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ACQUISITIONS

3 Months Ended

Mar. 31, 2023

NOTE 2 – ACQUISITIONS

Town and Country Financial Corporation

On February 1, 2023, HBT Financial acquired 100% of the issued and outstanding common stock of Town and Country Financial Corporation (“Town and Country”), the holding company for Town and Country Bank, pursuant to an Agreement and Plan of Merger dated August 23, 2022. Under the Agreement and Plan of Merger, Town and Country merged with and into HBT Financial, with HBT Financial as the surviving entity, immediately followed by the merger of Town and Country Bank with and into Heartland Bank, with Heartland Bank as the surviving entity.

At the effective time of the merger, each share of Town and Country was converted into the right to receive, subject to the election and proration procedures as provided in the Merger Agreement, one of the following: (i) 1.9010 shares of HBT Financial’s common stock, or (ii) $35.66 in cash, or (iii) a combination of cash and HBT Financial common stock. Total consideration consisted of 3,378,600 shares of HBT Financial’s common stock and $38.0 million in cash. In lieu of fractional shares, holders of Town and Country common stock received cash. Based upon the closing price of HBT Financial common stock of $21.12 on February 1, 2023, the aggregate transaction value was approximately $109.4 million.

This transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair values on the date of acquisition. Fair values are subject to refinement for up to one year after the closing date of February 1, 2023. Goodwill of $30.6 million was recorded in the acquisition, which reflects expected synergies from combining the operations of HBT Financial and Town and Country, and is nondeductible for tax purposes.

The acquisition of Town and Country further enhanced HBT Financial’s footprint in Central Illinois, and expanded our footprint into metro-east St. Louis. During the three months ended March 31, 2023, HBT Financial incurred the following expenses related to the acquisition of Town and Country (dollars in thousands):


Provision for credit losses	$	5,924
Salaries		3,518
Data processing		1,855
Marketing and customer relations		14
Legal fees and other noninterest expense		1,753
Total acquisition-related expenses	$	13,064

There were no expenses related to the acquisition of Town and Country during the three months ended March 31, 2022.

The fair value of the assets acquired and liabilities assumed from Town and Country on the acquisition date of February 1, 2023 were as follows (dollars in thousands):


	Fair Value
Assets acquired:
Cash and cash equivalents	$	23,542
Interest-bearing time deposits with banks		249
Debt securities		167,869
Equity securities		90
Restricted stock		2,822
Loans held for sale		1,612

Loans, before allowance for credit losses		635,376
Allowance for credit losses		(1,247)
Loans, net of allowance for credit losses		634,129

Bank owned life insurance		15,782
Bank premises and equipment		14,828
Foreclosed assets		271
Intangible assets		22,282
Mortgage servicing rights		10,469
Investments in unconsolidated subsidiaries		449
Accrued interest receivable		3,113
Other assets		8,061
Total assets acquired		905,568

Liabilities assumed:
Deposits		720,417
FHLB advances		86,439
Junior subordinated debentures		14,949
Other liabilities		4,965
Total liabilities assumed		826,770
Net assets acquired	$	78,798

Consideration paid:
Cash	$	37,996
Common stock		71,356
Total consideration paid	$	109,352

Goodwill	$	30,554

Of the loans acquired, there were $89.8 million which exhibited more-than-insignificant credit deterioration on the acquisition date. The following table provides a summary of these PCD loans at acquisition (dollars in thousands):


Unpaid principal balance	$	89,822
Allowance for credit losses at acquisition		(1,247)
Non-credit discount		(2,218)
Purchase price	$	86,357

Additionally, subsequent to the Town and Country acquisition, HBT Financial recognized an allowance for credit losses on non-PCD loans of $5.2 million and an allowance for credit losses on unfunded commitments of $0.7 million through an increase to the provision for credit losses.

The following table provides the pro forma information for the results of operations for the three months ended March 31, 2023 and 2022, as if the acquisition of Town and Country had occurred on January 1, 2022. The pro forma results combine the historical results of Town and Country into HBT Financial’s consolidated statements of income, including the impact of certain acquisition accounting adjustments, which include loan discount accretion, intangible assets amortization, deposit premium amortization, and borrowing premium amortization. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results that would have been obtained had the acquisition actually occurred on January 1, 2022. No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, provision for credit losses, expense efficiencies or asset dispositions. The acquisition-related expenses that have been recognized are included in net income in the following table.


	Pro Forma
	Three Months Ended March 31,
(dollars in thousands, except per share data)	2023		2022
Total revenues (net interest income and noninterest income)	$	57,770	$	54,512
Net income		10,015		17,577
Earnings per share - basic		0.31		0.57
Earnings per share - diluted		0.31		0.57