HBT FINANCIAL, INC. Unless the context requires otherwise, references in this report to the
"Company," "we," "us" and "our" refer to
Management's discussion and analysis should be read in conjunction with the following parts of this Annual Report on Form 10-K: Part I, Item 1 "Business", Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk", and Part II, Item 8 "Financial Statements and Supplementary Data". Detailed discussion and analysis of the financial condition and results of operation for 2022 as compared to 2021 can be found below.
OVERVIEW
HBT Financial, Inc. , headquartered inBloomington, Illinois , is the holding company forHeartland Bank andTrust Company , and has banking roots that can be traced back to 1920. We provide a comprehensive suite of business, commercial, wealth management, and retail banking products and services to businesses, families, and local governments throughout Central andNortheastern Illinois andEastern Iowa . As ofDecember 31, 2022 , the Company had total assets of$4.3 billion , loans held for investment of$2.6 billion and total deposits
of$3.6 billion . Market Area
As ofDecember 31, 2022 , our branch network included 58 full-service branch locations in Central andNortheastern Illinois andEastern Iowa . We hold a leading deposit share in many of our markets inCentral Illinois , which we define as a top three deposit share rank, providing the foundation for our strong deposit base. The stability provided by this low-cost funding is a key driver of our strong track record of financial performance. Below is a summary of our loan and deposit balances by geographic region. December 31, 2022 December 31, 2021 Total loans (dollars in thousands)Illinois by metropolitan and micropolitan statistical areas Bloomington-Normal $ 499,477 $ 527,161 Champaign-Urbana 235,537 191,646 Chicago 1,294,327 1,196,605 Lincoln 76,690 87,153 Ottawa-Peru 94,516 101,117 Peoria 117,795 123,143 Total Illinois 2,318,342 2,226,825 Iowa 301,911 272,864 Total loans $ 2,620,253 $ 2,499,689 Total depositsIllinois by metropolitan and micropolitan statistical areas Bloomington-Normal $ 857,988 $ 887,587 Champaign-Urbana 218,291 203,899 Chicago 1,216,423 1,237,486 Lincoln 179,923 203,098 Ottawa-Peru 385,117 407,156 Peoria 597,711 610,155 Total Illinois 3,455,453 3,549,381 Iowa 131,571 188,804 Total deposits $ 3,587,024 $ 3,738,185 49 Table of Contents Acquisitions The Company incurred the following pre-tax acquisition expenses during the years endedDecember 31 : Year Ended December 31, 2022 2021 2020 (dollars in thousands) Salaries $ -$ 65 $ - Furniture and equipment - 18 - Data processing 304 355 -
Marketing and customer relations - 12
-
Loan collection and servicing - 11
-
Legal fees and other noninterest expense 788 955
-
Total acquisition-related expenses$ 1,092 1,416
$ -
OnFebruary 1, 2023 ,HBT Financial completed its acquisition ofTown and Country Financial Corporation ("Town and Country"), the holding company forTown and Country Bank . The acquisition of Town and Country further enhancedHBT Financial's footprint inCentral Illinois and expanded our footprint into metro-eastSt. Louis . At the time of acquisition,Town and Country Bank operated ten full-service branch locations which began operating as branches ofHeartland Bank . The core system conversion is expected to occur inApril 2023 .
As of
Total consideration consisted of 3.4 million shares ofHBT Financial's common stock and$38.0 million in cash. Based upon the closing price ofHBT Financial common stock of$21.12 onFebruary 1, 2023 , the aggregate consideration was approximately$109.4 million .
OnOctober 1, 2021 ,HBT Financial completed its acquisition ofNXT Bancorporation, Inc. ("NXT"), the holding company forNXT Bank . The acquisition expanded our footprint intoEastern Iowa with four locations that began operating as branches ofHeartland Bank following the merger and system conversion ofNXT Bank intoHeartland Bank inDecember 2021 . After considering business combination accounting adjustments, NXT added total assets of$234.1 million , total loans of$194.6 million , and total deposits of$181.6 million . Total consideration consisted of 1.8 million shares ofHBT Financial's common stock and$10.6 million in cash. Based upon the closing price ofHBT Financial common stock of$16.27 onOctober 1, 2021 , the aggregate consideration was approximately$39.9 million .Goodwill of$5.7 million was recorded in the acquisition. The acquisition of NXT provided an opportunity to utilize our excess liquidity at the time to replace NXT's higher cost funding. Additionally,Heartland Bank's broader range of products and services and greater ability to meet larger borrowing needs provides an opportunity to expand NXT customer relationships. 50 Table of Contents Branch Rationalization Plan
InApril 2021 , the Company made plans to close or consolidate six branches. One branch was consolidated during the second quarter of 2021, and the remaining five branches were closed during the third quarter of 2021. The Company estimated annual pre-tax cost savings, net of associated revenue impacts, related to the branch rationalization plan to be approximately$1.1 million .
The Company incurred the following pre-tax branch closure costs during the year
ended
NONINTEREST INCOME Gains (losses) on other assets$ (682) NONINTEREST EXPENSE Salaries 53 Marketing and customer relations 6 Legal fees and other noninterest expense 7 Total noninterest expense 66 Total branch closure costs$ 748
Additionally, the Company recognized a net gain on sales of closed branch
premises of
Paycheck Protection Program Loans
During 2021 and 2020, we funded a total of$290.1 million of Paycheck Protection Program ("PPP") loans. The vast majority of those loans have received full forgiveness, and outstanding PPP loans totaled$28 thousand as ofDecember 31, 2022 . Income recognition for the fees collected at origination, net of associated origination costs, is deferred and recognized over the loan term on a level yield basis. Recognition of net deferred origination fees is accelerated upon loan forgiveness or repayment prior to contractual maturity. Net deferred origination fees on PPP loans recognized as taxable loan interest income totaled$1.5 million ,$9.2 million , and$3.0 million during the years endedDecember 31, 2022 , 2021, and 2020, respectively. 51
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FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Economic Conditions
The Company's business and financial performance are affected by economic conditions generally in theU.S. and more directly in theIllinois andIowa markets where we primarily operate. The significant economic factors that are most relevant to our business and our financial performance include the general economic conditions in theU.S. and in the Company's markets (including the effect of inflationary pressures and supply chain constraints), unemployment rates, real estate markets, and interest rates.
Interest Rates
Net interest income is our primary source of revenue. Net interest income is equal to the excess of interest income earned on interest earning assets (including discount accretion on purchased loans plus certain loan fees) over interest expense incurred on interest-bearing liabilities. The level of interest rates as well as the volume of interest-earning assets and interest-bearing liabilities both impact net interest income. Net interest income is also influenced by both the pricing and mix of interest-earning assets and interest-bearing liabilities which, in turn, are impacted by external factors such as local economic conditions, competition for loans and deposits, the monetary policy of theFederal Reserve and market interest rates. The cost of our deposits and short-term wholesale borrowings is largely based on short-term interest rates, which are primarily driven by theFederal Reserve's actions. The yields generated by our loans and securities are typically driven by short-term and long-term interest rates, which are set by the market and, to some degree, by theFederal Reserve's actions. Our net interest income is therefore influenced by movements in such interest rates and the pace at which such movements occur. Generally, we expect increases in market interest rates will increase our net interest income and net interest margin in future periods, while decreases in market interest rates may decrease our net interest income and net interest margin in future periods.
Credit Trends
We focus on originating loans with appropriate risk/reward profiles. We have a detailed loan policy that guides our overall loan origination philosophy and a well-established loan approval process that requires experienced credit officers to approve larger loan relationships. Although we believe our loan approval and credit review processes are strengths that allow us to maintain a high quality loan portfolio, we recognize that credit trends in the markets in which we operate and in our loan portfolio can materially impact our financial condition and performance and that these trends are primarily driven by the economic conditions in our markets.
Competition
Our profitability and growth are affected by the highly competitive nature of the financial services industry. We compete with community banks in all our markets and, to a lesser extent, with money center banks, primarily in the Chicago MSA. Additionally, we compete with non-bank financial services companies, FinTechs and other financial institutions operating within the areas we serve. We compete by emphasizing personalized service and efficient decision-making tailored to individual needs. We do not rely on any individual, group, or entity for a material portion of our loans or our deposits. We continue to see increased competitive pressures on loan rates and terms which may affect our financial results in the future. We have also observed an increase in competition for deposits during 2022 with increases short-term
market interest rates.
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Digital Banking
Throughout the banking industry, in-person branch traffic is expected to
continue to decline as more customers turn to digital banking for routine
banking transactions. The COVID-19 pandemic accelerated this transition, and
in-person branch traffic is not expected to return to pre-pandemic levels. We
plan to continue investing in our digital banking platforms, while maintaining
an appropriately sized branch network. An inability to meet evolving customer
expectations, with the appropriate level of security, for both digital and
in-person banking may adversely affect our financial results in the future.Regulatory Environment and Trends
We are subject to federal and state regulation and supervision, which continue to evolve as the legal and regulatory framework governing our operations continues to change. The current operating environment includes extensive regulation and supervision in areas such as consumer compliance, the Bank Secrecy Act and anti-money laundering compliance, risk management and internal audit. We anticipate that this environment of extensive regulation and supervision will continue for the industry. As a result, changes in the regulatory environment may result in additional costs for additional compliance, risk management and audit personnel or professional fees associated with advisors and consultants.
FACTORS AFFECTING COMPARABILITY OF FINANCIAL RESULTS
JOBS Act Accounting Election
We qualify as an "emerging growth company" under the JOBS Act. The JOBS Act permits us an extended transition period for complying with new or revised accounting standards affecting public companies. The Company may remain an emerging growth company until the earliest to occur of: (1) the end of the fiscal year following the fifth anniversary of the completion of our initial public offering, which isDecember 31, 2024 , (2) the last day of the fiscal year in which the Company has$1.235 billion or more in annual revenues, (3) the date on which the Company is deemed to be a "large accelerated filer" under the Exchange Act or (4) the date on which the Company has, during the previous three year period, issued, publicly or privately, more than$1.0 billion in non-convertible debt securities. We have elected to use the extended transition period until we are no longer an emerging growth company or until we choose to affirmatively and irrevocably opt out of the extended transition period. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies. 53 Table of Contents RESULTS OF OPERATIONS
Overview of Recent Financial Results
The following table presents selected financial results and measures for the years endedDecember 31 . As of or for the Year Ended December 31, 2022 2021 2020 (dollars in thousands, except per share amounts)
Total interest and dividend income $ 153,054 $
128,223 $ 124,065
Total interest expense 7,180 5,820 6,460
Net interest income 145,874 122,403 117,605
Provision for loan losses (706) (8,077) 10,532
Net interest income after provision for loan
losses 146,580 130,480 107,073
Total noninterest income 34,717 37,328 34,456
Total noninterest expense 105,107 91,246 91,956Income before income tax expense 76,190
76,562 49,573
Income tax expense 19,734 20,291 12,728
Net income $ 56,456 $ 56,271 $ 36,845
Adjusted net income (1) 55,805 56,840 39,734
Net interest income (tax-equivalent basis)
(1) (2) $ 148,373 $
124,431
Share and Per Share Information Earnings per share - Diluted $ 1.95 $ 2.02$ 1.34 Adjusted earnings per share - Diluted (1) 1.93 2.04 1.44 Weighted average shares of common stock outstanding 28,853,697
27,795,806 27,457,306
Summary Ratios Net interest margin 3.54 % 3.18 % 3.54 % Net interest margin (tax-equivalent basis) (1) (2) 3.60 3.23 3.60 Yield on loans 4.91 4.68 4.69 Yield on interest-earning assets 3.72 3.33 3.74 Cost of interest-bearing liabilities 0.26 0.23 0.29 Cost of total deposits 0.07
0.07 0.14
Cost of funds 0.19 0.16 0.21
Efficiency ratio 57.72 % 56.46 % 59.66 %
Efficiency ratio (tax-equivalent basis) (1)
(2) 56.93 55.76 58.91
Return on average assets 1.32 % 1.41 % 1.07 %
Return on average stockholders' equity 14.73 14.81 10.51
Return on average tangible common equity (1) 16.02 15.95 11.38
Adjusted return on average assets (1) 1.31 % 1.43 % 1.15 %
Adjusted return on average stockholders'
equity (1) 14.56 14.95 11.33
Adjusted return on average tangible common
equity (1) 15.83 16.12 12.28
(1) See "Non-GAAP Financial Information" for reconciliation of non-GAAP measures
to their most closely comparable GAAP measures.
(2) On a tax-equivalent basis assuming a federal income tax rate of 21% and a
state income tax rate of 9.5%.
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Comparison of the Year Ended
For the year ended
A
higher average balances of interest-earning assets following the NXT
? acquisition in the fourth quarter of 2021, a more favorable asset mix, and
higher yields on interest-earning assets which more than offset a
decrease in PPP loan fees recognized as loan interest income;
A
? totaling
of noninterest expense following the NXT acquisition;
A negative provision for loan losses of
? year ended
of
A
? attributable to a lower level of mortgage refinancing activity due to increases
in market interest rates.
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. Interest rate spread is the difference between the yield on
interest-earning assets and the rate paid for interest-bearing liabilities that
fund those assets. The net interest margin is expressed as the percentage of net
interest income to average interest-earning assets. The net interest margin
exceeds the interest rate spread because noninterest-bearing sources of funds,
principally noninterest-bearing demand deposits and stockholders' equity, also
support interest-earning assets.
55
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The following tables set forth average balances, average yields and costs, and certain other information for the years endedDecember 31, 2022 , 2021, and 2020. Average balances are daily average balances. Nonaccrual loans are included in the computation of average balances but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees and costs, discounts and premiums, and purchase accounting adjustments that are accreted or amortized to interest income or expense. Year Ended December 31, 2022 December 31, 2021 December 31, 2020 Average Average Average Balance Interest Yield/Cost Balance Interest Yield/Cost Balance Interest Yield/Cost (dollars in thousands) ASSETS Loans$ 2,514,549 $ 123,478 4.91 %$ 2,271,544 $ 106,284 4.68 %$ 2,245,093 $ 105,196 4.69 % Securities 1,403,016 27,937
1.99 1,148,900 21,348 1.86 789,062 17,875
2.27
Deposits with banks 197,030 1,541 0.78 422,828 527 0.12 282,130 938 0.33
Other 3,529 98 2.77 3,201 64 2.01 2,479 56 2.28
Total interest-earning assets 4,118,124 $ 153,054 3.72 % 3,846,473 $ 128,223 3.33 % 3,318,764 $ 124,065 3.74 %
Allowance for loan losses (24,703) (27,999) (27,661)
Noninterest-earning assets 176,452 162,064 156,397
Total assets $ 4,269,873 $ 3,980,538 $ 3,447,500
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities
Interest-bearing deposits:
Interest-bearing demand $ 1,141,402 $ 607 0.05 % $ 1,024,888 $ 518 0.05 % $ 873,060 $ 647 0.07 %
Money market 582,514 813 0.14 521,366 437 0.08 474,033 697 0.15
Savings 650,385 208 0.03 595,887 188 0.03 477,260 196 0.04
Time 283,232 883 0.31 295,788 1,329 0.45 317,308 2,681 0.84Total interest-bearing deposits 2,657,533 2,511 0.09 2,437,929 2,472 0.10 2,141,661 4,221
0.20
Securities sold under agreements to repurchase 51,554 36 0.07 50,104 34 0.07 49,714 48 0.10 Borrowings 26,468 967 3.65 1,653 9 0.54 1,080 2 0.22 Subordinated notes 39,355 1,879 4.77 39,275 1,879 4.78 12,869 616 4.79 Junior subordinated debentures issued to capital trusts 37,746 1,787
4.73 37,680 1,426 3.79 37,613 1,573
4.18
Total interest-bearing liabilities 2,812,656
0.29 %
Noninterest-bearing deposits 1,051,187 1,004,757 807,864
Noninterest-bearing liabilities 22,724
29,060 45,996
Total liabilities 3,886,567 3,600,458 3,096,797
Stockholders' Equity 383,306 380,080 350,703
Total liabilities and
stockholders' equity $ 4,269,873 $ 3,980,538 $ 3,447,500
Net interest income/Net interest
margin (1) $ 145,874 3.54 % $ 122,403 3.18 % $ 117,605 3.54 %
Tax-equivalent adjustment (2) 2,499 0.06 2,028 0.05 1,943 0.06
Net interest income (tax-equivalent basis)/ Net interest margin (tax-equivalent basis) (2) (3)$ 148,373 3.60 %$ 124,431 3.23 %$ 119,548 3.60 % Net interest rate spread (4) 3.46 % 3.10 % 3.45 % Net interest-earning assets (5)$ 1,305,468 $ 1,279,832 $ 1,075,827 Ratio of interest-earning assets to interest-bearing liabilities 1.46
1.50 1.48
Cost of total deposits 0.07 % 0.07 % 0.14 %
Cost of funds 0.19 0.16 0.21
(1) Net interest margin represents net interest income divided by average total
interest-earning assets.
(2) On a tax-equivalent basis assuming a federal income tax rate of 21% and a
state income tax rate of 9.5%.
(3) See "Non-GAAP Financial Information" for reconciliation of non-GAAP measures
to their most closely comparable GAAP measures.
Net interest rate spread represents the difference between the yield on (4) average interest-earning assets and the cost of average interest-bearing
liabilities.
(5) Net interest-earning assets represents total interest-earning assets less
total interest-bearing liabilities.
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The following table sets forth the components of loan interest income and their contributions to the total yield on loans.
Year Ended December 31,
2022 2021 2020
Yield Yield Yield
Interest Contribution Interest Contribution Interest Contribution
(dollars in thousands)
Contractual interest$ 113,775 4.52 %$ 90,647 3.99 %$ 96,543 4.30 % Loan fees (excluding PPP loans) 4,454 0.18 3,840 0.17 3,926 0.19 PPP loan fees 1,488 0.06 9,181 0.40 2,953 0.13 Accretion of acquired loan discounts 933 0.04 1,102 0.05 724 0.03 Nonaccrual interest recoveries 2,828 0.11 1,514 0.07 986 0.04 Net cash flow hedge earnings - - - - 64 - Total loan interest income$ 123,478 4.91 %$ 106,284 4.68 %$ 105,196 4.69 %
The following table sets forth the components of net interest income and their contributions to the net interest margin.
Year Ended December 31,
2022 2021 2020
Net Interest Net Interest Net Interest
Margin Margin Margin
Interest Contribution Interest Contribution Interest Contribution
(dollars in thousands)
Interest income:
Contractual interest on
loans $ 113,775 2.76 % $ 90,647 2.35 % $ 96,543 2.91 %
Contractual interest on
securities 34,896 0.85 28,426 0.74 22,920 0.69
Contractual interest on
deposits with banks 1,541 0.04 530 0.01 938 0.03
Loan fees (excluding PPP
loans) 4,454 0.11 3,840 0.10 3,926 0.12
PPP loan fees 1,488 0.04 9,181 0.24 2,953 0.09
Accretion of acquired loan
discounts 933 0.02 1,102 0.03 724 0.02
Nonaccrual interest
recoveries 2,828 0.07 1,514 0.04 986 0.03Securities amortization, net (6,959) (0.17) (7,066)
(0.18) (5,045) (0.15) Other 98 - 49 - 120 - Total interest income 153,054 3.72 128,223 3.33 124,065 3.74 Interest expense: Contractual interest on deposits 2,687 0.07 2,541 0.07 4,201 0.13 Contractual interest on other interest-bearing liabilities 4,398 0.11 2,903 0.07 1,846 0.06 Other 95 - 376 0.01 413 0.01 Total interest expense 7,180 0.18 5,820 0.15 6,460 0.20 Net interest income 145,874 3.54 122,403 3.18 117,605 3.54 Tax equivalent adjustment (1) 2,499 0.06 2,028 0.05 1,943 0.06 Net interest income (tax equivalent) (1) (2)$ 148,373 3.60 %$ 124,431 3.23 %$ 119,548 3.60 %
(1) On a tax-equivalent basis assuming a federal income tax rate of 21% and a
state income tax rate of 9.5%.
(2) See "Non-GAAP Financial Information" for reconciliation of non-GAAP measures
to their most closely comparable GAAP measures.
57
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Rate/Volume Analysis
The following table sets forth the dollar amount of changes in interest income
and interest expense for the major categories of our interest-earning assets and
interest-bearing liabilities. Information is provided for each category of
interest-earning assets and interest-bearing liabilities with respect to changes
attributable to volume (i.e., changes in average balances multiplied by the
prior-period average rate), and changes attributable to rate (i.e., changes in
average rate multiplied by prior-period average balances). For purposes of this
table, changes attributable to both volume and rate that cannot be segregated
have been allocated proportionately to the change due to volume and the change
due to rate.
Year Ended December 31, 2022 Year Ended December 31, 2021
vs. vs.
Year Ended December 31, 2021 Year Ended December 31, 2020
Increase (Decrease) Due to Increase (Decrease) Due to
Volume Rate Total Volume Rate Total
(dollars in thousands)
Interest-earning assets:
Loans $ 11,755 $ 5,439 $ 17,194 $ 1,238 $ (150) $ 1,088
Securities 4,977 1,612 6,589 7,100 (3,627) 3,473
Deposits with banks (418) 1,432 1,014 338 (749) (411)
Other 7 27 34 15 (7) 8
Total interest-earning assets 16,321 8,510 24,831 8,691 (4,533) 4,158
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand 61 28 89 100 (229) (129)
Money market 56 320 376 64 (324) (260)
Savings 17 3 20 43 (51) (8)
Time (54) (392) (446) (171) (1,181) (1,352)Total interest-bearing deposits 80 (41) 39 36 (1,785) (1,749) Securities sold under agreements to repurchase 1 1 2 - (14) (14) Borrowings 694 264 958 1 6 7 Subordinated notes 4 (4) - 1,264 (1) 1,263 Junior subordinated debentures issued to capital trusts 3 358 361 3 (150) (147) Total interest-bearing liabilities 782 578
1,360 1,304 (1,944) (640)
Change in net interest income $ 15,539 $ 7,932 $ 23,471 $ 7,387 $ (2,589) $ 4,798 Comparison of the Year Ended
For the year endedDecember 31, 2022 , net interest income was$145.9 million , increasing$23.5 million , or 19.2%, when compared to the year endedDecember 31, 2021 . The increase is primarily attributable to higher average balances of interest-earning assets following the NXT acquisition and a more favorable asset mix. These balance changes, as well as higher yields on interest-earning assets driven by recent increases in benchmark interest rates, more than offset a$7.7 million decrease in PPP loan fees recognized as loan interest income. Net interest margin increased to 3.54% for the year endedDecember 31, 2022 compared to 3.18% for the year endedDecember 31, 2021 . The contribution of PPP loans to net interest margin decreased to 4 basis points during the year endedDecember 31, 2022 from 24 basis points during the year endedDecember 31, 2021 . This decrease was more than offset by an increase in contractual interest on loans, driven by recent increases in benchmark interest rates. 58
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The quarterly net interest margins were as follows:
2022 2021 2020
Three months ended:
March 31 3.08 % 3.25 % 4.03 %
June 30 3.34 3.14 3.51
September 30 3.65 3.18 3.39
December 31 4.10 3.17 3.31
InMarch 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 theFederal Reserve would substantially increase itsTreasury and agency mortgage-backed securities holdings. This resulted in a historically low interest rate environment which lasted through the rest of 2020 and into 2021, putting downward pressure on our net interest margin. In 2021, theFOMC began to taper the pace of its security purchases, and, inMarch 2022 , theFOMC raised the target range for the federal funds rate to 0.25% to 0.50%. SinceMarch 2022 , theFOMC has raised the target range for the federal funds rate several times, setting the target range for the federal funds rate to 4.50% to 4.75% at theFebruary 2023 meeting and indicating that theFederal Reserve will continue reducing its security holdings. As a result of these developments, market interest rates rose during 2022 which has led to improvements in our net interest margin. In general, we believe that increases in market interest rates will lead to improved net interest margins while decreases in market interest rates will result in lower net interest margins. Additionally, these recent increases in market interest rates have increased competition for deposits. As a result, we expect deposit costs to increase during 2023 and deposits balances may decrease and be replaced by higher cost funding sources, such as FHLB advances, brokered deposits, or other wholesale funding.
Provision for Loan Losses
Provisions for loan losses are charged to operations in order to maintain the
allowance for loan losses at a level we consider necessary to absorb probable
incurred credit losses in the loan portfolio. In determining the level of the
allowance for loan losses, management considers past and current loss
experience, evaluations of collateral, current economic conditions, volume and
type of lending, adverse situations that may affect a borrower's ability to
repay a loan and the levels of nonperforming and other classified loans. The
amount of the allowance is based on estimates and the ultimate losses may vary
from such estimates as more information becomes available or as events change.
We assess the allowance for loan losses on a quarterly basis and make provisions
for loan losses in order to maintain the allowance. The provision for loan
losses is a function of the allowance for loan loss methodology we use to
determine the appropriate level of the allowance for inherent loan losses after
accounting for net charge-offs (recoveries).
Credit losses in our loan portfolio are highly dependent on the economic
conditions in the communities that we serve. The broad deterioration in economic
conditions initially caused by the COVID-19 pandemic adversely affected the
communities that we serve beginning in 2020. As a result, our allowance for loan
losses initially increased at the onset of the COVID-19 pandemic, remained
elevated during the remainder of 2020, and then gradually returned to near
pre-pandemic levels during 2021 as economic conditions improved in our market
areas. During 2022, our allowance for loan losses as a percentage of total loans
remained relatively stable, primarily due to the stable economic conditions
observed, as well as the low level of nonperforming loans maintained, throughout
2022. Potential deterioration of economic conditions, whether due to the
COVID-19 pandemic or other factors, may lead to higher credit losses and
adversely impact our financial condition and results of operations.
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OnJanuary 1, 2023 , the Company adopted ASU 2016-13 (Topic 326), Measurement of Credit Losses on Financial Instruments, commonly referenced as the Current Expected Credit Loss ("CECL") standard. Management is finalizing macroeconomic conditions and forecast assumptions to be used in our CECL model; however, we expect the initial allowance for credit losses and the reserve for unfunded commitments together to be approximately 30% to 50% above the existing allowance for loan loss levels. When finalized, this one-time increase will be recorded, net of tax, as an adjustment to beginning retained earnings. Ongoing impacts of the CECL methodology will be dependent upon changes in economic conditions and forecasts, the credit quality of our loan portfolio, originated and acquired loan portfolio composition, portfolio duration, and other factors.
Comparison of the Year Ended
The Company recorded a negative provision for loan losses of$0.7 million during the year endedDecember 31, 2022 , compared to a negative provision for loan losses of$8.1 million during the year endedDecember 31, 2021 . During the year endedDecember 31, 2022 , net recoveries of$2.1 million were mostly offset by a$1.4 million increase in required reserves, which included a$0.7 million increase in specific reserves on loans individually evaluated for impairment.
Noninterest Income
The following table outlines the amount of and changes to the various noninterest income line items as of the dates indicated.
Year Ended December 31,
2022 $ Change 2021 $ Change 2020
(dollars in thousands)
Card income $ 10,329 $ 595 $ 9,734 $ 1,647 $ 8,087
Wealth management fees 9,155 771 8,384 1,147 7,237
Service charges on deposit
accounts 7,072 992 6,080 93 5,987
Mortgage servicing 2,609 (216) 2,825 (153) 2,978
Mortgage servicing rights fair
value adjustment 2,153 463 1,690 4,274 (2,584)
Gains on sale of mortgage loans 1,461 (4,385) 5,846 (2,989) 8,835 Unrealized gains (losses) on equity securities (414) (521) 107 74 33 Gains (losses) on foreclosed assets (314) (624) 310 168 142
Gains (losses) on other assets 136 859 (723)
(652) (71) Income on bank owned life insurance 164 123 41 41 - Other noninterest income 2,366 (668) 3,034 (778) 3,812 Total noninterest income$ 34,717 $ (2,611) $ 37,328 $ 2,872 $ 34,456
Comparison of the Year Ended
Total noninterest income for the year ended
A
? attributable to a lower level of mortgage refinancing activity due to interest
rate increases;
? A
A
? results include impairment losses of
pursuant to our 2021 branch rationalization plan;
? A
increase in farm management and farmland brokerage fees;
? A
credit card transaction volume; and
? A
primarily resulting from slower mortgage prepayment speed assumptions.
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Noninterest Expense
The following table outlines the amount of and changes to the various noninterest expense line items as of the dates indicated.
Year Ended December 31,
2022 $ Change 2021 $ Change 2020
(dollars in thousands)
Salaries $ 51,767 $ 2,795 $ 48,972 $ (1,253) $ 50,225
Employee benefits 8,325 1,812 6,513 (1,392) 7,905
Occupancy of bank premises 7,673 885 6,788 208 6,580
Furniture and equipment 2,476 (200) 2,676 229 2,447
Data processing 7,441 112 7,329 587 6,742Marketing and customer relations 3,803 427 3,376 (100) 3,476 Amortization of intangible assets 873 (181) 1,054
(178) 1,232 FDIC insurance 1,164 121 1,043 336 707 Loan collection and servicing 1,049 (268) 1,317 (438) 1,755 Foreclosed assets 293 (615) 908 351 557 Other noninterest expense 20,243 8,973 11,270 940 10,330 Total noninterest expense$ 105,107 $ 13,861 $ 91,246 $ (710) $ 91,956
Comparison of the Year Ended
Total noninterest expense for the year ended
Following the NXT acquisition on
? of noninterest expense, primarily related to personnel costs and branch
operations;
A
? accruals totaling
2022 results; The$1.8 million increase in employee benefits expenses also included
accelerated recognition of
unit and performance restricted stock unit agreements to address treatment upon
? retirement. Total compensation costs related to the modified agreements remains
the same, and stock compensation expense in periods subsequent to the
modification are reduced as a result. The net impact of this modification was a
? A
foreclosed properties held during 2022 relative to 2021.
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.
Income Taxes
Comparison of the Year Ended
We recorded income tax expense of$19.7 million , or a 25.9% effective tax rate, during the year endedDecember 31, 2022 compared to$20.3 million , or a 26.5% effective tax rate during the year endedDecember 31, 2021 . The effective income tax rate was lower than the combined federal and state statutory rate primarily due to tax exempt interest income. The slight decrease in effective tax rate was primarily due to slightly higher federally tax exempt interest income and slightly lower state income taxes. 61 Table of Contents FINANCIAL CONDITION December 31, December 31, 2022 2021 $ Change % Change
Consolidated Balance Sheet Information (dollars in thousands, except per share data) Cash and cash equivalents$ 114,159 $ 409,268 $ (295,109) (72.1) % Debt securities available-for-sale, at fair value 843,524 942,168 (98,644) (10.5) Debt securities held-to-maturity 541,600 336,185 205,415 61.1 Loans held for sale 615
4,942 (4,327) (87.6)
Loans, before allowance for loan losses 2,620,253 2,499,689 120,564 4.8 Less: allowance for loan losses 25,333 23,936 1,397 5.8 Loans, net of allowance for loan losses 2,594,920 2,475,753 119,167 4.8 Goodwill 29,322 29,322 - - Core deposit intangible assets, net 1,070 1,943 (873) (44.9) Other assets 161,524 114,673 46,851 40.9 Total assets$ 4,286,734 $ 4,314,254 $ (27,520) (0.6) % Total deposits$ 3,587,024 $ 3,738,185 $ (151,161) (4.0) % Securities sold under agreements to repurchase 43,081 61,256 (18,175) (29.7) Borrowings 160,000 - 160,000 NM Subordinated notes 39,395 39,316 79 0.2 Junior subordinated debentures 37,780 37,714 66 0.2 Other liabilities 45,822 25,902 19,920 76.9 Total liabilities 3,913,102 3,902,373 10,729 0.3 Total stockholders' equity 373,632 411,881 (38,249) (9.3) Total liabilities and stockholders' equity$ 4,286,734 $ 4,314,254 $ (27,520) (0.6) % Tangible assets (1)$ 4,256,342 $ 4,282,989 $ (26,647) (0.6) % Tangible common equity (1) 343,240 380,616 (37,376) (9.8) Core deposits (1)$ 3,559,866 $ 3,674,435 $ (114,569) (3.1) % Share and Per Share Information Book value per share $ 12.99 $
14.21
Tangible book value per share (1) 11.94
13.13
Shares of common stock outstanding 28,752,626 28,986,061 Balance Sheet Ratios Loan to deposit ratio 73.05 % 66.87 % Core deposits to total deposits (1) 99.24
98.29
Stockholders' equity to total assets 8.72
9.55
Tangible common equity to tangible assets (1) 8.06
8.89
(1) See "Non-GAAP Financial Information" for reconciliation of non-GAAP measures
to their most comparable GAAP measures.
NM Not meaningful.
62
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Total assets were
Excess liquidity, including excess cash held at
? reinvested into debt securities, which increased by
held for investment which increased
? Loans increased by
due to forgiveness;
Total deposits decreased by
? maintained in noninterest-bearing business accounts and continued run-off of
higher cost time deposits;
? Borrowings, consisting of short-term FHLB advances, increased
and were utilized to fund short-term liquidity needs; and
Increases in market interest rates during 2022 drove a decrease in fair value
? of debt securities resulting in
available-for-sale portfolio and substantially contributing to a total decrease
of
Loan Portfolio
The following table sets forth the composition of the loan portfolio by category, excluding loans held-for-sale.
December 31, 2022 December 31, 2021
Balance Percent Balance Percent
(dollars in thousands)
Commercial and industrial $ 266,757 10.2 % $ 286,946 11.5 %
Agricultural and farmland 237,746 9.1 247,796 9.9Commercial real estate - owner occupied 218,503 8.3 234,544 9.4 Commercial real estate - non-owner occupied 713,202 27.2 684,023 27.4 Multi-family 287,865 11.0 263,911 10.5 Construction and land development 360,824 13.8 298,048 11.9 One-to-four family residential 338,253 12.9 327,837 13.1 Municipal, consumer, and other 197,103 7.5 156,584 6.3 Loans, before allowance for loan losses 2,620,253 100.0 % 2,499,689 100.0 % Allowance for loan losses (25,333)
(23,936)
Loans, net of allowance for loan losses$ 2,594,920 $ 2,475,753 PPP loans (included above) Commercial and industrial$ 28 - %$ 28,404 1.1 % Agricultural and farmland - - 913 0.1
Municipal, consumer, and other - -
171 -
Total PPP loans $ 28 - % $ 29,488 1.2 %
Loans, before allowance for loan losses were$2.62 billion atDecember 31, 2022 , an increase of$120.6 million , or 4.8%, fromDecember 31, 2021 . Notable changes include the following:
? Loan growth was partially offset by a
to forgiveness;
Loan growth excluding PPP loans was predominantly in the
? statistical area with balances in our
increasing; and
Our loan growth during 2022 was highest in the regulatory CRE categories, which
? includes construction and land development, commercial real estate - non-owner
occupied, and multi-family loans.
63
Table of Contents
Loan Portfolio Maturities
The following table summarizes the scheduled maturities of the loan portfolio as
of December 31, 2022 . Demand loans (loans having no stated repayment schedule or
maturity) and overdraft loans are reported as being due in one year or less.
After 1 Year After 5 Years
1 Year Through Through After
December 31, 2022 or Less 5 Years 15 Years 15 Years Total
(dollars in thousands)
Commercial and industrial
94,041 103,323 37,211 3,171 237,746
Commercial real estate -
owner occupied 15,778 132,718 67,760 2,247 218,503
Commercial real estate -
non-owner occupied 83,519 423,430 205,747 506 713,202
Multi-family 27,604 197,005 63,256 - 287,865
Construction and land
development 191,601 151,082 17,919 222 360,824
One-to-four family
residential 69,624 129,703 72,762 66,164 338,253
Municipal, consumer, and
other 90,085 17,533 69,584 19,901 197,103
Total $ 734,404 $ 1,244,155 $ 549,483 $ 92,211 $ 2,620,253 The following table summarizes loans maturing after one year, segregated into variable and fixed interest rates.
Variable Interest Rates
Repricing Repricing Total Predetermined
1 Year After Variable (Fixed)
December 31, 2022 or Less 1 Year Interest Rates Interest Rates Total
(dollars in thousands)
Commercial and industrial $ 25,953 $ 17 $ 25,970 $ 78,635 $ 104,605
Agricultural and farmland 7,568 5,798 13,366 130,339 143,705
Commercial real estate -
owner occupied 30,113 18,447 48,560 154,165 202,725
Commercial real estate -
non-owner occupied 74,175 14,615 88,790 540,893 629,683
Multi-family 17,689 3,550 21,239 239,022 260,261
Construction and land
development 87,961 738 88,699 80,524 169,223
One-to-four family
residential 68,152 27,734 95,886 172,743 268,629
Municipal, consumer, and
other 31,209 11,680 42,889 64,129 107,018
Total $ 342,820 $ 82,579 $ 425,399 $ 1,460,450 $ 1,885,849
Nonperforming Assets
Nonperforming loans consist of all loans 90 days or more past due or on
nonaccrual. Nonperforming assets consist of all nonperforming loans and
foreclosed assets. Typically, loans are placed on nonaccrual when they reach
90 days past due, or when, in management's opinion, there is reasonable doubt
regarding the collection of the amounts due through the normal means of the
borrower. Interest accrued and unpaid at the time a loan is placed on nonaccrual
status is reversed from interest income. Interest payments received on
nonaccrual loans are recognized in accordance with our significant accounting
policies. Once a loan is placed on nonaccrual status, the borrower must
generally demonstrate at least six months of payment performance and we must
believe that all remaining principal and interest is fully collectible, before
the loan is eligible to return to accrual status. Management believes the
Company's lending practices and active approach to managing nonperforming assets
has resulted in timely resolution of problem assets.
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Loans acquired with deteriorated credit quality are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. However, these loans may be considered performing, even though they may be contractually past due, as any non-payment of contractual principal or interest is considered in the periodic re-estimation of expected cash flows and is included in the resulting recognition of current period loan loss provision or future period yield adjustments. The accrual of interest is discontinued on loans acquired with deteriorated credit quality if management can no longer estimate future cash flows on the loan. Therefore, interest revenue, through accretion of the difference between the carrying value of the loans and the expected cash flows, is being recognized on all loans acquired with deteriorated credit quality, except those on which management can no longer estimate future cash flows. When it appears likely that we will obtain title to real estate collateral, we develop an exit strategy by assessing overall market conditions, the current use and condition of the asset, and its highest and best use. If determined necessary to maximize value, we complete the necessary improvements or tenant stabilization tasks, with the applicable time value discount and improvement expenses incorporated into our estimates of the expected costs to sell. Substantially all foreclosed real estate is valued on an "as-is" basis. Estimates of the net realizable value of real estate collateral also include a deduction for the expected selling costs. For most real estate collateral and foreclosed real estate, we apply a 7.0% deduction to the value of the asset to account for the expected costs to sell the asset. This estimate includes sales commissions and closing costs. Expenses for real estate taxes are accrued and repairs are expensed when incurred.
The following table sets forth information concerning nonperforming loans and
nonperforming assets as of
December 31, 2022 December 31, 2021
(dollars in thousands)
NONPERFORMING ASSETS
Nonaccrual $ 2,155 $ 2,763Past due 90 days or more, still accruing (1) 1
16
Total nonperforming loans 2,156 2,779
Foreclosed assets 3,030 3,278
Total nonperforming assets $ 5,186 $ 6,057
Allowance for loan losses $ 25,333 $ 23,936Loans, before allowance for loan losses 2,620,253 2,499,689 CREDIT QUALITY RATIOS Allowance for loan losses to loans, before allowance for loan losses 0.97 % 0.96 % Allowance for loan losses to nonaccrual loans 1,175.55 866.30 Allowance for loan losses to nonperforming loans 1,175.00 861.32 Nonaccrual loans to loans, before allowance for loan losses 0.08 0.11 Nonperforming loans to loans, before allowance for loan losses 0.08 0.11 Nonperforming assets to total assets 0.12 0.14 Nonperforming assets to loans, before allowance for loan losses, and foreclosed assets 0.20 0.24
Excludes loans acquired with deteriorated credit quality that are past due 90
(1) or more days totaling
and 2021, respectively.
Comparison of
Total nonperforming assets were$5.2 million as ofDecember 31, 2022 , a decrease of$0.9 million , or 14.4%, fromDecember 31, 2021 . Our level of nonperforming assets has remained low in recent years, representing only 0.12% of total assets as ofDecember 31, 2022 and 0.14% of total assets as ofDecember 31, 2021 . We believe our continuous credit monitoring and collection efforts have resulted in lower levels of nonperforming assets, while also recognizing that favorable economic conditions prior to the COVID-19 pandemic and substantial federal economic stimulus during the pandemic have also contributed to these lower
levels.
65
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Troubled Debt Restructurings
In general, if the Company grants a troubled debt restructuring ("TDR") that
involves either the absence of principal amortization or a material extension of
an existing loan amortization period in excess of our underwriting standards,
the loan will be placed on nonaccrual status. However, if a TDR is well secured
by an abundance of collateral and the collectability of both interest and
principal is probable, the loan may remain on accrual status. A nonaccrual TDR
in full compliance with the payment requirements specified in the loan
modification for at least six months may return to accrual status, if the
collectability of both principal and interest is probable. All TDRs are
individually evaluated for impairment.
The following table presents TDRs by loan category.
December 31, 2022 December 31, 2021
Accruing Nonaccrual Total Accruing Nonaccrual Total
(dollars in thousands)
Commercial and industrial $ 84 $ - $ 84 $ 203 $ - $ 203
Commercial real estate - owner
occupied 1,514 - 1,514 1,671 - 1,671
Commercial real estate - non-owner
occupied 1,204 - 1,204 1,278 - 1,278
One-to-four family residential 189 - 189 360 - 360
Total troubled debt restructurings
TDRs have remained a small portion of our loan portfolio as loan modifications
to borrowers with deteriorating financial condition are generally offered only
as part of an overall workout strategy to minimize losses to the Company.
66
Table of Contents
Risk Classification of Loans
Our policies, consistent with regulatory guidelines, provide for the classification of loans and other assets that are considered to be of lesser quality as pass-watch, substandard, doubtful, or loss.
A pass-watch loan is still considered a "pass" credit and is not a classified or criticized asset, but is a reflection of a borrower who exhibits credit weaknesses or downward trends warranting close attention and increased monitoring. These potential weaknesses may result in deterioration of the repayment prospects for the loan. No loss of principal or interest is expected, and the borrower does not pose sufficient risk to warrant classification. A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized as probable that the borrower will not pay principal and interest in accordance with the contractual terms. A doubtful loan has all the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets is not warranted; such balances are promptly charged-off as required by applicable federal regulations. As ofDecember 31, 2022 and 2021, our risk classifications of loans were as follows: December 31, 2022 December 31, 2021 (dollars in thousands) Pass $ 2,479,488 $ 2,269,228 Pass-watch 66,934 148,285 Substandard 73,831 82,176 Doubtful - - Total $ 2,620,253 $ 2,499,689 Pass-watch loans decreased$81.4 million , or 54.9% fromDecember 31, 2021 toDecember 31, 2022 . Additionally, substandard loans decreased$8.3 million , or 10.2%, fromDecember 31, 2021 toDecember 31, 2022 . These overall improvements were primarily driven by better economic conditions, relative to 2021, which resulted in both risk rating upgrades and paydowns. 67
Table of Contents
Net Charge-offs and Recoveries
The following table summarizes net charge-offs (recoveries) to average loans, before allowance for loan losses by loan category.
Year Ended December 31,
2022 2021 2020
(dollars in thousands)
Net charge-offs (recoveries)
Commercial and industrial $ (751) $ 15 $ 1,189
Agricultural and farmland - - 27Commercial real estate - owner occupied (1,006) 21
(401)
Commercial real estate - non-owner occupied (283) (24)
274
Multi-family - -
-
Construction and land development (1) (342)
(223)
One-to-four family residential (302) 18
(155)
Municipal, consumer, and other 240 137
282
Total$ (2,103) $ (175)
Average loans, before allowance for loan losses Commercial and industrial$ 268,765 $ 347,547 $ 372,927 Agricultural and farmland 233,349 230,364 223,381
Commercial real estate - owner occupied 219,127 204,148
222,593
Commercial real estate - non-owner occupied 695,230 583,084
543,227
Multi-family 258,490 227,736
196,632
Construction and land development 340,831 226,035
242,800
One-to-four family residential 328,656 314,871
324,645
Municipal, consumer, and other 170,101 137,759
118,888
Total$ 2,514,549 $ 2,271,544
Net charge-offs (recoveries) to average loans, before allowance for loan losses Commercial and industrial (0.28) % - % 0.32 % Agricultural and farmland - -
0.01
Commercial real estate - owner occupied (0.46) 0.01
(0.18)
Commercial real estate - non-owner occupied (0.04) -
0.05
Multi-family - -
-
Construction and land development - (0.15)
(0.09)
One-to-four family residential (0.09) 0.01
(0.05)
Municipal, consumer, and other 0.14 0.10
0.24
Total (0.08) % (0.01) % 0.04 %
Comparison of the Year Ended
Our net charge-offs (recoveries) percentage has remained low for several years, including each of the years endedDecember 31, 2022 , 2021, and 2020. We believe our continuous credit monitoring and collection efforts have resulted in lower levels of loan losses, while also recognizing that favorable economic conditions prior to the COVID-19 pandemic and substantial federal economic stimulus during the pandemic have also contributed to reduced loan losses.
Securities
The Company's investment policy emphasizes safety of the principal, liquidity needs, expected returns, cash flow targets and consistency with our interest rate risk management strategy. The composition and maturities of the debt securities portfolio as ofDecember 31, 2022 is summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. Security yields have not been adjusted to a tax-equivalent basis. 68 Table of Contents December 31, 2022 Available-for-Sale Held-to-Maturity Total Weighted Weighted Weighted Amortized Average Amortized Average Amortized Average Cost Yield Cost Yield Cost Yield (dollars in thousands) Due in 1 year or less U.S. Treasury$ 10,073 1.51 % $ - - %$ 10,073 1.51 % Municipal 4,431 2.51 2,288 4.01 6,719 3.02 Mortgage-backed: Agency residential 69 3.22 - - 69 3.22 Agency commercial 1,484 1.98 - - 1,484 1.98 Corporate 4,997 2.58 - - 4,997 2.58 Total$ 21,054 2.01 %$ 2,288 4.01 %$ 23,342 2.21 % Due after 1 year through 5 years U.S. Treasury$ 109,636 1.32 % $ - - %$ 109,636 1.32 % U.S. government agency 40,921 2.55 10,000 2.18 50,921 2.48 Municipal 59,838 2.05 17,813 3.19 77,651 2.31 Mortgage-backed: Agency residential 12,969 2.33 8,364 1.62 21,333 2.05 Agency commercial 43,737 2.02 16,708 2.64 60,445 2.19 Corporate 19,891 4.65 - - 19,891 4.65 Total$ 286,992 2.03 %$ 52,885 2.58 %$ 339,877 2.12 % Due after 5 years through 10 years U.S. Treasury$ 50,151 1.49 % $ - - %$ 50,151 1.49 % U.S. government agency 18,370 2.38 64,028 2.47 82,398 2.45 Municipal 143,973 1.75 19,153 3.43 163,126 1.95 Mortgage-backed: Agency residential 74,346 2.09 3,858 3.51 78,204 2.16 Agency commercial 64,083 1.67 233,021 1.77 297,104 1.75 Corporate 38,709 4.17 - - 38,709 4.17 Total$ 389,632 2.04 %$ 320,060 2.03 %$ 709,692 2.04 % Due after 10 years U.S. government agency $ - - %$ 14,396 2.72 %$ 14,396 2.72 % Municipal 67,730 1.88 2,913 3.35 70,643 1.94 Mortgage-backed: Agency residential 126,292 2.52 90,506 3.59 216,798 2.97 Agency commercial 40,756 2.03 58,552 1.98 99,308 2.00 Corporate 2,000 4.50 - - 2,000 4.50 Total$ 236,778 2.27 %$ 166,367 2.94 %$ 403,145 2.55 % Total U.S. Treasury$ 169,860 1.38 % $ - - %$ 169,860 1.38 % U.S. government agency 59,291 2.50 88,424 2.48 147,715 2.49 Municipal 275,972 1.86 42,167 3.36 318,139 2.06 Mortgage-backed: Agency residential 213,676 2.36 102,728 3.43 316,404 2.71 Agency commercial 150,060 1.87 308,281 1.86 458,341 1.86 Corporate 65,597 4.20 - - 65,597 4.20 Total$ 934,456 2.09 %$ 541,600 2.37 %$ 1,476,056 2.20 % 69 Table of Contents SOURCES OF FUNDS Deposits
Management continues to focus on growing non-maturity deposits, through the
Company's relationship-driven banking philosophy and community-focused marketing
programs, and to deemphasize higher cost deposit categories, such as time
deposits. Additionally, the Bank continues to add and improve digital banking
services to solidify deposit relationships.
The following tables set forth the distribution of average deposits, by account
type.
Percent
Year Ended December 31, 2022 Change in
Average Percent of Weighted Average Balance
Balance Total Deposits Average Cost 2022 vs. 2021
(dollars in thousands)
Noninterest-bearing $ 1,051,187 28.4 % - % 4.6 %
Interest-bearing demand 1,141,402 30.8 0.05 11.4
Money market 582,514 15.7 0.14 11.7
Savings 650,385 17.5 0.03 9.1
Total non-maturity deposits 3,425,488 92.4 0.05 8.9
Time 283,232 7.6 0.31 (4.2)
Total deposits $ 3,708,720 100.0 % 0.07 % 7.7 %
Percent
Year Ended December 31, 2021 Change in
Average Percent of Weighted Average Balance
Balance Total Deposits Average Cost 2021 vs. 2020
(dollars in thousands)
Noninterest-bearing $ 1,004,757 29.2 % - % 24.4 %
Interest-bearing demand 1,024,888 29.8 0.05 17.4
Money market 521,366 15.1 0.08 10.0
Savings 595,887 17.3 0.03 24.9
Total non-maturity deposits 3,146,898 91.4 0.04 19.6
Time 295,788 8.6 0.45 (6.8)
Total deposits $ 3,442,686 100.0 % 0.07 % 16.7 %
Year Ended December 31, 2020
Average Percent of Weighted
Balance Total Deposits Average Cost
(dollars in thousands)
Noninterest-bearing $ 807,864 27.4 % - %
Interest-bearing demand 873,060 29.6 0.07
Money market 474,033 16.1 0.15
Savings 477,260 16.2 0.04
Total non-maturity deposits 2,632,217 89.3 0.06
Time 317,308 10.7 0.84
Total deposits $ 2,949,525 100.0 % 0.14 %
Comparison of the Year Ended
The average balances of non-maturity deposits increased 8.9% from the year endedDecember 31, 2021 to the year endedDecember 31, 2022 , with the increase primarily attributable to higher balances maintained by deposit customers following the receipt of federal economic stimulus, in the form of PPP loan proceeds by commercial customers and direct payments received by retail customers, although this trend began to reverse in the second quarter of 2022. Additionally, the NXT acquisition added$139.4 million of non-maturity deposits onOctober 1, 2021 . Time deposits decreased slightly due to the continued run-off of higher cost time deposits, although this was partially offset by the addition of$42.1 million of time deposits acquired from NXT. 70
Table of Contents
The following table sets forth time deposits by remaining maturity as ofDecember 31, 2022 . 3 Months or Over 3 through Over 6 through Over Less 6 Months 12 Months 12 Months Total (dollars in thousands) Time deposits: Amounts less than$100,000 $ 36,773 $ 34,962 $ 49,768$ 48,858 $ 170,361 Amounts of$100,000 or more but less than$250,000 12,262 11,480 24,515 17,192 65,449 Amounts of$250,000 or more 5,743 3,414
12,128 5,873 27,158
Total time deposits $ 54,778 $ 49,856 $ 86,411 $ 71,923 $ 262,968 As of
Securities Sold Under Agreements to Repurchase
All securities sold under agreements to repurchase are sweep instruments, maturing daily. The securities underlying the agreements are held under our control in safekeeping at third-party financial institutions, and include debt securities.
The following table sets forth information concerning balances and interest rates on our securities sold under agreements to repurchase.
As of or for the Years Ended December 31,
2022 2021 2020
(dollars in thousands)
Balance at end of year $ 43,081 $ 61,256 $ 45,736
Average balance during year 51,554 50,104 49,714Maximum outstanding at any month end 55,698
61,256 58,839
Weighted average interest rate at end of year 0.28 % 0.07 % 0.06 % Average interest rate during year 0.07
0.07 0.10
Borrowings
Deposits are the primary source of funds for our lending activities and general
business purposes. However, we may also obtain advances from the Federal Home
Loan Bank of Chicago ("FHLB"), purchase federal funds, and engage in overnight
borrowing from the Federal Reserve . We may also use these sources of funds as
part of our asset liability management process to control our long-term interest
rate risk exposure, even if it may increase our short-term cost of funds. Our
level of short-term borrowing can fluctuate on a daily basis depending on
funding needs and the source of funds to satisfy the needs.
Our use of FHLB advances and other borrowings was nominal during 2020 and 2021,
but increased during the second half of 2022 to fund increases in loan demand
and to offset a decrease in deposits.
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Table of Contents
The following table sets forth information concerning balances and interest
rates on our borrowings.
As of or for the Years Ended December 31,
2022 2021 2020
(dollars in thousands)
Balance at end of year
FHLB advances $ 160,000 $ - $ -
Federal funds purchased - - -
Total borrowings $ 160,000 $ - $ -
Average balance during year
FHLB advances $ 25,934 $ 1,310 $ 656
Federal funds purchased 534 343 424
Total borrowings $ 26,468 $ 1,653 $ 1,080
Maximum outstanding at any month end
FHLB advances $ 160,000 $ - $ 4,000
Federal funds purchased - - -
Total borrowings $ 160,000 $ - $ 4,000
Weighted average interest rate at end of year
FHLB advances 4.29 % - % - %
Federal funds purchased - - -
Total borrowings 4.29 - -
Average interest rate during year
FHLB advances 3.68 % 0.56 % 0.02 %
Federal funds purchased 2.11
0.48 0.52
Total borrowings 3.65 0.54 0.22
LIQUIDITY
Bank Liquidity
The overall objective of bank liquidity management is to ensure the availability
of sufficient cash funds to meet all financial commitments and to take advantage
of investment opportunities. The Bank manages liquidity in order to meet deposit
withdrawals on demand or at contractual maturity, to repay borrowings as they
mature, and to fund new loans and investments as opportunities arise.
The Bank continuously monitors its liquidity positions to ensure that assets and
liabilities are managed in a manner that will meet all of our short-term and
long-term cash requirements. The Bank manages its liquidity position to meet our
daily cash flow needs, while maintaining an appropriate balance between assets
and liabilities to meet the return on investment objectives. The Bank also
monitors liquidity requirements in light of interest rate trends, changes in the
economy, the scheduled maturity and interest rate sensitivity of the investment
and loan portfolios and deposits, and regulatory capital requirements.
As part of the Bank's liquidity management strategy, the Bank is also focused on
minimizing costs of liquidity and attempts to decrease these costs by promoting
noninterest bearing and low-cost deposits and replacing higher cost funding
including time deposits and borrowed funds. While the Bank does not control the
types of deposit instruments our clients choose, those choices can be influenced
with the rates and the deposit specials offered.
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Additional sources of liquidity include unpledged securities, federal funds purchased, and borrowings from the FHLB. Unpledged securities may be sold or pledged as collateral for borrowings to meet liquidity needs. Interest is charged at the prevailing market rate on federal funds purchased and FHLB borrowings. Funds available through federal funds purchased and FHLB borrowings are used primarily to meet daily liquidity needs. The total remaining credit available to the Bank from the FHLB atDecember 31, 2022 was$409.9 million . As ofDecember 31, 2022 , the Bank's liquidity and available sources of liquidity were adequate to meet all of the reasonably foreseeable short-term and intermediate-term demands of the Bank. As ofDecember 31, 2022 , the Bank had no material commitments for capital expenditures.
Holding Company Liquidity
The Holding Company , orHBT Financial, Inc. on an unconsolidated basis, is a corporation separate and apart from the Bank and, therefore, it must provide for its own liquidity. As ofDecember 31, 2022 , the Holding Company had cash and cash equivalents of$24.3 million .The Holding Company's main source of funding is dividends declared and paid to it by the Bank. Due to state banking laws, the Bank may not declare dividends in any calendar year in an amount that would exceed accumulated retained earnings, after giving effect to any unrecognized losses and bad debts, without the prior approval of theIllinois Department of Financial and Professional Regulation . In addition, dividends paid by the Bank to the Holding Company would be prohibited if the effect thereof would cause the Bank's capital to be reduced below applicable minimum capital requirements. Management believes that these limitations will not impact the Holding Company's ability to meet its ongoing short-term and intermediate-term cash obligations. During the years endedDecember 31, 2022 , 2021, and 2020, the Bank paid dividends of$28.0 million ,$20.0 million , and$17.6 million to the Holding Company, respectively. The liquidity needs of the Holding Company on an unconsolidated basis consist primarily of operating expenses, interest payments on the subordinated notes and junior subordinated debentures, and shareholder distributions in the form of dividends and stock repurchases. During the years endedDecember 31, 2022 , 2021, and 2020, holding company operating expenses consisted of interest expense of$3.7 million ,$3.3 million , and$2.2 million , respectively, and other operating expenses of$5.3 million ,$3.7 million , and$2.5 million , respectively. Additionally, the Holding Company paid$18.6 million ,$16.8 million , and$16.5 million of dividends to stockholders during the years endedDecember 31, 2022 , 2021, and 2020, respectively. As ofDecember 31, 2022 , management was not aware of any known trends, events or uncertainties that had or were reasonably likely to have a material impact on the Holding Company's liquidity. As ofDecember 31, 2022 , the Holding Company's liquidity and available sources of liquidity were adequate to meet all of the reasonably foreseeable short-term and intermediate-term demands of the Holding Company. As ofDecember 31, 2022 , the Holding Company had no material commitments for capital expenditures.
CAPITAL RESOURCES
The overall objectives of capital management are to ensure the availability of
sufficient capital to support loan, deposit and other asset and liability growth
opportunities and to maintain capital to absorb unforeseen losses or write-downs
that are inherent in the business risks associated with the banking industry.
The Company seeks to balance the need for higher capital levels to address such
unforeseen risks and the goal to achieve an adequate return on the capital
invested by our stockholders.
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Regulatory Capital Requirements
The Company and Bank are each subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the financial statements of the Company and the Bank. In addition to meeting minimum capital requirements, the Company and the Bank must also maintain a "capital conservation buffer" to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. As ofDecember 31, 2022 and 2021, the capital conservation buffer requirement was 2.5% of risk-weighted assets.
As of
The following table sets forth actual capital ratios of the Company and the Bank
as of the dates indicated, as well as the minimum ratios for capital adequacy
purposes with the capital conservation buffer, and the minimum ratios to be well
capitalized under regulatory prompt corrective action provisions.
For Capital To Be Well
Adequacy Purposes Capitalized Under
December 31, December 31, With Capital Prompt Corrective
2022 2021
Conversation Buffer (1) Action Provisions (2)
Total Capital (to Risk Weighted Assets)
16.27 % 16.88 % 10.50 % N/A
Heartland Bank and Trust Company 15.43 15.94 10.50 10.00 %
Tier 1 Capital (to Risk Weighted
Assets)
Consolidated HBT Financial, Inc. 14.23 % 14.66 % 8.50 % N/A
Heartland Bank and Trust Company 14.63 15.09 8.50 8.00 %
Common Equity Tier 1 Capital (to Risk
Weighted Assets)
Consolidated HBT Financial, Inc. 13.07 % 13.37 % 7.00 % N/A
Heartland Bank and Trust Company 14.63 15.09 7.00 6.50 %
Tier 1 Capital (to Average Assets)
Consolidated HBT Financial, Inc. 10.48 % 9.84 % 4.00 N/A
Heartland Bank and Trust Company 10.78 10.13 4.00 5.00 %
(1) The Tier 1 capital to average assets ratio (known as the "leverage ratio") is
not impacted by the capital conservation buffer.
(2) The prompt corrective action provisions are not applicable to bank holding
companies.
N/A Not applicable.
As of December 31, 2022 , management was not aware of any known trends, events or
uncertainties that had or were reasonably likely to have a material impact on
the Company's capital resources.
Cash Dividends
The Company paid quarterly cash dividends of
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Stock Repurchase Program
The Company repurchased 265,379 shares of its common stock at a weighted average
price of $18.02 during 2022 and 290,486 shares at a weighted average price of
$16.89 during 2021. Repurchases were conducted in compliance with Rule 10b-18
and in compliance with Regulation M under the Exchange Act. On December 21,
2022 , the Company's Board of Directors approved a new stock repurchase program
which authorizes the Company to repurchase up to $15.0 million of its common
stock. The new stock repurchase program took effect upon the expiration of the
prior stock repurchase program and expires on January 1, 2024 .
OFF-BALANCE SHEET ARRANGEMENTS
As a financial services provider, the Bank is routinely a party to various financial instruments with off-balance sheet risks, such as commitments to extend credit, standby letters of credit, unused lines of credit, commitments to sell loans, and interest rate swaps. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process afforded to loans originated by the Bank. Although commitments to extend credit are considered while evaluating our allowance for loan losses, atDecember 31, 2022 and 2021, there were no reserves for unfunded commitments. For additional information, see "Note 23 - Commitments and Contingencies" to the consolidated financial statements.
CRITICAL ACCOUNTING ESTIMATES
Critical accounting estimates are those that are critical to the portrayal and understanding of the Company's financial condition and results of operations and require management to make assumptions that are difficult, subjective or complex. These estimates involve judgments, assumptions and uncertainties that are susceptible to change. In the event that different assumptions or conditions were to prevail, and depending on the severity of such changes, the possibility of a materially different financial condition or materially different results of operations is a reasonable likelihood. Further, changes in accounting standards could impact the Company's critical accounting estimates. The following accounting estimate could be deemed critical:
Allowance for Loan losses
The allowance for loan losses ("allowance") is an estimate of loan losses
inherent in the Company's loan portfolio. The allowance represents amounts that
have been established to recognize incurred credit losses in the loan portfolio
that are both probable and reasonably estimable at the date of the consolidated
financial statements. The allowance is established through a provision for loan
losses which is charged to expense. Additions to the allowance are expected to
maintain the adequacy of the total allowance. Loan losses are charged off
against the allowance when the Company determines the loan balance to be
uncollectible. Cash received on previously charged off amounts is recorded as a
recovery to the allowance.
The allowance consists of two primary components, general reserves and specific
reserves related to impaired loans. General reserves cover non-impaired loans,
or loans collectively evaluated for impairment, and are based on historical
losses adjusted for qualitative factors. The historical loss experience is
determined by portfolio segment and is based on the actual loss history
experienced by the Company over the most recent 16-quarter period. Qualitative
factor adjustments primarily consider current economic metrics, such as national
and regional unemployment rates, and current credit quality metrics of each
portfolio segment, such as past due and risk rating percentages, relative to
historical levels. These qualitative factor adjustments are inherently
subjective.
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Specific reserves cover impaired loans, or loans individually evaluated for impairment, and are primarily measured based on the fair value of collateral. Adjustments to the fair value of collateral are made for anticipated selling costs. A specific reserve may be zero if the fair value of collateral on the measurement date is greater than the carrying balance of the impaired loan. Additionally, the present value of expected future cash flows discounted at the original contractual interest rate may also be used, when practical.
While the Company uses the best information available to make evaluations, future adjustments to the allowance for loan losses may become necessary if conditions change substantially from the conditions used in previous evaluations. Determinations as to the risk classification of loans and the amount of the allowance for loan losses are subject to review by regulatory agencies, which can require that the Company establish additional loss allowances.
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NON-GAAP FINANCIAL MEASURES
This Annual Report on Form 10-K contains certain financial information
determined by methods other than in accordance with GAAP. Management believes
that it is a standard practice in the banking industry to present these non-GAAP
financial measures, and accordingly believes that providing these measures may
be useful for peer comparison purposes. These disclosures should not be viewed
as substitutes for the results determined to be in accordance with GAAP; nor are
they necessarily comparable to non-GAAP financial measures that may be presented
by other companies. See our reconciliation of non-GAAP financial measures to
their most closely comparable GAAP financial measures below.
Non-GAAP
Financial How the Measure Provides Useful
Measure Definition Information to Investors
Adjusted Net ? ?
Income Net income, with the following Enhances comparisons to prior periods
adjustments: and, accordingly, facilitates the
- development of future projections and
excludes acquisition expenses, earnings growth prospects.
- ?
excludes branch closure We also sometimes refer to ratios
expenses, that include Adjusted Net Income,
- such as:
excludes charges related to -
termination of certain Adjusted Return on Average Assets,
employee benefit plans, which is Adjusted Net Income divided
- by average assets.
excludes net earnings (losses) -
from closed or sold Adjusted Return on Average Equity,
operations, which is Adjusted Net Income divided
- by average equity.
excludes realized gains -
(losses) on sales of closed Adjusted Earnings Per Share - Basic,
branch premises, which is Adjusted Net Income
- allocated to common shares divided by
excludes realized gains weighted average common shares
(losses) on sales of outstanding.
securities, -
- Adjusted Earnings Per Share -
excludes mortgage servicing Diluted, which is Adjusted Net Income
rights fair value adjustment, allocated to common shares divided by
and weighted average common shares
- outstanding, including all dilutive
the income tax effect of these potential shares.
pre-tax adjustments.
Net Interest ? ?
Income (Tax Net interest income adjusted We believe the tax equivalent basis
Equivalent for the tax-favored status of is the preferred industry measurement
Basis) tax-exempt loans and of net interest income.
securities. (1) ?
Enhances comparability of net
interest income arising from taxable
and tax-exempt sources.
?
We also sometimes refer to Net
Interest Margin (Tax Equivalent
Basis), which is Net Interest Income
(Tax Equivalent Basis) divided by
average interest-earning assets.
Efficiency ? ?
Ratio (Tax Noninterest expense less Provides a measure of productivity in
Equivalent amortization of intangible the banking industry.
Basis) assets divided by the sum of ?
net interest income (tax Calculated to measure the cost of
equivalent basis) and generating one dollar of revenue.
noninterest income. (1) 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
income tax rate of 9.5%.
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Non-GAAP How the Measure Provides
Financial Useful Information to
Measure Definition Investors
Tangible Common ? ?
Equity to Tangible Common Equity is total Generally used by investors,
Tangible Assets stockholders' equity less our management, and banking
goodwill and other intangible regulators to evaluate capital
assets. adequacy.
? ?
Tangible Assets is total assets Facilitates comparison of our
less goodwill and other earnings with the earnings of
intangible assets. other banking organization
with significant amounts of
goodwill or intangible assets.
?
We also sometimes refer to
ratios that include Tangible
Common Equity, such as:
-
Tangible Book Value Per Share,
which is Tangible Common
Equity divided by shares of
common stock outstanding.
-
Return on Average Tangible
Common Equity, which is net
income divided by average
Tangible Common Equity.
-
Adjusted Return on Average
Tangible Common Equity, which
is Adjusted Net Income divided
by average Tangible Common
Equity.
Core Deposits ? ?
Total deposits, excluding: Provides investors with
- information regarding the
Time deposits of $250,000 or stability of the Company's
more, and sources of funds.
- ?
Brokered deposits We also sometimes refer to the
ratio of Core Deposits to
total deposits.
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Reconciliation of Non-GAAP Financial Measure - Adjusted Net Income and Adjusted
Return on Average Assets
Year Ended December 31,
2022 2021 2020
(dollars in thousands)
Net income $ 56,456 $ 56,271 $ 36,845
Adjustments:
Acquisition expenses (1,092) (1,416) -
Branch closure expenses - (748) -
Gains (losses) on sales of closed branch
premises 141 - -
Charges related to termination of certain
employee benefit plans - - (1,457)
Mortgage servicing rights fair value
adjustment 2,153 1,690 (2,584)
Total adjustments 1,202 (474) (4,041)
Tax effect of adjustments (551) (95) 1,152
Less adjustments after tax effect 651 (569) (2,889)
Adjusted net income $ 55,805 $ 56,840 $ 39,734
Average assets $ 4,269,873 $ 3,980,538 $ 3,447,500
Return on average assets 1.32 % 1.41 % 1.07 %
Adjusted return on average assets 1.31 1.43 1.15
Reconciliation of Non-GAAP Financial Measure - Adjusted Earnings Per Share
Year Ended December 31,
2022 2021 2020
(dollars in thousands, except per share amounts)
Numerator:
Net income $ 56,456 $ 56,271 $ 36,845
Earnings allocated to participating securities
(1) (66) (104) (93)
Numerator for earnings per share - basic and
diluted $ 56,390 $ 56,167 $ 36,752
Adjusted net income $ 55,805 $ 56,840 $ 39,734
Earnings allocated to participating securities
(1) (65) (105) (101)
Numerator for adjusted earnings per share - basic
and diluted $ 55,740 $
56,735
Denominator:
Weighted average common shares outstanding 28,853,697 27,795,806 27,457,306 Dilutive effect of outstanding restricted stock units 65,619 15,487 - Weighted average common shares outstanding, including all dilutive potential shares 28,919,316
27,811,293 27,457,306
Earnings per share - Basic $ 1.95 $ 2.02$ 1.34 Earnings per share - Diluted $ 1.95 $
2.02
Adjusted earnings per share - Basic $ 1.93 $ 2.04$ 1.44 Adjusted earnings per share - Diluted $ 1.93 $
2.04 $ 1.44
The Company has granted certain restricted stock units that containnon-forfeitable rights to dividend equivalents. Such restricted stock units
are considered participating securities. As such, we have included these
restricted stock units in the calculation of basic earnings per share and (1) calculate basic earnings per share using the two-class method. The two-class
method of computing earnings per share is an earnings allocation formula that
determines earnings per share for each class of common stock and
participating security according to dividends declared (or accumulated) and
participation rights in undistributed earnings.
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Reconciliation of Non-GAAP Financial Measure - Net Interest Margin (Tax
Equivalent Basis)
Year Ended December 31,
2022 2021 2020
(dollars in thousands)
Net interest income (tax equivalent basis)
Net interest income $ 145,874 $ 122,403 $ 117,605
Tax-equivalent adjustment (1) 2,499
2,028 1,943
Net interest income (tax equivalent basis) (1)
Net interest margin (tax equivalent basis) Net interest margin 3.54 % 3.18 % 3.54 % Tax-equivalent adjustment (1) 0.06 0.05 0.06 Net interest margin (tax equivalent basis) (1) 3.60 %
3.23 % 3.60 %
Average interest-earning assets$ 4,118,124 $
3,846,473
(1) On a tax-equivalent basis assuming a federal income tax rate of 21% and a
state income tax rate of 9.5%.
Reconciliation of Non-GAAP Financial Measure - Efficiency Ratio (Tax Equivalent
Basis)
Year Ended December 31,
2022 2021 2020
(dollars in thousands)
Efficiency ratio (tax equivalent basis)
Total noninterest expense $ 105,107 $ 91,246 $91,956
Less: amortization of intangible assets 873 1,054
1,232 Adjusted noninterest expense$ 104,234 $ 90,192 $ 90,724 Net interest income$ 145,874 $ 122,403 $ 117,605 Total noninterest income 34,717 37,328 34,456 Operating revenue 180,591 159,731 152,061 Tax-equivalent adjustment (1) 2,499 2,028 1,943
Operating revenue (tax-equivalent basis) (1)
Efficiency ratio 57.72 % 56.46 % 59.66 % Efficiency ratio (tax equivalent basis) (1) 56.93 55.76
58.91
(1) On a tax-equivalent basis assuming a federal income tax rate of 21% and a
state income tax rate of 9.5%.
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Reconciliation of Non-GAAP Financial Measure - Tangible Common Equity to Tangible Assets and Tangible Book Value Per Share
December 31, 2022
(dollars in thousands, except per share data)
Tangible Common Equity
Total stockholders' equity $ 373,632 $ 411,881
Less: Goodwill 29,322 29,322
Less: Core deposit intangible assets, net 1,070 1,943
Tangible common equity $ 343,240 $ 380,616
Tangible Assets
Total assets $ 4,286,734 $ 4,314,254
Less: Goodwill 29,322 29,322
Less: Core deposit intangible assets, net 1,070 1,943
Tangible assets $ 4,256,342 $ 4,282,989
Total stockholders' equity to total assets 8.72 % 9.55 %
Tangible common equity to tangible assets 8.06 8.89
Shares of common stock outstanding 28,752,626 28,986,061
Book value per share $ 12.99 $ 14.21
Tangible book value per share 11.94 13.13
Reconciliation of Non-GAAP Financial Measure - Return on Average Tangible Common
Equity, Adjusted Return on Average Stockholders' Equity, and Adjusted Return on
Average Tangible Common Equity
Year Ended December 31,
2022 2021 2020
(dollars in thousands)
Average Tangible Common Equity
Total stockholders' equity $ 383,306 $ 380,080 $ 350,703
Less: Goodwill 29,322 25,057
23,620
Less: Core deposit intangible assets, net 1,480 2,333
3,436
Average tangible common equity$ 352,504 $ 352,690 $
323,647 Net income$ 56,456 $ 56,271 $ 36,845 Adjusted net income 55,805 56,840 39,734 Return on average stockholders' equity 14.73 % 14.81 % 10.51 % Return on average tangible common equity 16.02 15.95 11.38 Adjusted return on average stockholders' equity 14.56 % 14.95 % 11.33 % Adjusted return on average tangible common equity 15.83 16.12
12.28
Reconciliation of Non-GAAP Financial Measure - Core Deposits
December 31, 2022 December 31, 2021
(dollars in thousands)
Core Deposits
Total deposits $ 3,587,024 $ 3,738,185Less: time deposits of$250,000 or more 27,158
59,512 Less: brokered deposits - 4,238 Core deposits $ 3,559,866 $ 3,674,435
Core deposits to total deposits 99.24 %
98.29 %
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