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STOCK-BASED COMPENSATION PLANS

3 Months Ended

Mar. 31, 2022

NOTE 11 – 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):


	Three Months Ended March 31,
	2022		2021

	(dollars in thousands)
Restricted stock units	$	608	$	114
Performance restricted stock units		293		15
Total awards classified as equity		901		129
Stock appreciation rights		(23)		130
Total stock-based compensation expense	$	878	$	259

In February 2022, all outstanding restricted stock unit and performance restricted stock unit agreements were modified to address treatment upon retirement. In the event of retirement, if the retirement eligibility requirements are met, then 100% of unvested restricted stock units and performance restricted stock units will continue to vest in accordance with the originally established vesting schedule. The retirement modification resulted in the acceleration of $0.6 million of expense, although total compensation costs related to the modified agreements remained the same.

Restricted Stock Units

A restricted stock unit grants a participant the right to receive one share of the Company’s 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 service period for the entire award. Dividend equivalents on restricted stock units, which are either accrued until vested or paid at the same time as dividends on common stock, are classified as dividends charged to retained earnings.

During the three months ended March 31, 2022 and 2021, the total grant date fair value of the restricted stock units granted was $0.9 million and $0.7 million, respectively, based on the grant date closing prices. The total intrinsic value of restricted stock that vested during the three months ended March 31, 2022 and 2021 was $0.7 million and $0.3 million, respectively.

The following is a summary of restricted stock unit activity:


	Three Months Ended March 31,
	2022			2021
		Weighted			Weighted
		Average			Average
	Restricted	Grant Date		Restricted	Grant Date
	Stock Units	Fair Value		Stock Units	Fair Value
Beginning balance	109,244	$	17.27	71,000	$	18.98
Granted	46,312		19.11	46,347		15.53
Vested	(34,925)		17.26	(20,225)		18.86
Forfeited	—		—	—		—
Ending balance	120,631	$	17.98	97,122	$	17.36

As of March 31, 2022, unrecognized compensation cost related to the non-vested restricted stock units was $1.6 million. This cost is expected to be recognized over the weighted average remaining service period of 2.1 years.

Performance Restricted Stock Units

A performance restricted stock unit is similar to a restricted stock unit, except that the number of shares of the Company’s common stock awarded is based on a performance condition and the completion of the requisite service period. The number of shares of the Company’s common stock that may be earned ranges from 0% to 150% of the number of performance restricted stock units granted. Performance restricted stock units are classified as equity. Compensation cost is based on the Company’s stock price on the grant date and an assessment of the probable outcome of the performance condition. Compensation cost is recognized on a straight-line basis over the service period of the entire award. Changes in the performance condition probability assessment result in cumulative catch-up adjustments to the compensation cost recognized. Dividend equivalents on performance restricted stock units, which are accrued until vested, are classified as dividends charged to retained earnings.

During the three months ended March 31, 2022 and 2021, the total fair value of the performance restricted stock units granted was $0.5 million and $0.4 million, respectively, based on the grant date closing prices and an assessment of the probable outcome of the performance condition on the grant date.

The following is a summary of performance restricted stock unit activity:


	Three months ended March 31,
	2022			2021
		Weighted			Weighted
	Performance	Average		Performance	Average
	Restricted	Grant Date		Restricted	Grant Date
	Stock Units	Fair Value		Stock Units	Fair Value
Beginning balance	38,344	$	15.72	—	$	—
Granted	23,723		19.14	28,697		15.53
Vested	—		—	—		—
Forfeited	—		—	—		—
Ending balance	62,067	$	17.02	28,697	$	15.53

As of March 31, 2022, unrecognized compensation cost related to non-vested performance restricted stock units was $0.7 million, based on the current assessment of the probable outcome of the performance conditions. This cost is expected to be recognized over the weighted average remaining service period of 1.9 years.

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 are classified as liabilities. The liability is based on an option-pricing model used to estimate the fair value of the stock appreciation rights. Compensation cost for non-vested stock appreciation rights is recognized on a straight line basis over the service period of the entire award. The non-vested stock appreciation rights vest in four equal annual installments beginning on the first anniversary of the grant date.

The following is a summary of stock appreciation rights activity:


	Three Months Ended March 31,
	2022			2021
	Stock Appreciation Rights	Weighted Average Grant Date Assigned Value		Stock Appreciation Rights	Weighted Average Grant Date Assigned Value
Beginning balance	97,920	$	16.32	105,570	$	16.32
Granted	—		—	—		—
Exercised	(6,120)		16.32	—		—
Expired	—		—	(1,530)		16.32
Forfeited	—		—	—		—
Ending balance	91,800	$	16.32	104,040	$	16.32

A further summary of stock appreciation rights as of March 31, 2022, is as follows:


			Weighted Average
	Stock Appreciation Rights		Remaining
Grant Date Assigned Values	Outstanding	Exercisable	Contractual Term
$ 16.32	91,800	79,560	7.0	years

As of March 31, 2022, unrecognized compensation cost related to non-vested stock appreciation rights was $46 thousand.

As of March 31, 2022 and December 31, 2021, the liability recorded for outstanding stock appreciation rights was $0.4 million and $0.5 million, respectively. 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, 2022			December 31, 2021
Risk-free interest rate		2.37	%		1.40	%
Expected volatility		35.83	%		35.52	%
Expected life (in years)		7.4			7.7
Expected dividend yield		3.52	%		3.20	%

As of March 31, 2022, the liability recorded for previously exercised stock appreciation rights was $0.5 million, which will be paid in two remaining annual installments. As of December 31, 2021, the liability recorded for previously exercised stock appreciation rights was $0.8 million.