.5% for Tier 1 Capital and 10.5% for Total Capital.
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 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.
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.
Monetary Policy The monetary policy of the Federal Reserve has a significant effect on the operating results of 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.
Following the global financial crisis, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, announced agreement on a strengthened set of capital requirements for banking organizations around the world, known as Basel III, to address deficiencies recognized in connection with the global financial crisis.
Following the global financial crisis, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, announced an agreement on a strengthened set of capital requirements for banking organizations around the world, known as the Basel III accords, to address deficiencies recognized in connection with the global financial crisis.
The FDIC has adopted a risk-based assessment system, whereby FDIC-insured institutions pay insurance premiums at rates based on their risk classification. For institutions like the Bank that are not considered large and highly complex banking organizations, assessments are now based on examination ratings and financial ratios.
The FDIC has adopted a risk-based assessment system, whereby FDIC-insured institutions pay insurance premiums at rates based on their risk classification. For institutions like the Bank that are not considered large and highly complex banking organizations, the risk-based assessment is now based on examination ratings and financial ratios.
The regulatory agencies generally have broad discretion to impose restrictions and limitations on the operations of a regulated entity where the agencies determine, among other things, that such operations are unsafe or unsound, fail to comply with applicable law, or are otherwise inconsistent with laws and regulations.
The banking agencies generally have broad discretion to impose restrictions and limitations on the operations of a regulated entity where the agencies determine, among other things, that such operations are unsafe or unsound, fail to comply with applicable law, or are otherwise inconsistent with laws and regulations.
Basel III includes a liquidity framework that requires the largest insured institutions to measure their liquidity against specific liquidity tests.
The Basel III Rule includes a liquidity framework that requires the largest insured institutions to measure their liquidity against specific liquidity tests.
If an FDIC-insured institution fails to submit an acceptable compliance plan, or fails in any material respect to implement a compliance plan that has been accepted by its primary federal regulator, the regulator is required to issue an order directing the institution to cure the deficiency.
If an FDIC-insured institution fails to submit an acceptable compliance plan, or fails in any material respect to implement a compliance plan that has been accepted by its primary federal regulator, the banking agency is required to issue an order directing the institution to cure the deficiency.
The Basel III Rule The U.S. bank regulatory agencies adopted the Basel III regulatory capital reforms, and, at the same time, effected changes required by the Dodd-Frank Act, in regulations that were effective (with certain phase-ins) in 2015 (the “Basel III Rule”).
The Basel III Rule The U.S. banking agencies adopted the U.S. Basel III regulatory capital reforms, and, at the same time, effected changes required by the Dodd-Frank Act, in regulations that were effective (with certain phase-ins) in 2015 (the “Basel III Rule”).
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.
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 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.
As a result, our growth and earnings performance may be affected not only by management decisions and general economic conditions, but also by the requirements of federal and state statutes, and by the regulations and policies of various bank regulatory agencies, including the Illinois Department of Financial and Professional Regulation (the “IDFPR”), the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the FDIC, and the Consumer Financial Protection Bureau (the “CFPB”).
As a result, our growth and earnings performance may be affected not only by management decisions and general economic conditions, but also by the requirements of federal and state statutes, and by the regulations and policies of various banking agencies, including the Illinois Department of Financial and Professional Regulation (the “IDFPR”), the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the FDIC, and the Consumer Financial Protection Bureau (the “CFPB”).
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 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 organization's Common Equity Tier 1 Capital.
Depending on the capital category to which an institution is assigned, the regulators’ corrective powers include: (i) requiring the institution to submit a capital restoration plan; (ii) limiting the institution’s asset growth and restricting its activities; (iii) requiring the institution to issue additional capital stock (including additional voting stock) or to sell itself; (iv) restricting transactions between the institution and its affiliates; (v) restricting the interest rate that the institution may pay on deposits; (vi) ordering a new election of directors of the institution; (vii) requiring that senior executive officers or directors be dismissed; (viii) prohibiting the institution from accepting deposits from correspondent banks; (ix) requiring the institution to divest certain subsidiaries; (x) prohibiting the payment of principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution.
Depending on the capital category to which a banking organization is assigned, the banking agencies' corrective powers include: (i) requiring the institution to submit a capital restoration plan; (ii) limiting the institution’s asset growth and restricting its activities; (iii) requiring the institution to issue additional capital stock (including additional voting stock) or to sell itself; (iv) restricting transactions between the institution and its affiliates; (v) restricting the interest rate that the institution may pay on deposits; (vi) ordering a new election of directors of the institution; (vii) requiring that senior executive officers or directors be dismissed; (viii) prohibiting the institution from accepting deposits from correspondent banks; (ix) requiring the institution to divest certain subsidiaries; (x) prohibiting the payment of principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution.
Although capital historically has been one of the key measures of the financial health of both bank holding companies and banks, its role became fundamentally more important in the wake of the global financial crisis, as the banking regulators recognized that the amount and quality of capital held by banks prior to the crisis was insufficient to absorb losses during periods of severe stress.
Although capital historically has been one of the key measures of the financial health of both bank holding companies and banks, its role became fundamentally more important in the wake of the global financial crisis, as the banking agencies recognized that the amount and quality of capital held by banking organizations prior to that crisis was insufficient to absorb losses during periods of severe stress.
The interagency Concentrations in Commercial Real Estate (“CRE”) Lending, Sound Risk Management Practices guidance (“CRE Guidance”) provides supervisory criteria, including the following numerical indicators, to assist bank examiners in identifying banks with potentially significant commercial real estate loan concentrations that may warrant greater supervisory scrutiny: (i) CRE loans exceeding 300% of capital and increasing 50% or more in the preceding three years, or (ii) construction and land development loans exceeding 100% of capital.
The Interagency Concentrations in CRE Lending, Sound Risk Management Practices guidance (“CRE Guidance”) provides supervisory criteria, including the following numerical indicators, to assist bank examiners in identifying banks with potentially significant CRE loan concentrations that may warrant greater supervisory scrutiny: (i) CRE loans exceeding 300% of capital and increasing 50% or more in the preceding three years, or (ii) construction and land development loans exceeding 100% of capital.
The Basel III Rule requires minimum capital ratios as follows: • A ratio of Common Equity Tier 1 Capital equal to 4.5% of risk-weighted assets; • A ratio of Tier 1 Capital equal to 6% of risk-weighted assets; • A continuation of the minimum required amount of Total Capital (Tier 1 plus Tier 2) at 8% of risk-weighted assets; and • A leverage ratio of Tier 1 Capital to total quarterly average assets equal to 4% in all circumstances.
The Basel III Rule requires banking organizations to maintain minimum capital ratios as follows: • A ratio of Common Equity Tier 1 Capital equal to 4.5% of risk-weighted assets; • A ratio of Tier 1 Capital equal to 6% of risk-weighted assets; • A continuation of the minimum required amount of Total Capital (Tier 1 plus Tier 2) at 8% of risk-weighted assets; and • A leverage ratio of Tier 1 Capital to total quarterly average assets equal to 4% in all circumstances.
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.
More specifically, the federal banking 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) 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 banking agencies.
We are required to file with the Federal Reserve periodic reports of our operations, and such additional information regarding us and our subsidiaries as the Federal Reserve may require. Acquisitions, Activities and Financial Holding Company Election The primary purpose of a bank holding company is to control and manage banks.
We are required to file with the Federal Reserve periodic reports of our operations, and such additional information regarding us and our subsidiaries as the Federal Reserve may require. 10 Table of Contents Acquisitions, Activities and Financial Holding Company Election The primary purpose of a bank holding company is to control and manage banks.
For a discussion of capital requirements, see “—The Role of Capital” above. Dividend Payments The Company’s ability to pay dividends to its stockholders may be affected by both general corporate law considerations and policies of the Federal Reserve applicable to bank holding companies.
For a discussion of capital requirements, see “—The Role of Capital” above. 11 Table of Contents Dividend Payments The Company’s ability to pay dividends to its stockholders may be affected by both general corporate law considerations and the policies and capital requirements of the Federal Reserve applicable to bank holding companies.
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.
The federal banking agencies have 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.
We continue to enhance our digital banking suite of products so that all consumer and commercial customers can do their banking at their convenience, through their channels of choice. Additionally, we provide traditional trust and investment services, farmland management, and farmland sales through our wealth management division.
We continue to enhance our digital banking suite of products so that all consumer and commercial customers can do their banking at their convenience, through their channels of choice. 3 Table of Contents Additionally, we provide traditional trust and investment services, farmland management, and farmland sales through our wealth management division.
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.
In addition, banking organizations 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.
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.
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.
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.
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.
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.
As of December 31, 2024, we had total assets of $5.0 billion, loans held for investment of $3.5 billion, and total deposits of $4.3 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.
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.
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.
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.
The amount of the assessment is calculated on the basis of the Bank’s total assets. During the year ended December 31, 2024, 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.
Properly managing risks has been identified as critical to the conduct of safe and sound banking activities and has become even more important as new technologies, product innovation, and the size and speed of financial transactions have changed the nature of banking markets.
Properly managing risks has been identified as critical to the conduct of safe and sound banking activities and has become even more important as new technologies, new third-party relationships, product innovation, and the size and speed of financial transactions have changed the nature of banking markets.
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.
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, 2024: (i) the Bank was not subject to a directive from the FDIC or the IDFPR to increase its capital; and (ii) the Bank was well-capitalized, as defined by FDIC regulations.
FDIC-insured institutions with $10 billion or less in assets, like the Bank, continue to be examined by their applicable bank regulators.
FDIC-insured institutions with $10 billion or less in assets, like the Bank, continue to be examined by their applicable primary federal regulators.
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.
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 one-year horizon.
The CRE Guidance does not limit banks’ levels of CRE lending activities, but rather guides institutions in developing risk management practices and levels of capital that are commensurate with the level and nature of their commercial real estate concentrations.
The CRE Guidance does not limit banks’ levels of CRE lending activities, but rather guides institutions in developing risk management practices and levels of capital that are commensurate with the level and nature of their CRE concentrations.
Supervision and Regulation of the Company General As the sole shareholder of the Bank, we are a bank holding company. As a bank holding company, we are registered with, and are subject to regulation supervision and enforcement by, the Federal Reserve under the Bank Holding Company Act of 1956, as amended (the “BHCA”).
As a bank holding company, we are registered with, and are subject to regulation supervision and enforcement by, the Federal Reserve under the Bank Holding Company Act of 1956, as amended (the “BHCA”).
The Company has elected to operate as a financial holding company. To maintain its status as a financial holding company, the Company and the Bank must be well-capitalized, well-managed, and the Bank must have a least a satisfactory CRA rating.
The Company has elected to operate as a financial holding company. To maintain its status as a financial holding company, the Company and the Bank must be well-capitalized, well-managed, and the Bank must have a least a satisfactory Community Reinvestment Act ("CRA") rating.
The minimums have been expressed in terms of ratios of “capital” divided by “total assets.” The capital guidelines for U.S. banks beginning in 1989 have been based upon international capital accords (known as “Basel” rules) adopted by the Basel Committee on Banking Supervision, a committee of central banks and bank supervisors that acts as the primary global standard-setter for prudential regulation, as implemented by the U.S. bank regulatory agencies on an interagency basis.
The minimum capital levels for banking organizations have been expressed in terms of ratios of “capital” divided by “total assets.” The capital guidelines for U.S. banking organizations beginning in 1989 have been based upon international capital accords (known as the “Basel” accords) adopted by the Basel Committee on Banking Supervision, a committee of central banks and bank supervisors that acts as the primary global standard-setter for prudential regulation, as implemented by the U.S. federal banking agencies on an interagency basis.
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.
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.
Until the deficiency cited in the regulator’s order is cured, the regulator may restrict the FDIC-insured institution’s rate of growth, require the FDIC-insured institution to increase its capital, restrict the rates that the institution pays on deposits, or require the institution to take any action that the regulator deems appropriate under the circumstances.
Until the deficiency cited in the banking agency's order is cured, the agency may restrict the FDIC-insured institution’s rate of growth, require the FDIC-insured institution to increase its capital, restrict the rates that the institution pays on deposits, or require the institution to take any action that the agency deems appropriate under the circumstances.
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.
We have produced consistently strong earnings even through challenging cycles such as the 2008-2009 global financial crisis and 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. We convey the values of the Midwest through hard work and perseverance.
Change in Control Federal law prohibits any person or company from acquiring “control” of an FDIC-insured depository institution or its holding company without prior notice to the appropriate federal bank regulator.
Change in Control Federal law prohibits any person or company from acquiring “control” of an FDIC-insured depository institution or its holding company without prior notice to the appropriate federal banking agency.
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.
On December 18, 2015, and again in recent years, the federal banking agencies issued statements 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 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.
Our digital banking services include online banking, mobile banking, digital payments, and personal financial management tools. We also provide small business and commercial checking accounts and related services such as treasury management.
Much of the guidance addresses large banking organizations and, because of the size and complexity of their operations, the regulators expect those organizations to maintain systematic and formalized policies, procedures, and systems for ensuring that the incentive compensation arrangements for all executive and non-executive employees covered by this guidance are identified and reviewed, and appropriately balance risks and rewards.
Much of the guidance is directed at large banking organizations and, because of the size and complexity of their operations, the federal banking agencies expect those organizations to maintain systematic and formalized policies, procedures, and systems for ensuring that the incentive compensation arrangements for all executive and non-executive employees covered by this guidance are identified and reviewed, and appropriately balance risks and rewards.
Our management team believes our diverse footprint in both urban and rural markets positions us well relative to our competition in terms of access to both high quality, stable funding sources and loan growth opportunities in attractive markets.
We believe our diverse footprint in both urban and rural markets positions us well relative to our competition in terms of access to both high quality, stable funding sources and loan growth opportunities in attractive markets.
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.
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. The FDIC regularly assesses the Bank’s record of meeting the credit needs of its communities in dedicated examinations.
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.
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 under state and/or federal law.
The extent of the regulators’ powers depends on whether the institution in question is “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” in each case as defined by regulation.
The extent of the banking agencies' powers depends on whether the banking organization in question is “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” in each case as defined by regulation.
In addition, under the Basel III Rule, institutions that seek the freedom to pay unrestricted 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, banking organizations that want to pay unrestricted dividends have to maintain 2.5% in Common Equity Tier 1 Capital attributable to the capital conservation buffer. See “—The Role of Capital” above.
These reforms have been favorable to our operations. The supervisory framework for U.S. banking organizations subjects banks and bank holding companies to regular examination by their respective regulatory agencies, which results in examination reports and ratings that are not publicly available, and that can impact the conduct and growth of their business.
The supervisory framework for U.S. banking organizations subjects banks and bank holding companies to regular examination by their respective banking agencies, which results in examination reports and ratings that are not publicly available, and that can impact the conduct and growth of their business.
Utilizing various industry specific compensation surveys and member associations, we analyze pay practices for jobs and job families on a regular basis to ensure we remain competitive in the markets we operate and to maintain internal pay equity.
Compensation & Benefits To attract and retain high-performing, skilled individuals, we offer competitive base pay and benefits. Utilizing various industry specific compensation surveys and member associations, we analyze pay practices for jobs and job families on a regular basis to ensure we remain competitive in the markets we operate and to maintain internal pay equity.
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.
In addition, under the Basel III Rule, banking organizations that want to pay unrestricted dividends have to maintain 2.5% in Common Equity Tier 1 Capital attributable to the capital conservation buffer.
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.
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 federal banking agencies and the U.S. Congress that flawed incentive compensation practices in the financial industry were one of many factors contributing to the global financial crisis.
Capital Levels Banks have been required to hold minimum levels of capital based on guidelines established by the bank regulatory agencies since 1983.
Capital Levels Banking organizations have been required to hold minimum levels of capital based on guidelines established by the federal banking agencies since 1983.
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.
Prompt Corrective Action The concept of a banking organization being “well-capitalized” is part of a regulatory enforcement regime that provides the federal banking agencies 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 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.
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 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 Dodd-Frank Act also directed the Federal Reserve, together with the other federal banking and financial services agencies, 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.
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.
Although the reforms primarily targeted large banking organizations and systemically important financial institutions, their influence filtered down in varying degrees to community banking organizations over time and caused our compliance and risk management processes, and the costs thereof, to increase.
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.
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.
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.
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.
Notwithstanding the availability of funds for dividends, however, the FDIC and the IDFPR may prohibit the payment of dividends by the Bank if either or both determine that such payment would constitute an unsafe or unsound practice.
As described above, the Bank exceeded its capital requirements under applicable guidelines as of December 31, 2024. Notwithstanding the availability of funds for dividends, however, the FDIC and the IDFPR may prohibit the payment of dividends by the Bank if either or both determine that such payment would constitute an unsafe or unsound practice.
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.
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.
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.
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.
State Bank Investments and Activities The Bank is permitted to make investments and engage in activities directly or through subsidiaries as authorized by Illinois law.
See “—The Role of Capital” above. 14 Table of Contents State Bank Investments, Activities and Acquisitions The Bank is permitted to make investments and engage in activities directly or through subsidiaries as authorized by Illinois law.
These security and privacy policies and procedures are in effect across all businesses and geographic locations. Branching Authority Illinois banks, such as the Bank, have the authority under Illinois law to establish branches anywhere in the State of Illinois, subject to receipt of all required regulatory approvals.
Branching Authority Illinois banks, such as the Bank, have the authority under Illinois law to establish branches anywhere in the State of Illinois, subject to receipt of all required regulatory approvals.
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.
The total base assessment rates, effective as of January 1, 2023, currently range from 2.5 basis points to 32 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.
To support the well-being of our employees and their families, we provide access to a variety of flexible and convenient healthcare programs for physical and mental health, long-term and short-term disability, paid time off, and a Company-matched 401(k) plan. COMPETITION Our profitability and growth are affected by the highly competitive nature of the financial services industry.
To support the well-being of our employees and their families, we provide access to a variety of flexible and convenient healthcare programs for physical and mental health, long-term and short-term disability, paid time off, and a Company-matched 401(k) plan. In 2025, we also began offering paid parental leave for employees.
Residential Mortgage Lending As required by the Dodd-Frank Act, the CFPB issued a series of final rules in January 2013 amending Regulation Z, implementing the Truth in Lending Act, which requires mortgage lenders to make a reasonable and good faith determination, based on verified and documented information, that a consumer applying for a residential mortgage loan has a reasonable ability to repay the loan according to its terms.
Because the extent of any obligation to increase the level of investment in the FHLB of Chicago depends entirely upon the occurrence of future events, we are unable to determine the extent of future required potential payments to the FHLB of Chicago at this time. 17 Table of Contents Residential Mortgage Lending As required by the Dodd-Frank Act, the CFPB issued a series of final rules in January 2013 amending Regulation Z, implementing the Truth in Lending Act, which requires mortgage lenders to make a reasonable and good faith determination, based on verified and documented information, that a consumer applying for a residential mortgage loan has a reasonable ability to repay the loan according to its terms.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf 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.
Biggest changeIn addition to the general risks associated with any growth plans, acquiring other banks, businesses, or branches involves various risks commonly associated with acquisitions, including, among other things: • the time and expense associated with identifying and evaluating potential acquisitions and negotiating potential transactions; • inaccuracies in the estimates and judgments used to evaluate credit, operations, management, and market risks with respect to the target institution (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; • potential goodwill impairment; • 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.
Unfavorable market conditions can result in a deterioration in the credit quality of our borrowers and the demand for our products and services, an increase in the number of loan delinquencies, defaults and charge-offs, additional provisions for loan losses, adverse asset values and an overall material adverse effect on the quality of our loan portfolio.
Unfavorable market conditions can result in a deterioration in the credit quality of our borrowers and the demand for our products and services, an increase in the number of loan delinquencies, defaults and charge-offs, additional provisions for credit losses, adverse asset values and an overall material adverse effect on the quality of our loan portfolio.
These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities, can have less access to capital sources and loan facilities, frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete, and may experience substantial volatility in operating results, any of which may impair a borrower’s ability to repay a loan.
These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities, may have less access to capital sources and loan facilities, frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete, and may experience substantial volatility in operating results, any of which may impair a borrower’s ability to repay a loan.
We anticipate that much of our future growth will be dependent on our ability to successfully implement our acquisition growth strategy because certain of our market areas are comprised of mature, rural communities with limited population growth. A risk exists, however, that we will not be able to identify suitable additional candidates for acquisitions.
We anticipate that much of our future growth will be dependent on our ability to successfully implement our acquisition growth strategy because certain of our market areas are comprised of mature, rural communities with limited population growth. A risk exists, however, that we will not be able to identify suitable candidates for acquisitions.
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.
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. 21 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.
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.
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 increases in the prevailing interest rates.
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.
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. 25 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.
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.
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 in which we operate, may adversely impact our borrowers and our business. 20 Table of Contents CREDIT RISKS We may not be able to adequately measure and limit our credit risk, which could lead to unexpected losses.
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.
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 26 Table of Contents sensitive financial and other personal information of their customers and employees and subjecting them to potential fraudulent activity.
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.
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. 27 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.
The banking laws and regulations applicable to us govern a variety of matters, including, among other things, the types of business activities in which we and our subsidiaries can engage; permissible types, amounts and terms of loans and investments we may make; the maximum interest rate that we may charge; the amount of reserves we must hold against deposits we take; the types of deposits we may accept; maintenance of adequate capital and liquidity; changes in the control of us and the Bank; restrictions on dividends or other capital distributions; and establishment of new offices or branches.
The banking laws and regulations applicable to us govern a variety of matters, including, among other things, the types of business activities in which we and our subsidiaries can engage; permissible types, amounts and terms of loans and investments we may make; the maximum interest rate that we may charge; the amount of reserves we must hold against deposits we take; the types of deposits we may accept; maintenance of adequate capital and liquidity; changes in the control of us and the Bank; restrictions on dividends or other capital distributions; and 28 Table of Contents establishment of new offices or branches.
Decreases in commodity prices or lower crop yields may result in a decrease in wealth management fees collected for our agricultural services. 21 Table of Contents INTEREST RATE RISKS Fluctuations in interest rates may reduce net interest income and otherwise negatively impact our financial condition and results of operations.
Decreases in commodity prices or lower crop yields may result in a decrease in wealth management fees collected for our agricultural services. 23 Table of Contents INTEREST RATE RISKS Fluctuations in interest rates may reduce net interest income and otherwise negatively impact our financial condition and results of operations.
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
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. 39 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
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.
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.
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.
In addition, the success of a small or mid-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.
Concerns about, or a default by, one institution could lead to significant liquidity problems and losses or defaults by other institutions, as the commercial and financial soundness of many financial institutions is closely related as a result of these credit, trading, clearing and other relationships.
Concerns about, or a failure of, one institution could lead to significant liquidity problems and losses or defaults by other institutions, as the commercial and financial soundness of many financial institutions is closely related as a result of these credit, trading, clearing and other relationships.
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.
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 trade-off.
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.
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. 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.
The fair value of these investments may also be affected by factors other than the underlying performance of the issuer of the securities or the mortgages underlying the securities, such as changes in the interest rate environment, negative trends in the residential and commercial real estate markets, ratings downgrades, adverse changes in the business climate and a lack of liquidity for certain investment securities.
The fair value of these investments may also be affected by factors other than the underlying performance of the issuer of the securities or the mortgages underlying the securities, such as negative trends in the residential and commercial real estate markets, ratings downgrades, adverse changes in the business climate and a lack of liquidity for certain investment securities.
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.
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 commercial real estate loans could have a material adverse impact on our financial condition and results of operations. 22 Table of Contents Real estate construction loans are based upon estimates of costs and values associated with the complete project.
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.
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 depository institution. These laws include the BHCA and the CBCA.
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.
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.
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.
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, 2024, our principal stockholder, Heartland Bancorp, Inc. Voting Trust U/A/D 5/4/2016 (the "Voting Trust”), owned approximately 54.5% of the outstanding shares of our common stock and its trustee is our Executive Chairman.
The small to midsized businesses to which we lend may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan, and such impairment could adversely affect our results of operations and financial condition.
The small to mid-sized businesses to which we lend may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan, and such impairment could adversely affect our results of operations and financial condition.
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.
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.
Our business is subject to increased litigation and regulatory enforcement risks due to a number of factors, including the highly regulated nature of the financial services industry and the focus of state and federal prosecutors on banks and the financial services industry generally.
Our business is subject to increased litigation and regulatory enforcement risks due to a number of factors, including the highly regulated nature of the financial services industry and the focus of state and federal 32 Table of Contents prosecutors on banks and the financial services industry generally.
Any decision to declare and pay dividends will be dependent on a variety of factors, including our financial condition, earnings, legal requirements, our general liquidity needs, and other factors that our board deems relevant.
Any decision to declare and pay 35 Table of Contents dividends will be dependent on a variety of factors, including our financial condition, earnings, legal requirements, our general liquidity needs, and other factors that our board deems relevant.
For example, we could be required to sell banking centers as a condition to receiving regulatory approvals and such a condition may not be acceptable to us or may reduce the benefit of any acquisition.
For example, we could be required to sell banking centers as a condition to receiving regulatory approvals and such a condition may not be acceptable to us or may reduce the benefit of 34 Table of Contents any acquisition.
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.
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.
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.
The FDIC has the primarily responsibility for supervising and examining the Bank’s compliance with federal consumer 30 Table of Contents financial laws and regulations, including CFPB regulations. See "Supervision and Regulation—Supervision and Regulation of the Bank—Consumer Financial Services" for additional information.
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, 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 33 Table of Contents our ability to make acquisitions at attractive prices.
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.
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.
The Basel III Rule require us to maintain a minimum Common Equity Tier 1 capital ratio of 4.5%, a minimum total Tier 1 capital ratio of 6%, a minimum total capital ratio of 8% and a minimum Tier 1 leverage ratio of 4%, and a capital conservation buffer of greater than 2.5% of risk-weighted assets (the "Capital Conservation Buffer").
The Basel III Rule requires us to maintain a minimum Common Equity Tier 1 capital ratio of 4.5%, a minimum total Tier 1 capital ratio of 6%, a minimum total capital ratio of 8% and a minimum Tier 1 leverage ratio of 4%, 29 Table of Contents and a capital conservation buffer of greater than 2.5% of risk-weighted assets (the "Capital Conservation Buffer").
We compete for loans, deposits and other financial services with other commercial banks, credit unions, brokerage houses, mutual funds, insurance companies, real estate conduits, mortgage brokers and specialized finance companies.
We compete for loans, deposits and other financial services with other commercial banks, credit unions, FinTechs, digital asset service providers, brokerage houses, mutual funds, insurance companies, real estate conduits, mortgage brokers and specialized finance companies.
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.
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. 37 Table of Contents Continued elevated levels of inflation could adversely impact our business and results of operations.
The shares of our common stock held by each of our executive officers and directors and the trustee of the Voting Trust may be sold in accordance with the volume, manner of sale, and other limitations under Rule 144, and may also be sold pursuant to a Registration Statement on Form S-3 filed by the Company, which was declared effective by the SEC on April 19, 2023. 33 Table of Contents In the future, we may also issue securities in connection with acquisitions or investments.
The shares of our common stock held by each of our executive officers and directors and the trustee of the Voting Trust may be sold in accordance with the volume, manner of sale, and other limitations under Rule 144, and may also be sold pursuant to a Registration Statement on Form S-3 filed by the Company, which was declared effective by the SEC on April 19, 2023.
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 majority of our loan portfolio consists of commercial and commercial real estate loans, which may have a higher degree of risk than some other types of loans. Commercial and commercial real estate loans, including multi-family loans, are often larger and may involve greater risks than some other types of lending.
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.
An important function of the Federal Reserve is to regulate the money supply and credit conditions. 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.
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.
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 bank, and to commit resources to support such subsidiary bank.
With respect to the risks particularly associated with the integration of an acquired business, we may encounter a number of difficulties, such as: (1) customer loss and revenue loss; (2) the loss of key employees; (3) the disruption of its operations and business; (4) the inability to maintain and increase its competitive presence; (5) possible inconsistencies in standards, control procedures and policies; and/or (6) unexpected problems with costs, operations, personnel, technology and credit.
With respect to the risks particularly associated with the integration of an acquired business, we may encounter a number of difficulties, including, among other things: • customer loss and revenue loss; • the loss of key employees; • the disruption of its operations and business; • the inability to maintain and increase its competitive presence; • possible inconsistencies in standards, control procedures and policies; and • unexpected problems with costs, operations, personnel, technology and credit.
Economic events, including decreases in office occupancy following the COVID-19 pandemic, or governmental regulations outside of the control of the borrower or lender could negatively impact the future cash flow and market values of the affected properties.
Economic events, including decreases in office occupancy following the COVID-19 pandemic as a result of the shift to remote and hybrid work environments, or governmental regulations outside of our control or the control of the borrower could negatively impact the future cash flow and market values of the affected properties.
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.
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.
The concentration of ownership may also have the effect of delaying, preventing or deterring a change of control of the Company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.
The concentration of ownership may also have the effect of delaying, preventing or deterring a change of control of the Company and might ultimately affect the market price of our common stock.
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.
When needed, additional liquidity may be available by borrowing from the Federal Reserve Bank of Chicago or 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 deposits.
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.
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.
Climate change presents multi-faceted risks, including, but not limited to: • operational risk from the physical effects of climate events on the Company and our customers’ facilities and other assets; • credit risk from borrowers with significant exposure to climate risk; • legal and regulatory compliance risk as our regulators, investors, and other stakeholders have increasingly viewed financial institutions as important in helping to address the risks related to climate change, both directly and with respect to their customers, which may result in financial institutions coming under increased pressure regarding the disclosure and management of their climate risks and related lending and investment activities; and • reputational risk from stakeholder concerns about the Company’s practices related to climate change, the Company’s carbon footprint, and the Company’s business relationships with clients who operate in carbon-intensive industries.
Climate change presents multi-faceted risks, including, but not limited to: • operational risk from the physical effects of climate events on the Company and our customers’ facilities and other assets; • credit risk from borrowers with significant exposure to climate risk; • legal and regulatory compliance risk; and • reputational risk from stakeholder concerns about the Company’s practices related to climate change and the Company’s business relationships with clients who operate in carbon-intensive industries.
These instruments are used in varying 22 Table of Contents combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits.
These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits.
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.
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 a significant effect on the operating results of commercial banks. The effects of such policies upon our business, financial condition and results of operations cannot be predicted.
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.
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.
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.
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.
These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of the Company, even if doing so would benefit our stockholders.
These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of the Company, even if doing so would benefit our stockholders. 36 Table of Contents These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.
Our future growth and success will depend on our ability to compete effectively in a highly competitive environment. We face substantial competition in all phases of our operations from a variety of different competitors. Our future growth and success will depend on our ability to compete effectively in this highly competitive environment.
The risks associated with climate change are changing and evolving in an escalating fashion, making them difficult to assess due to limited data and other uncertainties. Our future growth and success will depend on our ability to compete effectively in a highly competitive environment. We face substantial competition in all phases of our operations from a variety of different competitors.
These rules also require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure or the inability to comply with these regulations could result in fines or penalties, curtailment of expansion opportunities, intervention or sanctions by regulators and costly litigation or expensive additional controls and systems.
Failure or the inability to comply with these regulations could result in fines or penalties, curtailment of expansion opportunities, intervention or sanctions by regulators and costly litigation or expensive additional controls and systems. In recent years, several banking institutions have received large fines for non-compliance with these laws and regulations.
Given 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.
Given 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; the implementation of policies proposed by the new presidential administration; and geopolitical developments, such as future terrorist attacks and threats, widespread disease or pandemics, and acts of war including the Russian invasion of Ukraine and ongoing conflicts in the Middle East, there is a meaningful risk that the Federal Reserve and other central banks may maintain interest rates at elevated levels, which may negatively impact the entire national economy.
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.
Additionally, technology and other changes are allowing consumers and businesses to complete financial transactions through alternative methods that historically have involved 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.
In recent years, several banking institutions have received large fines for non-compliance with these laws and regulations. In addition, FinCEN requires financial institutions to enhance their customer due diligence programs, including verifying the identity of beneficial owners of qualifying business customers.
In addition, FinCEN requires financial institutions to enhance their customer due diligence programs, including verifying the identity of beneficial owners of qualifying business customers. We have developed policies and continue to augment procedures and systems designed to assist in compliance with these laws and regulations, but these policies may not be effective to provide such compliance.
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.
Accordingly, a downturn in the real estate market or a challenging business and economic environment, including those which disproportionately affect a class of borrower, may increase our risk associated with our loan portfolio.
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.
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.
Financial institutions are required under the USA PATRIOT Act of 2001 and the BSA to develop programs to prevent financial institutions from being used for money-laundering, terrorist financing and other illicit activities. Financial institutions are also obligated to file suspicious activity reports with the Office of Financial Crimes Enforcement Network ("FinCEN") of the Treasury if such activities are detected.
Non-compliance with the USA PATRIOT Act, the Bank Secrecy Act, or other laws and regulations could result in fines or sanctions. Financial institutions are required under the USA PATRIOT Act of 2001 and the BSA to develop programs to prevent financial institutions from being used for money-laundering, terrorist financing and other illicit activities.
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 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.
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.
While the significant increase in prevailing interest rates increased our net interest income, it also led to increased losses in our available-for-sale debt securities portfolio. Since 2022, the magnitude of our net unrealized losses on debt securities available-for-sale have partially reversed and were $59.4 million as of December 31, 2024.
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.
In the future, we may also issue securities in connection with acquisitions or investments. 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.
Any of these results could have a material adverse effect on our business, financial condition, results of operations and growth prospects. 29 Table of Contents Regulation in the areas of privacy and data security could increase our costs. We are subject to various regulations related to privacy and data security, and we could be negatively impacted by these regulations.
Regulation in the areas of privacy and data security could increase our costs. We are subject to various regulations related to privacy and data security, and we could be negatively impacted by these regulations. For example, we are subject to the safeguards guidelines under the Gramm-Leach-Bliley Act.
The Federal Reserve is mandated to pursue the goals of maximum employment and price stability, and beginning in March 2022 it made a series of significant increases to the target Federal Funds rate as part of an effort to combat elevated levels of inflation affecting the U.S. economy.
Their use also affects interest rates charged on loans or paid on deposits. 24 Table of Contents Beginning in March 2022, the Federal Open Market Committee of the Federal Reserve (the "FOMC") made a series of significant increases to the federal funds target range as part of an effort to combat elevated levels of inflation affecting the U.S. economy.
Removed
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.
Added
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.
Removed
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.
Added
It is currently expected that during 2025, and perhaps beyond, the FOMC may decrease interest rates. In September 2024, the FOMC began lowering interest rates with the target range for the federal funds rate decreasing by 100 basis points to a range of 4.25% to 4.50% by the end of 2024.
Removed
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.
Added
The decrease was expressly made in response to inflation moderating and the labor market weakening. Any future change in monetary policy by the FOMC, in an effort to stimulate the economy or otherwise, resulting in lower interest rates would likely result in lower revenue through lower net interest income over time, which could adversely affect our results of operations.
Removed
Some of this unrealized loss reversed during the year ended December 31, 2023 with a $16.9 million unrealized gain on debt securities available-for-sale. Higher interest rates can also negatively affect our customers’ businesses and financial condition, and the value of collateral securing loans in our portfolio.
Added
These effects from interest rate changes or from other sustained economic stress or a recession, among other matters, could have a material adverse effect on our business, financial condition, liquidity, and results of operations.
Removed
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.
Added
In addition, emerging trends, such as generative artificial intelligence, have the potential to disrupt the banking industry. Although generative artificial intelligence offers opportunities to enhance operational efficiency, it also introduces risks, including fraud, security vulnerabilities, and compliance challenges.
Removed
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.
Added
Legal, regulatory and policy changes may directly affect financial institutions and the global economy. Changes in policy and at banking agencies, including changes in interpretation and prioritization, occur over time through policy and personnel changes following federal and state-level elections, which lead to changes involving the level of oversight and focus on the financial services industry.
Removed
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.
Added
The nature, timing and economic and political effects of potential changes to the current legal and regulatory framework affecting financial institutions remain highly uncertain in connection with a change in presidential administration.
Removed
We have developed policies and continue to augment procedures and systems designed to assist in compliance with these laws and regulations, but these policies may not be effective to provide such compliance.
Added
Given the complex factors affecting the strength of the U.S. economy, including uncertainties regarding the persistence of inflation, geopolitical developments such as ongoing conflicts in the Middle East and the Russian invasion of Ukraine, and resulting disruptions in the global energy market, tight labor market conditions domestically, supply chain issues both domestically and internationally and the potential effects of a new presidential administration, including its response to the foregoing, potential imposition of new tariffs, mass deportations and changes to tax or other financial regulations, uncertainty surrounding future changes may adversely affect our operating environment and therefore our business, financial condition, results of operations and growth prospects.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur current Chief Information Officer has over 20 years of technology experience, including 15 years in Banking. In addition, our board of directors is responsible for the oversight of risk management.
Biggest changeOur management team is responsible for the day-to-day management of risks we face, including our Chief Information Officer. Our current Chief Information Officer has over 20 years of technology experience, including 16 years in Banking. In addition, our board of directors is responsible for the oversight of risk management.
To carry out those duties, our board of directors receive reports from our management team regarding cybersecurity risks, and the Company’s efforts to prevent, detect, mitigate and remediate any cybersecurity incidents. These reports are delivered at least quarterly, with additional information and trainings provided at least twice per year.
To carry out those duties, our board of directors receive reports from our management team regarding cybersecurity risks, and the Company’s efforts to prevent, detect, mitigate and remediate any cybersecurity incidents. These reports are delivered at least quarterly, with additional information and trainings provided at least twice per year. 40 Table of Contents
Accordingly, we have long devoted significant resources to assessing, identifying and managing risks associated with cybersecurity threats, including: • internal resources who are responsible for conducting regular assessments of our information systems, existing controls, vulnerabilities and potential improvements; • continuous monitoring tools that can detect and help respond to cybersecurity threats in real-time; • performing due diligence with respect to our third-party service providers, including their cybersecurity practices, and requiring contractual commitments from our service providers to take certain cybersecurity measures; • third-party cybersecurity consultants, who conduct periodic penetration testing, vulnerability assessments and other procedures to identify potential weaknesses in our systems and processes; and • periodic cybersecurity training for our workforce.
Accordingly, we have long devoted significant resources to assessing, identifying and managing risks associated with cybersecurity threats, including: • internal resources who are responsible for conducting regular assessments of our information systems, existing controls, vulnerabilities and potential improvements; • continuous monitoring tools that can detect, alert on, respond to, and help mitigate cybersecurity threats in real-time; • performing due diligence with respect to our third-party service providers, including their cybersecurity practices, and requiring contractual commitments from our service providers to take certain cybersecurity measures; • third-party cybersecurity consultants, who conduct periodic penetration testing, vulnerability assessments, and other procedures which identify potential weaknesses in our systems and help validate and improve internal processes and tooling; and • periodic cybersecurity training for our workforce.
While none of these identified threats or incidents have materially affected us, it is possible that threats and incidents we identify in the future could have a material adverse effect on our business strategy, results of operations and financial condition. Our management team is responsible for the day-to-day management of risks we face, including our Chief Information Officer.
While none of these identified threats or incidents have materially affected us, it is possible that threats and incidents we identify in the future could have a material adverse effect on our business strategy, results of operations and financial condition. We continue to evolve our controls to mitigate these threats as effectively as we can reasonably foresee them occurring.

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. The Company considers its properties to be suitable and adequate for its present needs. 39 Table of Contents
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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMINE SAFETY DISCLOSURES Not applicable. 40 Table of Contents PART II.
Biggest changeMINE SAFETY DISCLOSURES Not applicable. 41 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 changeCOMPARISON 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.
Biggest changeCOMPARISON OF CUMULATIVE TOTAL RETURN Index December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 HBT Financial, Inc. $ 100.00 $ 83.45 $ 106.84 $ 115.44 $ 128.91 $ 138.91 Russell 2000 100.00 119.96 137.74 109.59 128.14 142.93 S&P 600 Small Cap Bank Index 100.00 87.95 119.38 109.98 108.10 123.92 The performance graph and table represent past performance and should not be considered to be an indication of future performance.
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.
There are no longer any shares subject to repurchase under the 2024 Repurchase Plan. The 2025 Repurchase Plan took effect upon the expiration of the 2024 Repurchase Plan, and there remains $15.0 million in common stock subject to repurchase thereunder.
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.
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 2024, we paid quarterly cash dividends of $0.19 per share on our common stock. The quarterly cash dividend was increased to $0.21 per share on January 21, 2025.
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.
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 19, 2025, HBT Financial, Inc. had approximately 113 shareholders of record.
The 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 following table sets forth information about the Company’s purchases of its common stock during the fourth quarter of 2024: 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, 2024 — $ — — $ 10,603 November 1 - 30, 2024 — — — 10,603 December 1 - 31, 2024 — — — 10,603 Total — $ — — $ 10,603 (1) __________________________________ (1) As of December 31, 2024, there was $10.6 million left under the 2024 Repurchase Plan, which expired on January 1, 2025.
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.
On December 17, 2024, 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, 2026 (the “2025 Repurchase Plan”). The 2025 Repurchase Plan authorizes the Company to repurchase up to $15 million of its common stock.
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”).
Issuer Purchases of Equity Securities On December 19, 2023, 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, 2025 (the “2024 Repurchase Plan”).
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.
Unregistered Sales of Equity Securities None. 42 Table of Contents Stock Performance Graph The performance graph and table below compares the cumulative total return on the Company’s common stock from December 31, 2019 through December 31, 2024, 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.

Item 7. Management's Discussion & Analysis

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

78 edited+36 added−53 removed29 unchanged
Biggest changeCore 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.
Biggest changeCore 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. _________________________________________________ (1) Tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%. 69 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) 2024 2023 2022 Net income $ 71,780 $ 65,842 $ 56,456 Less: adjustments Acquisition expenses (1) — (13,691) (1,092) Gains (losses) on closed branch premises (635) 75 141 Realized gains (losses) on sales of securities (3,697) (1,820) — Mortgage servicing rights fair value adjustment (174) (1,615) 2,153 Total adjustments (4,506) (17,051) 1,202 Tax effect of adjustments (2) 1,284 4,711 (551) Total adjustments after tax effect (3,222) (12,340) 651 Adjusted net income $ 75,002 $ 78,182 $ 55,805 Average assets $ 5,008,083 $ 4,927,904 $ 4,269,873 Return on average assets 1.43 % 1.34 % 1.32 % Adjusted return on average assets 1.50 1.59 1.31 _________________________________________________ (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.
The following accounting estimates could be deemed critical: Allowance for Credit Losses The allowance for credit losses reflects an estimate of lifetime expected credit losses. Measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts.
The following accounting estimate could be deemed critical: Allowance for Credit Losses The allowance for credit losses reflects an estimate of lifetime expected credit losses. Measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts.
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.
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 23 – Commitments and Contingencies” to the consolidated financial statements.
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.
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 10 full-service branch locations which began operating as branches of Heartland Bank. The core system conversion was successfully completed in April 2023.
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.
The composition and maturities of the debt securities portfolio as of December 31, 2024, 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.
Management leverages economic projections from a reputable third party to inform its economic forecasts with a reversion to historical averages for periods beyond a reasonable and supportable forecast period. Nonaccrual loans and loans which do not share risk characteristics with other loans in the pool are individually evaluated to determine expected credit losses.
Management leverages economic projections from a reputable third party to form its economic forecasts with a reversion to historical averages for periods beyond a reasonable and supportable forecast period. Nonaccrual loans and loans which do not share risk characteristics with other loans in the pool are individually evaluated to determine expected credit losses.
(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.
(2) See "Non-GAAP Financial Information" for reconciliation of non-GAAP measure to their most closely comparable GAAP measures. 48 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) 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.
(2) The prompt corrective action provisions are not applicable to bank holding companies. N/A Not applicable. As of December 31, 2024, 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.
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, 2023 vs. Year Ended December 31, 2022 Year Ended December 31, 2022 vs.
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, 2024 vs. Year Ended December 31, 2023 Year Ended December 31, 2023 vs.
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.
As of December 31, 2024, 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.
(5) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities. 49 Table of Contents The following table sets forth the components of loan interest income and their contributions to the total loan yield.
(5) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities. 47 Table of Contents The following table sets forth the components of loan interest income and their contributions to the total loan yield.
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.
December 31, 2024 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.
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.
Market Area As of December 31, 2024, our branch network included 66 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.
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.
Repurchases were conducted in compliance with Rule 10b-18 and in compliance with Regulation M under the Exchange Act. On December 17, 2024, 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.
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.
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 gains (losses) on 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. • Adjusted Return on Average Assets is a performance measure utilized in determining executive compensation.
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.
During the years ended December 31, 2024, 2023, and 2022, holding company operating expenses consisted of interest expense of $5.7 million, $5.4 million, and $3.7 million, respectively, and other operating expenses of $4.1 million, $5.5 million, and $5.3 million, respectively.
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 of December 31, 2024, 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 . As of December 31, 2024, the Bank had no material commitments for capital expenditures.
December 31, 2023 December 31, 2022 For Capital Adequacy Purposes With Capital Conversation Buffer (1) To Be Well Capitalized Under Prompt Corrective Action Provisions (2) Consolidated HBT Financial, Inc.
December 31, 2024 December 31, 2023 For Capital Adequacy Purposes With Capital Conservation Buffer (1) To Be Well Capitalized Under Prompt Corrective Action Provisions (2) Consolidated HBT Financial, Inc.
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.
During the years ended December 31, 2024, 2023, and 2022, the Bank paid $34.0 million, $64.0 million, and $28.0 million in dividends to the Holding Company, respectively.
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 .
As of December 31, 2024, 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 .
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.
Total Capital (to Risk Weighted Assets) 16.51 % 15.33 % 10.50 % N/A Tier 1 Capital (to Risk Weighted Assets) 14.50 13.42 8.50 N/A Common Equity Tier 1 Capital (to Risk Weighted Assets) 13.21 12.12 7.00 N/A Tier 1 Capital (to Average Assets) 11.51 10.49 4.00 N/A Heartland Bank and Trust Company Total Capital (to Risk Weighted Assets) 16.11 % 14.92 % 10.50 % 10.00 % Tier 1 Capital (to Risk Weighted Assets) 15.10 14.01 8.50 8.00 Common Equity Tier 1 Capital (to Risk Weighted Assets) 15.10 14.01 7.00 6.50 Tier 1 Capital (to Average Assets) 11.98 10.96 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 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 or for the Years Ended December 31, (dollars in thousands) 2024 2023 2022 Balance at end of year FHLB advances $ 13,231 $ 12,623 $ 160,000 Federal Reserve discount window — — — Federal funds purchased — — — Total borrowings $ 13,231 $ 12,623 $ 160,000 Average balance during year FHLB advances $ 13,301 $ 139,554 $ 25,934 Federal Reserve discount window — 3 — Federal funds purchased 82 260 534 Total borrowings $ 13,383 $ 139,817 $ 26,468 Average interest rate during year FHLB advances 3.57 % 5.10 % 3.68 % Federal Reserve discount window — 5.25 — Federal funds purchased 5.93 5.56 2.11 Total borrowings 3.59 5.10 3.65 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.
Additionally, the Holding Company paid $21.9 million, $18.6 million, and $16.8 million of dividends to stockholders during the years ended December 31, 2023, 2022, and 2021, respectively. The Holding Company also paid $38.0 million in cash consideration in the acquisition of Town and Country during the first quarter of 2023.
Additionally, the Holding Company paid $24.2 million, $21.9 million, and $18.6 million of dividends to stockholders during the years ended December 31, 2024, 2023, and 2022, respectively. The Holding Company also paid $38.0 million in cash consideration in the acquisition of Town and Country during 2023.
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.
As of or for the Years Ended December 31, (dollars in thousands) 2024 2023 2022 Balance at end of year $ 28,969 $ 42,442 $ 43,081 Average balance during year 30,984 35,450 51,554 Average interest rate during year 1.92 % 0.72 % 0.07 % Borrowings Deposits are the Bank's primary source of funds for our lending activities and general business purposes.
(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.
(2) On a tax-equivalent basis assuming a federal income tax rate of 21% and a state income tax rate of 9.5%. 45 Table of Contents Comparison of the Year Ended December 31, 2024 to the Year Ended December 31, 2023 For the year ended December 31, 2024, net income was $71.8 million, increasing by $5.9 million, or 9.0%, when compared to net income for the year ended December 31, 2023.
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.
We provide a comprehensive suite of financial products and services to consumers, businesses, and municipal entities throughout Illinois and eastern Iowa. As of December 31, 2024, the Company had total assets of $5.0 billion, loans held for investment of $3.5 billion, and total deposits of $4.3 billion.
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.
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. The capital conservation buffer requirement is 2.5% of risk-weighted assets.
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.
Potential deterioration of economic conditions may lead to higher credit losses and adversely impact our financial condition and results of operations.
Year Ended December 31, 2023 2022 2021 (dollars in thousands) Interest Yield Contribution Interest Yield Contribution Interest Yield Contribution Contractual interest $ 185,772 5.75 % $ 113,775 4.52 % $ 90,647 3.99 % Loan fees (excluding PPP loans) 4,584 0.14 4,454 0.18 3,840 0.17 PPP loan fees 2 — 1,488 0.06 9,181 0.40 Accretion of acquired loan discounts 4,136 0.13 933 0.04 1,102 0.05 Nonaccrual interest recoveries 703 0.02 2,828 0.11 1,514 0.07 Total loan interest income $ 195,197 6.04 % $ 123,478 4.91 % $ 106,284 4.68 % The following table sets forth the components of net interest income and their contributions to the net interest margin.
Year Ended December 31, 2024 2023 2022 (dollars in thousands) Interest Yield Contribution Interest Yield Contribution Interest Yield Contribution Contractual interest $ 205,031 6.07 % $ 185,772 5.75 % $ 113,775 4.52 % Loan fees (excluding PPP loans) 4,264 0.13 4,584 0.14 4,454 0.18 PPP loan fees 1 — 2 — 1,488 0.06 Accretion of acquired loan discounts 4,450 0.13 4,136 0.13 933 0.04 Nonaccrual interest recoveries 1,117 0.03 703 0.02 2,828 0.11 Total loan interest income $ 214,863 6.36 % $ 195,197 6.04 % $ 123,478 4.91 % The following table sets forth the components of net interest income and their contributions to the net interest margin.
The increase is 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. Net interest margin increased to 4.09% for the year ended December 31, 2023, compared to 3.54% for the year ended December 31, 2022.
The decrease is primarily attributable to an increase in funding costs which were partially offset by higher yields on interest-earning assets and higher interest-earning asset balances following the Town and Country merger. Net interest margin decreased to 3.96% for the year ended December 31, 2024, compared to 4.09% for the year ended December 31, 2023.
Three pools include equipment finance loans purchased from a bank that originated the loans through its equipment finance division. These loans are to borrowers across multiple industries and geographic regions.
One pool included equipment finance loans purchased from a bank that originated the loans through its equipment finance division to borrowers across multiple industries and geographic regions.
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.
Income Taxes During the years ended December 31, 2024 and 2023, we recorded income tax expense of $25.6 million, or an effective tax rate of 26.3%, and $22.7 million, or an effective tax rate of 25.7%, respectively.
CAPITAL RESOURCES The overall objectives of capital management are to ensure the availability of sufficient capital to support loan, deposit and other asset and liability growth opportunities and to maintain capital to absorb unforeseen losses or write-downs that are inherent in the business risks associated with the banking industry.
As of December 31, 2024, the Holding Company had no material commitments for capital expenditures. 65 Table of Contents CAPITAL RESOURCES The overall objectives of capital management are to ensure the availability of sufficient capital to support loan, deposit and other asset and liability growth opportunities and to maintain capital to absorb unforeseen losses or write-downs that are inherent in the business risks associated with the banking industry.
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.
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.
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.
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 gross domestic product ("GDP") as macroeconomic variables, although other economic metrics are considered on a qualitative basis. 51 Table of Contents Noninterest Income The following table sets forth the major categories of noninterest income for the years indicated: Year Ended December 31, Year Ended December 31, (dollars in thousands) 2024 2023 $ Change % Change 2023 2022 $ Change % Change Card income $ 11,051 $ 11,043 $ 8 0.1 % $ 11,043 $ 10,329 $ 714 6.9 % Wealth management fees 10,978 9,883 1,095 11.1 9,883 9,155 728 8.0 Service charges on deposit accounts 7,932 7,846 86 1.1 7,846 7,072 774 10.9 Mortgage servicing 4,437 4,678 (241) (5.2) 4,678 2,609 2,069 79.3 Mortgage servicing rights fair value adjustment (174) (1,615) 1,441 NM (1,615) 2,153 (3,768) NM Gains on sale of mortgage loans 1,611 1,526 85 5.6 1,526 1,461 65 4.4 Realized gains (losses) on sales of securities (3,697) (1,820) (1,877) NM (1,820) — (1,820) NM Unrealized gains (losses) on equity securities (59) 160 (219) NM 160 (414) 574 NM Gains (losses) on foreclosed assets 22 501 (479) (95.6) 501 (314) 815 NM Gains (losses) on other assets (635) 166 (801) NM 166 136 30 22.1 Income on bank owned life insurance 915 573 342 59.7 573 164 409 249.4 Other noninterest income 3,190 3,105 85 2.7 3,105 2,366 739 31.2 Total $ 35,571 $ 36,046 $ (475) (1.3) % $ 36,046 $ 34,717 $ 1,329 3.8 % _________________________________________________ NM Not meaningful.
Additionally, the Bank continues to add and improve digital banking services to solidify deposit relationships.
Additionally, we continue to add and improve digital banking services to solidify deposit relationships.
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.
Year Ended December 31, (dollars in thousands) 2024 2023 2022 Net charge-offs (recoveries) Commercial and industrial $ 1,300 $ 369 $ (751) Commercial real estate - owner occupied (10) (13) (1,006) Commercial real estate - non-owner occupied (586) (66) (283) Construction and land development (3) (53) (1) Multi-family 188 (281) — One-to-four family residential (142) (152) (302) Agricultural and farmland 51 (6) — Municipal, consumer, and other 960 382 240 Total $ 1,758 $ 180 $ (2,103) Average loans Commercial and industrial $ 402,936 $ 370,255 $ 268,765 Commercial real estate - owner occupied 294,847 290,489 219,127 Commercial real estate - non-owner occupied 886,903 874,661 695,230 Construction and land development 364,138 368,111 340,831 Multi-family 423,532 372,201 258,490 One-to-four family residential 482,984 476,856 328,656 Agricultural and farmland 285,747 254,106 233,349 Municipal, consumer, and other 236,972 225,057 170,101 Total $ 3,378,059 $ 3,231,736 $ 2,514,549 Charge-offs (recoveries) to average loans Commercial and industrial 0.32 % 0.10 % (0.28) % Commercial real estate - owner occupied — — (0.46) Commercial real estate - non-owner occupied (0.07) (0.01) (0.04) Construction and land development — (0.01) — Multi-family 0.04 (0.08) — One-to-four family residential (0.03) (0.03) (0.09) Agricultural and farmland 0.02 — — Municipal, consumer, and other 0.41 0.17 0.14 Total 0.05 % 0.01 % (0.08) % The net charge-offs (recoveries) to average total loans ratio has remained low for several years.
The yields set forth below include the effect of deferred fees and costs, discounts and premiums, as well as purchase accounting adjustments that are accreted or amortized to interest income or expense. 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.
The yields set forth below include the effect of deferred fees and costs, discounts and premiums, as well as purchase accounting adjustments that are accreted or amortized to interest income or expense. 46 Table of Contents Year Ended December 31, 2024 December 31, 2023 December 31, 2022 (dollars in thousands) Average Balance Interest Yield/Cost Average Balance Interest Yield/Cost Average Balance Interest Yield/Cost ASSETS Loans $ 3,378,059 $ 214,863 6.36 % $ 3,231,736 $ 195,197 6.04 % $ 2,514,549 $ 123,478 4.91 % Debt securities 1,200,444 27,903 2.32 1,343,419 29,971 2.23 1,396,704 27,806 1.99 Deposits with banks 178,436 8,272 4.64 84,544 3,020 3.57 197,030 1,541 0.78 Other 12,732 662 5.20 15,326 811 5.29 9,841 229 2.33 Total interest-earning assets 4,769,671 $ 251,700 5.28 % 4,675,025 $ 228,999 4.90 % 4,118,124 $ 153,054 3.72 % Allowance for credit losses (40,694) (37,504) (24,703) Noninterest-earning assets 279,106 290,383 176,452 Total assets $ 5,008,083 $ 4,927,904 $ 4,269,873 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Interest-bearing deposits: Interest-bearing demand $ 1,106,136 $ 5,499 0.50 % $ 1,188,680 $ 3,130 0.26 % $ 1,141,402 $ 607 0.05 % Money market 797,444 18,637 2.34 669,118 7,352 1.10 582,514 813 0.14 Savings 584,769 1,621 0.28 661,424 1,033 0.16 650,385 208 0.03 Time 757,456 28,183 3.72 481,466 10,784 2.24 283,232 883 0.31 Brokered 38,286 2,107 5.50 52,724 2,836 5.38 — — — Total interest-bearing deposits 3,284,091 56,047 1.71 3,053,412 25,135 0.82 2,657,533 2,511 0.09 Securities sold under agreements to repurchase 30,984 594 1.92 35,450 255 0.72 51,554 36 0.07 Borrowings 13,383 480 3.59 139,817 7,128 5.10 26,468 967 3.65 Subordinated notes 39,514 1,879 4.75 39,434 1,879 4.76 39,355 1,879 4.77 Junior subordinated debentures issued to capital trusts 52,819 3,850 7.29 51,489 3,530 6.86 37,746 1,787 4.73 Total interest-bearing liabilities 3,420,791 $ 62,850 1.84 % 3,319,602 $ 37,927 1.14 % 2,812,656 $ 7,180 0.26 % Noninterest-bearing deposits 1,033,811 1,113,300 1,051,187 Noninterest-bearing liabilities 38,113 44,074 22,724 Total liabilities 4,492,715 4,476,976 3,886,567 Stockholders' Equity 515,368 450,928 383,306 Total liabilities and stockholders’ equity $ 5,008,083 $ 4,927,904 $ 4,269,873 Net interest income/Net interest margin (1) $ 188,850 3.96 % $ 191,072 4.09 % $ 145,874 3.54 % Tax-equivalent adjustment (2) 2,242 0.05 2,758 0.06 2,499 0.06 Net interest income (tax-equivalent basis)/ Net interest margin (tax-equivalent basis) (2) (3) $ 191,092 4.01 % $ 193,830 4.15 % $ 148,373 3.60 % Net interest rate spread (4) 3.44 % 3.76 % 3.46 % Net interest-earning assets (5) $ 1,348,880 $ 1,355,423 $ 1,305,468 Ratio of interest-earning assets to interest-bearing liabilities 1.39 1.41 1.46 Cost of total deposits 1.30 % 0.60 % 0.07 % Cost of funds 1.41 0.86 0.19 _________________________________________________ (1) Net interest margin represents net interest income divided by average total interest-earning assets.
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.
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. As of December 31, 2024, the Holding Company had cash and cash equivalents of $16.2 million.
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.
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.
Our use of FHLB advances and other borrowings was nominal during 2021, but increased during the second half of 2022 and throughout 2023 to fund increases in loan demand and to offset a decrease in deposits. 62 Table of Contents The following table sets forth information concerning balances and interest rates on our borrowings.
Our use of FHLB advances and other borrowings was nominal during the first half of 2022, but increased during the second half of 2022 and throughout most of 2023 to fund increases in loan demand and to offset a decrease in deposits.
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%.
Year Ended December 31, 2024 2023 2022 (dollars in thousands) Interest Net Interest Margin Contribution Interest Net Interest Margin Contribution Interest Net Interest Margin Contribution Interest income: Contractual interest on loans $ 205,031 4.30 % $ 185,772 3.97 % $ 113,775 2.76 % Loan fees (excluding PPP loans) 4,264 0.09 4,584 0.10 4,454 0.11 PPP loan fees 1 — 2 — 1,488 0.04 Accretion of acquired loan discounts 4,450 0.09 4,136 0.09 933 0.02 Nonaccrual interest recoveries 1,117 0.02 703 0.02 2,828 0.07 Debt securities 27,903 0.59 29,971 0.64 27,806 0.67 Interest-bearing deposits in bank 8,272 0.18 3,020 0.06 1,541 0.04 Other 662 0.01 811 0.02 229 0.01 Total interest income 251,700 5.28 228,999 4.90 153,054 3.72 Interest expense: Deposits 56,047 1.18 25,135 0.54 2,511 0.07 Other interest-bearing liabilities 6,803 0.14 12,792 0.27 4,669 0.11 Total interest expense 62,850 1.32 37,927 0.81 7,180 0.18 Net interest income 188,850 3.96 191,072 4.09 145,874 3.54 Tax-equivalent adjustment (1) 2,242 0.05 2,758 0.06 2,499 0.06 Net interest income (tax-equivalent) (1) (2) $ 191,092 4.01 % $ 193,830 4.15 % $ 148,373 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%.
Excluding the impact of the Town and Country merger, the remaining provision for credit losses primarily reflects a $2.4 million increase in required reserves driven by growth of and changes in the loan portfolio and unfunded commitments, a $1.4 million increase in required reserves resulting from changes in economic and qualitative factors, and a $2.1 million decrease in specific reserves on individually evaluated loans.
The 2024 provision for credit losses primarily reflects a $4.0 million increase in required reserves resulting from changes in qualitative factors; an $0.8 million increase in required reserves driven by changes within the loan portfolio; a $1.2 million decrease in specific reserves on individually evaluated loans; and a $0.6 million decrease in required reserves resulting from improvements in economic forecasts.
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.
Comparison of the Year Ended December 31, 2024 to the Year Ended December 31, 2023 Total noninterest income for the year ended December 31, 2024, was $35.6 million, a decrease of $0.5 million, or 1.3%, from the year ended December 31, 2023.
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.
Detailed discussion and analysis of the financial condition and results of operation for 2023 as compared to 2022 can be found in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 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.
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.
December 31, 2024 December 31, 2023 (dollars in thousands) Balance Percent Balance Percent Commercial and industrial $ 428,389 12.4 % $ 427,800 12.6 % Commercial real estate - owner occupied 322,316 9.3 295,842 8.7 Commercial real estate - non-owner occupied 899,565 25.9 880,681 25.9 Construction and land development 374,657 10.8 363,983 10.7 Multi-family 431,524 12.4 417,923 12.3 One-to-four family residential 463,968 13.4 491,508 14.4 Agricultural and farmland 293,375 8.5 287,294 8.4 Municipal, consumer, and other 252,352 7.3 239,386 7.0 Loans, before allowance for credit losses 3,466,146 100.0 % 3,404,417 100.0 % Allowance for credit losses (42,044) (40,048) Loans, net of allowance for credit losses $ 3,424,102 $ 3,364,369 Loans, before allowance for credit losses were $3.47 billion at December 31, 2024, an increase of $61.7 million, or 1.8%, from December 31, 2023.
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.
The following table sets forth the distribution of average deposits, by account type: Year Ended December 31, 2024 Percent Change in Average Balance 2024 vs. 2023 (dollars in thousands) Average Balance Percent of Total Deposits Weighted Average Cost Noninterest-bearing $ 1,033,811 23.9 % — % (7.1) % Interest-bearing demand 1,106,136 25.6 0.50 (6.9) Money market 797,444 18.6 2.34 19.2 Savings 584,769 13.5 0.28 (11.6) Time 757,456 17.5 3.72 57.3 Brokered 38,286 0.9 5.50 (27.4) Total deposits $ 4,317,902 100.0 % 1.30 % 3.6 % 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 (dollars in thousands) Average Balance Percent of Total Deposits Weighted Average Cost Noninterest-bearing $ 1,051,187 28.4 % — % Interest-bearing demand 1,141,402 30.8 0.05 Money market 582,514 15.7 0.14 Savings 650,385 17.5 0.03 Time 283,232 7.6 0.31 Brokered — — — Total deposits $ 3,708,720 100.0 % 0.07 % The increase in average deposit balances in 2024 compared to 2023 was primarily attributable to increases in time deposits, including the addition of $65.0 million from a State of Illinois loan matching program, and money market accounts as balances continued to shift towards higher cost deposit products.
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.
Ratio of 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 varying 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, 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.
The Holding Company’s main source of funding is dividends declared and paid to it by the Bank.
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.
There were no acquisition-related expenses during the year ended December 31, 2024. 44 Table of Contents RESULTS OF OPERATIONS Overview of Recent Financial Results Year Ended December 31, (dollars in thousands, except per share amounts) 2024 2023 2022 Total interest and dividend income $ 251,700 $ 228,999 $ 153,054 Total interest expense 62,850 37,927 7,180 Net interest income 188,850 191,072 145,874 Provision for credit losses 3,031 7,573 (706) Net interest income after provision for credit losses 185,819 183,499 146,580 Total noninterest income 35,571 36,046 34,717 Total noninterest expense 124,007 130,964 105,107 Income before income tax expense 97,383 88,581 76,190 Income tax expense 25,603 22,739 19,734 Net income $ 71,780 $ 65,842 $ 56,456 Adjusted net income (1) $ 75,002 $ 78,182 $ 55,805 Pre-provision net revenue (1) $ 100,414 $ 96,154 $ 75,484 Pre-provision net revenue less net charge-offs (recoveries) (1) 98,656 95,974 77,587 Adjusted pre-provision net revenue (1) 104,920 107,281 74,282 Adjusted pre-provision net revenue less net charge-offs (recoveries) (1) 103,162 107,101 76,385 Share and Per Share Information Earnings per share - Diluted $ 2.26 $ 2.07 $ 1.95 Adjusted earnings per share - Diluted (1) 2.37 2.46 1.93 Weighted average shares of common stock outstanding 31,590,117 31,626,308 28,853,697 Summary Ratios Net interest margin 3.96 % 4.09 % 3.54 % Net interest margin (tax-equivalent basis) (1) (2) 4.01 4.15 3.60 Yield on loans 6.36 6.04 4.91 Yield on interest-earning assets 5.28 4.90 3.72 Cost of total deposits 1.30 0.60 0.07 Cost of funds 1.41 0.86 0.19 Efficiency ratio 53.99 % 56.49 % 57.72 % Efficiency ratio (tax-equivalent basis) (1) (2) 53.46 55.81 56.93 Adjusted efficiency ratio (tax-equivalent basis) (1)(2) 52.42 51.68 57.05 Return on average assets 1.43 % 1.34 % 1.32 % Return on average stockholders' equity 13.93 14.60 14.73 Return on average tangible common equity (1) 16.45 17.63 16.02 Adjusted return on average assets (1) 1.50 % 1.59 % 1.31 % Adjusted return on average stockholders' equity (1) 14.55 17.34 14.56 Adjusted return on average tangible common equity (1) 17.19 20.94 15.83 _________________________________________________ (1) See "Non-GAAP Financial Information" for reconciliation of non-GAAP measures to their most closely comparable GAAP measures.
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.
Cash Dividends The Company paid quarterly cash dividends of $0.19 per share during 2024, $0.17 per share during 2023, and $0.16 per share during 2022.
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
Reconciliation of Non-GAAP Financial Measure — Efficiency Ratio (Tax-Equivalent Basis) and Adjusted Efficiency Ratio (Tax-Equivalent Basis) Year Ended December 31, (dollars in thousands) 2024 2023 2022 Total noninterest expense $ 124,007 $ 130,964 $ 105,107 Less: amortization of intangible assets 2,839 2,670 873 Noninterest expense excluding amortization of intangible assets $ 121,168 $ 128,294 $ 104,234 Less: adjustments to noninterest expense Acquisition expenses — 7,767 1,092 Total adjustments to noninterest expense — 7,767 1,092 Adjusted noninterest expense $ 121,168 $ 120,527 $ 103,142 Net interest income $ 188,850 $ 191,072 $ 145,874 Total noninterest income 35,571 36,046 34,717 Operating revenue 224,421 227,118 180,591 Tax-equivalent adjustment (1) 2,242 2,758 2,499 Operating revenue (tax-equivalent basis) (1) 226,663 229,876 183,090 Less: adjustments to noninterest income Gains (losses) on closed branch premises (635) 75 141 Realized gains (losses) on sales of securities (3,697) (1,820) — Mortgage servicing rights fair value adjustment (174) (1,615) 2,153 Total adjustments to noninterest income (4,506) (3,360) 2,294 Adjusted operating revenue (tax-equivalent basis) (1) $ 231,169 $ 233,236 $ 180,796 Efficiency ratio 53.99 % 56.49 % 57.72 % Efficiency ratio (tax-equivalent basis) (1) 53.46 55.81 56.93 Adjusted efficiency ratio (tax-equivalent basis) (1) 52.42 51.68 57.05 _________________________________________________ (1) On a tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%. 73 Table of Contents Reconciliation of Non-GAAP Financial Measure — Ratio of Tangible Common Equity to Tangible Assets and Tangible Book Value Per Share (dollars in thousands, except per share data) December 31, 2024 December 31, 2023 Tangible Common Equity Total stockholders' equity $ 544,605 $ 489,496 Less: Goodwill 59,820 59,820 Less: Intangible assets, net 17,843 20,682 Tangible common equity $ 466,942 $ 408,994 Tangible Assets Total assets $ 5,032,902 $ 5,073,170 Less: Goodwill 59,820 59,820 Less: Intangible assets, net 17,843 20,682 Tangible assets $ 4,955,239 $ 4,992,668 Total stockholders' equity to total assets 10.82 % 9.65 % Tangible common equity to tangible assets 9.42 8.19 Shares of common stock outstanding 31,559,366 31,695,828 Book value per share $ 17.26 $ 15.44 Tangible book value per share 14.80 12.90 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) 2024 2023 2022 Average Tangible Common Equity Total stockholders' equity $ 515,368 $ 450,928 $ 383,306 Less: Goodwill 59,820 57,266 29,322 Less: Intangible assets, net 19,247 20,272 1,480 Average tangible common equity $ 436,301 $ 373,390 $ 352,504 Net income $ 71,780 $ 65,842 $ 56,456 Adjusted net income 75,002 78,182 55,805 Return on average stockholders' equity 13.93 % 14.60 % 14.73 % Return on average tangible common equity 16.45 17.63 16.02 Adjusted return on average stockholders' equity 14.55 % 17.34 % 14.56 % Adjusted return on average tangible common equity 17.19 20.94 15.83 74 Table of Contents Reconciliation of Non-GAAP Financial Measure — Core Deposits (dollars in thousands) December 31, 2024 December 31, 2023 Core Deposits Total deposits $ 4,318,254 $ 4,401,437 Less: time deposits of $250,000 or more 202,196 130,183 Less: brokered deposits — 144,880 Core deposits $ 4,116,058 $ 4,126,374 Core deposits to total deposits 95.32 % 93.75 % 75 Table of Contents
Such restricted stock units are considered participating securities. As such, we have included these restricted stock units in the calculation of basic earnings per share and calculate basic earnings per share using the two-class method.
Prior to 2024, these restricted stock units were included in the calculation of basic earnings per share using the two-class method.
Our net interest margin decreased modestly beginning in the second quarter of 2023 as increased competition for deposits drove an increase in our funding costs. Competition for deposits continues to be elevated relative to 2022. As a result, deposit and funding costs have increased during 2023 compared to such costs in 2022 and could continue to increase.
As a result, market interest rates also rose during this time which led to improvements in our net interest margin through the first quarter of 2023. Our net interest margin decreased modestly beginning in the second quarter of 2023, as increased competition for deposits drove an increase in our funding costs.
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.
Notable changes in noninterest income include the following: • Net losses of $3.7 million were realized on the sale of debt securities during the year ended December 31, 2024, compared to net losses of $1.8 million realized during the year ended December 31, 2023; • A $0.2 million negative mortgage servicing rights fair value adjustment included in the 2024 results, compared to a $1.6 million negative mortgage servicing rights fair value adjustment included in the 2023 results; • A $1.1 million increase in wealth management fees, driven by higher values of assets under management, partially offset by lower farm management fees as a result of lower commodity prices; • Impairment losses on bank premises of $0.6 million related to the closure of two branch premises were recognized during 2024, compared to a $0.1 million gain on sales of closed branch premises recognized during 2023; and • A $0.3 million increase in income on bank owned life insurance, primarily attributable to a $0.2 million gain on life insurance proceeds. 52 Table of Contents Noninterest Expense The following table sets forth the major categories of noninterest expense for the years indicated: Year Ended December 31, Year Ended December 31, (dollars in thousands) 2024 2023 $ Change % Change 2023 2022 $ Change % Change Salaries $ 65,130 $ 67,453 $ (2,323) (3.4) % $ 67,453 $ 51,767 $ 15,686 30.3 % Employee benefits 11,311 10,037 1,274 12.7 10,037 8,325 1,712 20.6 Occupancy of bank premises 10,293 9,918 375 3.8 9,918 7,673 2,245 29.3 Furniture and equipment 2,004 2,790 (786) (28.2) 2,790 2,476 314 12.7 Data processing 11,169 12,352 (1,183) (9.6) 12,352 7,441 4,911 66.0 Marketing and customer relations 4,320 5,043 (723) (14.3) 5,043 3,803 1,240 32.6 Amortization of intangible assets 2,839 2,670 169 6.3 2,670 873 1,797 205.8 FDIC insurance 2,254 2,280 (26) (1.1) 2,280 1,164 1,116 95.9 Loan collection and servicing 2,056 1,402 654 46.6 1,402 1,049 353 33.7 Foreclosed assets 109 251 (142) (56.6) 251 293 (42) (14.3) Other noninterest expense 12,522 16,768 (4,246) (25.3) 16,768 20,243 (3,475) (17.2) Total $ 124,007 $ 130,964 $ (6,957) (5.3) % $ 130,964 $ 105,107 $ 25,857 24.6 % Comparison of the Year Ended December 31, 2024 to the Year Ended December 31, 2023 Total noninterest expense for the year ended December 31, 2024, was $124.0 million, a decrease of $7.0 million, or 5.3%, from the year ended December 31, 2023.
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.
Year Ended December 31, 2022 Increase (Decrease) Due to Total Increase (Decrease) Due to Total (dollars in thousands) Volume Rate Volume Rate Interest-earning assets: Loans $ 9,054 $ 10,612 $ 19,666 $ 39,701 $ 32,018 $ 71,719 Debt securities (3,286) 1,218 (2,068) (1,092) 3,257 2,165 Deposits with banks 4,141 1,111 5,252 (1,312) 2,791 1,479 Other (136) (13) (149) 177 405 582 Total interest-earning assets 9,773 12,928 22,701 37,474 38,471 75,945 Interest-bearing liabilities: Interest-bearing deposits: Interest-bearing demand (231) 2,600 2,369 26 2,497 2,523 Money market 1,641 9,644 11,285 139 6,400 6,539 Savings (132) 720 588 4 821 825 Time 8,080 9,319 17,399 1,007 8,894 9,901 Brokered (794) 65 (729) 2,836 — 2,836 Total interest-bearing deposits 8,564 22,348 30,912 4,012 18,612 22,624 Securities sold under agreements to repurchase (36) 375 339 (15) 234 219 Borrowings (5,008) (1,640) (6,648) 5,640 521 6,161 Subordinated notes 4 (4) — 4 (4) — Junior subordinated debentures issued to capital trusts 93 227 320 781 962 1,743 Total interest-bearing liabilities 3,617 21,306 24,923 10,422 20,325 30,747 Change in net interest income $ 6,156 $ (8,378) $ (2,222) $ 27,052 $ 18,146 $ 45,198 Comparison of the Year Ended December 31, 2024 to the Year Ended December 31, 2023 Net interest income for the year ended December 31, 2024 was $188.9 million, decreasing $2.2 million, or 1.2%, when compared to the year ended December 31, 2023.
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.
On January 21, 2025, the Company’s Board of Directors increased the quarterly cash dividend by $0.02 per share to $0.21 per share. 66 Table of Contents Stock Repurchase Program The Company repurchased 232,803 shares of its common stock at a weighted average price of $18.89 during 2024, 479,005 shares at a weighted average price of $18.43 during 2023, and 265,379 shares at a weighted average price of $18.02 during 2022.
Net Interest Income Net interest income equals the excess of interest income on interest earning assets (including discount accretion on acquired loans plus certain loan fees) over interest expense incurred on interest-bearing liabilities. Interest rate spread and net interest margin are utilized to measure and explain changes in net interest income.
This increased our effective tax rate to 26.3% during the year ended December 31, 2024, compared to 25.7% during the year ended December 31, 2023. Net Interest Income Net interest income equals the excess of interest income on interest earning assets (including discount accretion on acquired loans plus certain loan fees) over interest expense incurred on interest-bearing liabilities.
The remaining pool is a 50% participation in a pool of loans originated by a financial services company with a long-standing history of originating loans to healthcare and professional service borrowers. These loans are to borrowers across multiple geographic regions.
The remaining pool consisted of loans originated by a financial services company with a long-standing history of originating loans to healthcare and professional service borrowers across multiple geographic regions. 55 Table of Contents Commercial Real Estate Portfolios Commercial real estate – owner occupied loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower.
Additionally, of the $7.9 of nonperforming loans held as of December 31, 2023, $2.6 million are either wholly or partially guaranteed by the U.S. Government.
The slight decrease was primarily attributable to sales of foreclosed assets and a decrease in nonaccrual one-to-four family residential loans. Additionally, of the $7.7 million of nonperforming loans held as of December 31, 2024, $1.6 million are either wholly or partially guaranteed by the U.S. Government.
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.
While we believe our continuous credit monitoring and collection efforts have resulted in lower levels of credit losses, we also recognize that substantial federal economic stimulus during the COVID-19 pandemic and the relatively stable economic conditions after the pandemic have also contributed to reduced credit losses.
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%.
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. 71 Table of Contents Reconciliation of Non-GAAP Financial Measure — Pre-Provision Net Revenue, Pre-Provision Net Revenue Less Charge-offs (Recoveries), Adjusted Pre-Provision Net Revenue, and Adjusted Pre-Provision Net Revenue Less Charge-offs (Recoveries) Year Ended December 31, (dollars in thousands) 2024 2023 2022 Net interest income $ 188,850 $ 191,072 $ 145,874 Noninterest income 35,571 36,046 34,717 Noninterest expense (124,007) (130,964) (105,107) Pre-provision net revenue 100,414 96,154 75,484 Less: adjustments Acquisition expenses — (7,767) (1,092) Gains (losses) on closed branch premises (635) 75 141 Realized gains (losses) on sales of securities (3,697) (1,820) — Mortgage servicing rights fair value adjustment (174) (1,615) 2,153 Total adjustments (4,506) (11,127) 1,202 Adjusted pre-provision net revenue $ 104,920 $ 107,281 $ 74,282 Pre-provision net revenue $ 100,414 $ 96,154 $ 75,484 Less: net charge-offs (recoveries) 1,758 180 (2,103) Pre-provision net revenue less net charge-offs (recoveries) $ 98,656 $ 95,974 $ 77,587 Adjusted pre-provision net revenue $ 104,920 $ 107,281 $ 74,282 Less: net charge-offs (recoveries) 1,758 180 (2,103) Adjusted pre-provision net revenue less net charge-offs (recoveries) $ 103,162 $ 107,101 $ 76,385 72 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) 2024 2023 2022 Net interest income (tax-equivalent basis) Net interest income $ 188,850 $ 191,072 $ 145,874 Tax-equivalent adjustment (1) 2,242 2,758 2,499 Net interest income (tax-equivalent basis) (1) $ 191,092 $ 193,830 $ 148,373 Net interest margin (tax-equivalent basis) Net interest margin 3.96 % 4.09 % 3.54 % Tax-equivalent adjustment (1) 0.05 0.06 0.06 Net interest margin (tax-equivalent basis) (1) 4.01 % 4.15 % 3.60 % Average interest-earning assets $ 4,769,671 $ 4,675,025 $ 4,118,124 _________________________________________________ (1) On a tax-equivalent basis assuming a federal income tax rate of 21% and a state tax rate of 9.5%.
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.
Additionally, the contribution of acquired loan discount accretion to net interest margin was 9 basis points for each of the years ended December 31, 2024 and 2023. 49 Table of Contents The quarterly net interest margins were as follows: 2024 2023 2022 Three months ended: March 31 3.94 % 4.20 % 3.08 % June 30 3.95 4.16 3.34 September 30 3.98 4.07 3.65 December 31 3.96 3.93 4.10 The FOMC began raising the target range for the federal funds rate in March 2022 and continued raising interest rates until its July 2023 meeting.
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.
The increase in effective tax rate during 2024 was primarily attributable to an additional $0.5 million of tax expense for a deferred tax asset write-down, as a result of an Illinois tax change, as well as changes in the proportion of federally tax-exempt interest income to pre-tax income. 53 Table of Contents FINANCIAL CONDITION (dollars in thousands, except per share data) December 31, 2024 December 31, 2023 $ Change % Change Cash and cash equivalents $ 137,692 $ 141,252 $ (3,560) (2.5) % Debt securities available-for-sale, at fair value 698,049 759,461 (61,412) (8.1) Debt securities held-to-maturity 499,858 521,439 (21,581) (4.1) Loans held for sale 1,586 2,318 (732) (31.6) Loans, before allowance for credit losses 3,466,146 3,404,417 61,729 1.8 Less: allowance for credit losses 42,044 40,048 1,996 5.0 Loans, net of allowance for credit losses 3,424,102 3,364,369 59,733 1.8 Goodwill 59,820 59,820 — — Intangible assets, net 17,843 20,682 (2,839) (13.7) Other assets 193,952 203,829 (9,877) (4.8) Total assets $ 5,032,902 $ 5,073,170 $ (40,268) (0.8) % Total deposits $ 4,318,254 $ 4,401,437 $ (83,183) (1.9) % Securities sold under agreements to repurchase 28,969 42,442 (13,473) (31.7) Borrowings 13,231 12,623 608 4.8 Subordinated notes 39,553 39,474 79 0.2 Junior subordinated debentures 52,849 52,789 60 0.1 Other liabilities 35,441 34,909 532 1.5 Total liabilities 4,488,297 4,583,674 (95,377) (2.1) Total stockholders' equity 544,605 489,496 55,109 11.3 Total liabilities and stockholders' equity $ 5,032,902 $ 5,073,170 $ (40,268) (0.8) % Tangible assets (1) $ 4,955,239 $ 4,992,668 $ (37,429) (0.7) % Tangible common equity (1) 466,942 408,994 57,948 14.2 Core deposits (1) $ 4,116,058 $ 4,126,374 $ (10,316) (0.3) % Share and Per Share Information Book value per share $ 17.26 $ 15.44 $ 1.82 11.8 % Tangible book value per share (1) 14.80 12.90 1.90 14.7 Shares of common stock outstanding 31,559,366 31,695,828 Balance Sheet Ratios Loan to deposit ratio 80.27 % 77.35 % Core deposits to total deposits (1) 95.32 93.75 Stockholders' equity to total assets 10.82 9.65 Tangible common equity to tangible assets (1) 9.42 8.19 _________________________________________________ (1) See "Non-GAAP Financial Information" for reconciliation of non-GAAP measure to their most closely comparable GAAP measures. 54 Table of Contents Notable changes in our consolidated balance sheet include the following: • Debt securities decreased $83.0 million, largely due to the sale of $69.2 million of municipal securities with sales proceeds primarily used to reduce wholesale funding.
As of those dates, the Bank was “well capitalized” under the regulatory prompt corrective action provisions.
As of December 31, 2024 and 2023, 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.
Management regularly monitors office and other industry concentrations within the loan portfolio. 56 Table of Contents Loan Portfolio Maturities The following table summarizes the scheduled maturities of the loan portfolio as of December 31, 2023. Demand loans (loans having no stated repayment schedule or maturity) and overdraft loans are reported as being due in one year or less.
Demand loans (loans having no stated repayment schedule or maturity) and overdraft loans are reported as being due in one year or less.
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.
The allowance for credit losses on unfunded commitments is estimated in the same manner as the associated loans, adjusted for anticipated funding rate. 67 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.
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 include the following: • There were no Town and Country acquisition-related expenses during the year ended December 31, 2024, compared to $13.7 million of acquisition-related expenses incurred during the year ended December 31, 2023; • Net losses of $3.7 million were realized on the sale of debt securities during the year ended December 31, 2024, compared to net losses of $1.8 million realized during the year ended December 31, 2023; • A $2.2 million decrease in net interest income, primarily attributable to higher funding costs which were partially offset by higher asset yields and an increase in interest-earning assets; • A $0.2 million negative mortgage servicing rights fair value adjustment included in the 2024 results, compared to a $1.6 million negative mortgage servicing rights fair value adjustment included in the 2023 results; and • A $2.9 million increase in income tax expense, primarily reflecting higher pre-tax income resulting from the above items as well as an additional $0.5 million for a deferred tax expense write-down, primarily as a result of an Illinois tax change.
Notable changes in noninterest expense include the following: • Town and Country acquisition-related noninterest expenses totaled $7.8 million and $1.1 million for the years ended December 31, 2023 and 2022, respectively; • Excluding Town and Country acquisition-related expenses, the $19.2 million increase in noninterest expense was mainly attributable to the addition of Town and Country’s operations, primarily related to personnel costs, occupancy of bank premises, and data processing; • Legal accruals totaled $1.0 million during the year ended December 31, 2023 and $8.2 million during the year ended December 31, 2022 relating to legal matters disclosed in Note 22 - Commitments and Contingencies - Legal Contingencies to the consolidated financial statements; and • A $1.8 million increase in amortization of intangible assets related to the addition of $22.3 million of intangible assets recognized through the Town and Country acquisition.
Notable changes in noninterest expense include the following: • There were no Town and Country acquisition-related noninterest expenses for the year ended December 31, 2024, but acquisition-related noninterest expenses totaled $7.8 million for the year ended December 31, 2023; • Excluding Town and Country acquisition-related expenses, the $1.3 million increase in salaries expense was primarily driven by annual merit increases; • The $1.3 million increase in employee benefits expense was primarily attributable to higher medical benefits expenses; and • Excluding Town and Country acquisition-related expenses, the $2.3 million decrease in other noninterest expense primarily reflects the absence of $0.8 million of legal fees and $1.0 million of accruals related to litigation matters disclosed in Note 23 to the Company's Consolidated Financial Statements in this Annual Report on Form 10-K.
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.
Net interest margin, which is expressed as the percentage of net interest income to average interest-earning assets, is utilized to measure and explain changes in net interest income. The following table sets forth average balances, average yields and costs, and certain other information. Average balances are daily average balances.
Provision for Credit Losses The following table sets forth the components of provision for credit losses for the periods indicated: Year Ended December 31, (dollars in thousands) 2023 2022 2021 PROVISION FOR CREDIT LOSSES Loans $ 6,665 $ (706) $ (8,077) Unfunded lending-related commitments 908 — — Total provision for credit losses $ 7,573 $ (706) $ (8,077) Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022 In connection with the Town and Country merger, we recognized an allowance for credit losses on non-PCD loans of $5.2 million and an allowance for credit losses on unfunded commitments of $0.7 million.
Generally, we expect increases in market interest rates will increase our net interest income and net interest margin in future periods, while decreases in market interest rates may decrease our net interest income and net interest margin in future periods; however, this depends upon the timing and extent of interest rate fluctuations and may not always be the case. 50 Table of Contents Provision for Credit Losses The following table sets forth the components of provision for credit losses for the years indicated: Year Ended December 31, (dollars in thousands) 2024 2023 2022 PROVISION FOR CREDIT LOSSES Loans $ 3,754 $ 6,665 $ (706) Unfunded lending-related commitments (723) 908 — Total provision for credit losses $ 3,031 $ 7,573 $ (706) Comparison of the Year Ended December 31, 2024 to the Year Ended December 31, 2023 The Company recorded a provision for credit losses of $3.0 million for the year ended December 31, 2024.
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.
Government $ 1,573 $ 2,641 Allowance for credit losses $ 42,044 $ 40,048 Loans, before allowance for credit losses 3,466,146 3,404,417 CREDIT QUALITY RATIOS Allowance for credit losses to loans, before allowance for credit losses 1.21 % 1.18 % Allowance for credit losses to nonaccrual loans 549.45 512.12 Allowance for credit losses to nonperforming loans 549.16 509.71 Nonaccrual loans to loans, before allowance for credit losses 0.22 0.23 Nonperforming loans to loans, before allowance for credit losses 0.22 0.23 Nonperforming assets to total assets 0.16 0.17 Nonperforming assets to loans, before allowance for credit losses, and foreclosed assets 0.23 0.26 Total nonperforming assets were $8.0 million at December 31, 2024, a slight decrease when compared to $8.7 million at December 31, 2023.
Treasury $ 159,715 1.37 % $ — — % $ 159,715 1.37 % U.S. government agency 55,359 2.53 88,448 2.48 143,807 2.50 Municipal 229,030 1.80 38,442 3.30 267,472 2.02 Mortgage-backed: Agency residential 188,641 2.58 95,828 3.47 284,469 2.88 Agency commercial 141,214 1.97 298,721 1.98 439,935 1.98 Corporate 57,665 4.47 — — 57,665 4.47 Total $ 831,624 2.16 % $ 521,439 2.43 % $ 1,353,063 2.26 % 60 Table of Contents SOURCES OF FUNDS Deposits Management continues to focus on growing deposits through the Company’s relationship-driven banking philosophy and community-focused marketing programs.
Treasury $ 119,690 1.36 % $ — — % $ 119,690 1.36 % U.S. government agency 55,742 2.74 88,472 2.48 144,214 2.58 Municipal 150,163 1.72 35,862 3.26 186,025 2.02 Mortgage-backed: Agency residential 241,342 3.45 85,643 3.44 326,985 3.44 Agency commercial 128,823 1.96 289,881 1.98 418,704 1.98 Corporate 61,732 4.76 — — 61,732 4.76 Total $ 757,492 2.58 % $ 499,858 2.41 % $ 1,257,350 2.51 % 61 Table of Contents SOURCES OF FUNDS Deposits Management continues to focus on growing deposits through the Company’s relationship-driven banking philosophy and community-focused marketing programs.
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.
Risk Classification of Loans Our risk classifications of loans were as follows: (dollars in thousands) December 31, 2024 December 31, 2023 Pass $ 3,264,396 $ 3,241,889 Pass-watch 83,947 98,206 Special mention (1) 46,590 — Substandard 71,213 64,322 Total $ 3,466,146 $ 3,404,417 _________________________________________________ (1) In June 2024, the Company updated its risk rating categories to add the special mention category to provide another level of granularity in distinguishing risk levels of loans.
The increase was primarily attributable to higher yields on interest-earning assets which were partially offset by increased funding costs, driven by significant increases in market rates since early 2022.
The decrease was primarily attributable to increases in funding costs outpacing increases in interest-earning asset yields.
The following table sets forth time deposits by remaining maturity as of December 31, 2023: (dollars in thousands) 3 Months or Less Over 3 through 6 Months Over 6 through 12 Months Over 12 Months Total Time and brokered time deposits: Amounts less than $100,000 $ 141,825 $ 107,869 $ 125,348 $ 54,284 $ 429,326 Amounts of $100,000 or more but less than $250,000 40,961 56,555 85,203 29,905 212,624 Amounts of $250,000 or more 36,659 39,899 42,576 11,049 130,183 Total time and brokered time deposits $ 219,445 $ 204,323 $ 253,127 $ 95,238 $ 772,133 As of December 31, 2023 and December 31, 2022, the Bank’s uninsured deposits were estimated to be $867.7 million and $739.0 million, respectively.
As a result of these changes, deposit costs increased during 2024 compared to 2023. 62 Table of Contents The following table sets forth time deposits by remaining maturity as of December 31, 2024: (dollars in thousands) 3 Months or Less Over 3 through 6 Months Over 6 through 12 Months Over 12 Months Total Time deposits: Amounts less than $100,000 $ 139,856 $ 96,944 $ 64,947 $ 28,486 $ 330,233 Amounts of $100,000 or more but less than $250,000 117,795 76,462 47,624 11,120 253,001 Amounts of $250,000 or more 105,284 72,534 21,295 3,083 202,196 Total time deposits $ 362,935 $ 245,940 $ 133,866 $ 42,689 $ 785,430 As of December 31, 2024 and 2023, the Bank’s uninsured deposits were estimated to be $949.4 million and $867.7 million, respectively.
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.
Below is a summary of our loan and deposit balances by geographic region: December 31, 2024 December 31, 2023 (dollars in thousands) Loans Deposits Loans Deposits Central $ 1,676,842 $ 2,984,820 $ 1,693,794 $ 3,094,305 Chicago MSA 1,443,777 1,218,098 1,406,348 1,197,865 Illinois 3,120,619 4,202,918 3,100,142 4,292,170 Iowa 345,527 115,336 304,275 109,267 Total $ 3,466,146 $ 4,318,254 $ 3,404,417 $ 4,401,437 Town and Country Financial Corporation Acquisition On February 1, 2023, HBT Financial completed its acquisition of Town and Country, the holding company for Town and Country Bank.
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.
Our on-balance sheet sources of liquidity included cash and cash equivalents as well as unpledged securities which may be sold or pledged as collateral to meet liquidity needs.
Removed
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.
Added
Detailed discussion and analysis of the financial condition and results of operation for 2024 as compared to 2023 can be found below.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+4 added−0 removed13 unchanged
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.
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, 2024 +400 22.0 % 4.9 % 11.3 % +300 18.3 3.9 9.0 +200 13.4 3.2 6.7 +100 7.3 2.0 3.8 -100 (9.1) (4.2) (6.2) -200 (20.3) (5.5) (10.2) -300 (22.1) (5.7) (14.0) -400 (14.1) (5.8) (15.9) 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) Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements.
Credit Risk Credit risk is the risk that borrowers or counterparties will be unable or unwilling to repay their obligations in accordance with the underlying contractual terms. We manage and control credit risk in the loan portfolio by adhering to well-defined underwriting criteria and account administration standards established by management.
Credit Risk Credit risk is the risk that borrowers or counterparties will be unable or unwilling to repay their obligations in accordance with the underlying contractual terms. We manage credit risk in the loan portfolio by adhering to well-defined underwriting criteria and account administration standards established by management.
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
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. 77 Table of Contents
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.
Generally, mortgage portfolio prepayments increase in lower rate environments, while commercial and consumer portfolios have historically remained more consistent throughout rate cycles. 76 Table of Contents 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.
Added
The base and shock scenarios in the rate shock analysis assume a static balance sheet, static interest rates, no changes to product mix shift, and cash flow reinvestment at current market interest rates. We also make assumptions for our deposit betas and asset prepayments, based on historical experience.
Added
Deposit Betas Deposit pricing changes are primarily driven by changes in the federal funds rate, with the relationship between deposit rates and federal funds rate defined as deposit beta.
Added
We define cumulative deposit beta as the change in our quarterly cost of deposits divided by the change in the upper level of the stated federal funds rate range over a specified period. During the most recent rising rate cycle, which was from the fourth quarter of 2021 through the second quarter of 2024, our cumulative deposit beta was 23.6%.
Added
During the current falling rate cycle, which began with the third quarter of 2024, our cumulative deposit beta was 13.1%. Asset Prepayments We include prepayment assumptions for both our loan and securities portfolios, based on historical experience.

Other HBT 10-K year-over-year comparisons