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STOCK-BASED COMPENSATION PLANS

12 Months Ended

Dec. 31, 2022

STOCK-BASED COMPENSATION PLANS

STOCK-BASED COMPENSATION PLANS

NOTE 20 – STOCK-BASED COMPENSATION PLANS

The Company adopted the HBT Financial, Inc. Omnibus Incentive Plan (the “Omnibus Incentive Plan”) in 2019. 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 (vii) 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):


		Year Ended December 31,
		2022			2021			2020

		(dollars in thousands)
Restricted stock units		$	1,334		$	579		$	351
Performance restricted stock units			615			185			—
Total awards classified as equity			1,949			764			351
Stock appreciation rights			88			226			(137)
Total stock-based compensation expense		$	2,037		$	990		$	214

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, and 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 years ended December 31, 2022, 2021, and 2020, the total grant date fair value of the restricted stock units granted was $1.3 million, $0.9 million, and $1.4 million, respectively, based on the grant date closing prices. The total intrinsic value of restricted stock units that vested during the year ended December 31, 2022 and 2021 were $0.7 million and $0.3 million, respectively.

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


				Weighted
				Average
		Restricted		Grant Date
		Stock Units		Fair Value
Balance, December 31, 2019		—		$	—
Granted		73,700			18.98
Vested		—			—
Forfeited		(2,700)			19.03
Balance, December 31, 2020		71,000		$	18.98
Granted		59,994			15.81
Vested		(20,225)			18.86
Forfeited		(1,525)			18.11
Balance, December 31, 2021		109,244		$	17.27
Granted		66,995			18.81
Vested		(34,925)			17.26
Forfeited		(1,328)			18.35
Balance, December 31, 2022		139,986		$	18.01

As of December 31, 2022, unrecognized compensation cost related to non-vested restricted stock units was $1.2 million. This cost is expected to be recognized over the weighted average remaining contractual term of 2.0 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 years ended December 31, 2022 and 2021, the total fair value of the performance restricted stock units granted was $0.5 million and $0.6 million, respectively, based on the grant date closing prices and an assessment of the probable outcome of the performance condition on the grant date. Performance conditions are based on either the average annual return on average tangible common equity during the performance period or average loan balances for a specified geographic region during the performance period, with downward adjustments if certain credit quality criteria are not maintained.

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


				Weighted
		Performance		Average
		Restricted		Grant Date
		Stock Units		Fair Value
Balance, December 31, 2019		—		$	—
Granted		—			—
Vested		—			—
Forfeited		—			—
Balance, December 31, 2020		—		$	—
Granted		38,344			15.72
Vested		—			—
Forfeited		—			—
Balance, December 31, 2021		38,344		$	15.72
Granted		23,723			19.14
Vested		—			—
Forfeited		—			—
Balance, December 31, 2022		62,067		$	17.02

As of December 31, 2022, unrecognized compensation cost related to non-vested performance restricted stock units was $0.3 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 1.6 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:


				Weighted
		Stock		Average
		Appreciation		Grant Date
		Rights		Assigned Value
Balance, December 31, 2019		110,160		$	16.32
Granted		—			—
Exercised		—			—
Expired		—			—
Forfeited		(4,590)			16.32
Balance, December 31, 2020		105,570		$	16.32
Granted		—			—
Exercised		(6,120)			16.32
Expired		(1,530)			16.32
Forfeited		—			—
Balance, December 31, 2021		97,920		$	16.32
Granted		—			—
Exercised		(24,480)			16.32
Expired		—			—
Forfeited		—			—
Balance, December 31, 2022		73,440		$	16.32

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


						Weighted Average
		Stock Appreciation Rights				Remaining
Grant Date Assigned Values		Outstanding		Exercisable		Contractual Term
$ 16.32		73,440		67,320		6.7	years

As of December 31, 2022, unrecognized compensation cost related to non-vested stock appreciation rights was $28 thousand.

As of December 31, 2022 and 2021, the liability recorded for outstanding stock appreciation rights was $0.5 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.


		December 31, 2022			December 31, 2021
Risk-free interest rate			3.95	%		1.40	%
Expected volatility			36.54	%		35.52	%
Expected life (in years)			6.7			7.7
Expected dividend yield			3.27	%		3.20	%

As of December 31, 2022, the liability recorded for previously exercised stock appreciation rights was $0.5 million, which will be paid in two remaining annual installments in 2023 and 2024. As of December 31, 2021, the liability recorded for previously exercised stock appreciation rights was $0.8 million.