NOTE 14 – STOCK-BASED COMPENSATION PLANS

The Company has adopted the HBT Financial, Inc. Omnibus Incentive Plan (the “Omnibus Incentive Plan”). The Omnibus Incentive Plan provides for grants of (i) stock options, (ii) stock appreciation rights, (iii) restricted shares, (iv) restricted stock units, (v) performance awards, (vi) other share-based awards and (vi) other cash-based awards to eligible employees, non-employee directors and consultants of the Company. The maximum number of shares of common stock available for issuance under the Omnibus Incentive Plan is 1,820,000 shares.

The following is a summary of stock-based compensation expense (benefit) during the three months ended March 31, 2020 and 2019:


	Three Months Ended March 31,
	2020		2019
	(dollars in thousands)
Restricted stock units	$	67	$	—
Stock appreciation rights		(335)		(115)
Total stock-based compensation expense (benefit)	$	(268)	$	(115)

Restricted Stock Units

A restricted stock unit grants a participant the right to receive one share of common stock, following the completion of the requisite service period. Restricted stock units are classified as equity. Compensation cost is based on the Company’s stock price on the grant date and is recognized on a straight-line basis over the vesting period for the entire award. Non-forfeitable dividend equivalents are paid on non-vested restricted stock units and are classified as dividends charged to retained earnings. If restricted stock units are subsequently forfeited, the non-forfeitable dividends related to the forfeited restricted stock units are reclassified to compensation cost in the period the forfeiture occurs.

On January 28, 2020, the Company granted 70,400 restricted stock units to certain key employees which vest in four equal annual installments beginning on February 1, 2021. On January 28, 2020, the Company also granted 2,750 restricted stock units to non-employee directors which vest on February 1, 2021. The total fair value of the restricted stock units granted was $1,392,000, based on the grant date closing price of $19.03 per share.

The following is a summary of outstanding restricted stock unit activity during the three months ended March 31, 2020 and 2019:


	Three Months Ended March 31,
	2020			2019
		Weighted			Weighted
	Restricted	Average		Restricted	Average
	Stock Units	Grant Date		Stock Units	Grant Date
	Outstanding	Fair Value		Outstanding	Fair Value
Beginning balance	—	$	—	—	$	—
Granted	73,150		19.03	—		—
Vested	—		—	—		—
Forfeited	—		—	—		—
Ending balance	73,150	$	19.03	—	$	—

A further summary of outstanding restricted stock units as of March 31, 2020, is as follows:


		Weighted Average
		Remaining
Range of Grant Date Fair Values	Outstanding	Contractual Term
$ 19.03	73,150	3.7	years

As of March 31, 2020, unrecognized compensation cost related to non-vested restricted stock units was $1,325,000.

Stock Appreciation Rights

A stock appreciation right grants a participant the right to receive an amount of cash, the value of which equals the appreciation in the Company’s stock price between the grant date and the exercise date. Stock appreciation rights units are classified as liabilities. Prior to becoming a public entity, the liability was based on the intrinsic value of the stock appreciation rights, calculated using the grant date assigned value and an independent appraisal of the Company’s stock price that was subject to approval by the Board of Directors. Since becoming a public entity on October 11, 2019, the liability was based on an option-pricing model used to estimate the fair value of the stock appreciation rights. Compensation cost for unvested stock appreciation rights is recognized on a straight line basis over the vesting period of the entire award. The unvested stock appreciation rights vest in four equal annual installments beginning on the first anniversary of the grant date.

The following is a summary of outstanding stock appreciation rights activity during the three months ended March 31, 2020 and 2019, is as follows:


	Three Months Ended March 31,
	2020			2019
	Stock Appreciation Rights Outstanding	Weighted Average Grant Date Assigned Value		Stock Appreciation Rights Outstanding	Weighted Average Grant Date Assigned Value
Beginning balance	110,160	$	16.32	91,800	$	5.73
Granted	—		—	—		—
Exercised	—		—	—		—
Forfeited	—		—	—		—
Ending balance	110,160	$	16.32	91,800	$	5.73

A further summary of outstanding stock appreciation rights as of March 31, 2020, is as follows:


			Weighted Average
			Remaining
Range of Grant Date Assigned Values	Outstanding	Exercisable	Contractual Term
$ 16.32	110,160	79,560	9.4	years

As of March 31, 2020, unrecognized compensation cost related to non-vested stock appreciation rights was $23,000.

As of March 31, 2020 and December 31, 2019, the liability recorded for outstanding stock appreciation rights was $74,000 and $409,000, respectively. As of March 31, 2020 and December 31, 2019, the Company used an option pricing model to value the stock appreciation rights, using the assumptions in the following table. Expected volatility is derived from the historical volatility of the Company’s stock price and a selected peer group of industry-related companies.


	March 31,			December 31,
	2020			2019
Risk-free interest rate		0.67	%		1.90	%
Expected volatility		32.47	%		28.83	%
Expected life (in years)		9.4			9.7
Expected dividend yield		5.70	%		3.16	%

As of March 31, 2020, the liability recorded for previously exercised stock appreciation rights was $1,206,000, which will be paid in four remaining equal annual installments. As of December 31, 2019, the liability recorded for previously exercised units was $1,512,000.