HBT Financial (HBT 0.95%) has been around in some form for almost a century, most notably as Heartland Bank and Trust and adding the State Bank of Lincoln last year. Despite its history, it's not a familiar name to most investors. That's because it just went public in October.
The Bloomington, Ill.-based bank, which serves customers in Central and Northeastern Illinois, is a true family business, run by the Drake family since the beginning. That stability -- and its solid financials -- make it a bank stock worth knowing.
All in the family
HBT started out with one community bank in Cornland, Ill., founded by M.B. Drake in 1920. The family added more, and in 1982, they were all incorporated into a holding company by M.B.'s son George. The company continued to grow, and in the '90s, George's son Fred took over as CEO, a role he has held since.
Since 2010, the company has acquired seven banks, including four failed banks purchased from the FDIC. These acquisitions expanded their presence in the greater Chicago area, as well as mid-sized metropolitan markets in central and Northeastern Illinois, like Lincoln and Farmer City.
Currently, HBT Financial has $3.2 billion in assets, $2.2 billion in loans, and $2.7 billion in total deposits.
HBT's initial public offering of 9.4 million shares was priced at $16 per share. The IPO raised net proceeds of $138 million, which the company will used to fund a $170 million distribution to its stockholders. The company -- which has a market cap of roughly $500 million -- began trading on the Nasdaq on Oct. 11 and is now trading around $18 per share.
"We are very pleased to have completed our initial public offering," Fred Drake said in the third-quarter earnings report. "Becoming a public company is an important next chapter in our history, but our focus remains squarely on understanding our clients' needs and delivering the products and services that help them achieve their financial goals. By remaining consistent with our core values, we believe that we will continue to enhance the value of our franchise over the long term."
In its first earnings report as a public company, HBT Financial reported net income of $17.4 million in the third quarter, or $0.97 earnings per share (EPS), which is down slightly from $17.6 million, or $0.98 EPS, in the third quarter of 2018. Expenses were $22.3 million, up 1.7% from the third quarter of 2018, due to a $0.8 million charge during the third quarter of 2019 associated with the termination of the supplemental executive retirement plan (SERP).
Net interest income for the third quarter of 2019 was $33.1 million, up 1.7% year over year. The increase was due to a higher net interest margin (NIM) of 4.31%, which is better than its competitors. That number is up from 4.22% in the third quarter of 2018, due to higher loan yields.
Total loans were $2.17 billion in the third quarter, up from $2.14 billion in the third quarter of 2018. Total deposits were $2.70 billion on Sept. 30, down from $2.74 billion from the same period a year ago.
The loan-to-deposit ratio is 80%, which is better than its peers. A good loan-to-deposit ratio means a bank has strong liquidity, and HBT plans to take advantage by building on its loan growth and strengthening its market share.
About that market share
HBT is also looking to increase its presence in the larger Chicago market. HBT officials expect to use the company's size to its advantage in the Windy City, as it can be more responsive and make quicker decisions to serve clients than larger, more bureaucratic competitors.
HBT will also continue to pursue acquisitions, as it has over the past decade. There are a lot of small banks in Illinois with less than $2 billion in assets, so there are growth opportunities there. But the company will also look to new and adjacent markets where it makes sense.
By the books
If you're looking for a solid, long-term investment in the banking sector, this stock is not a bad choice. There have been three CEOs over the past 100 years, so it's going to be hard to find a more stable operation. The company has become a leader in its market and is committed to slow, steady growth, for which it is well positioned with strong liquidity and good financials. A risk-averse investor could do a lot worse than HBT Financial.