First Bancorp Stock And Other Rate Sensitive US Financials To Watch

With Fed Chair Kevin Warsh hinting at more rate hikes to tame 3.7% inflation, the usual playbook for stocks is under review again. Higher short term rates can reshape which financial companies benefit and which come under pressure, and that shift can move quickly. This article walks through three U.S. financial stocks from a quality focused screener that appear closely tied to this new rate path and explains why their exposure matters now.

The three stocks in focus below are just a starting sample from this higher rate friendly quality screen, which in full surfaced 32 more U.S. financial companies with equally compelling quantitative stories that are not covered here. To identify and analyze those additional banks and diversified financial stocks directly, head straight to the U.S. Financials (Banks and Diversified Financial Services) screener.

First Bancorp (FBNC)

First Bancorp is a regional U.S. bank based in Southern Pines, North Carolina, and fits the screener’s focus on banks whose earnings are closely linked to net interest income in a higher rate setting. Through First Bank, it offers a full suite of deposit accounts, loans, cards, digital banking and wealth and insurance services to individuals and businesses, generating about $410 million from its core banking operations in the U.S. Investors are looking at a company valued at roughly $2.6b by market cap.

First Bancorp provides direct exposure to a traditional regional bank model that can be sensitive to higher short term rates, especially after Kevin Warsh’s hawkish signal on inflation and policy. Strong recent net interest income and earnings, a cash dividend and share buybacks point to a management team focused on shareholder returns, while asset quality metrics such as modest charge offs help frame credit risk. However, the stock already trades on a higher P/E than many peers and ROE is only in the mid single digits, so a lot depends on earnings holding up if rate expectations or growth forecasts change. That mix of income potential and valuation risk is what makes First Bancorp worth a closer look.

First Bancorp’s mix of richer P/E and mid single digit ROE suggests something in the story may be easy to miss. Compare that trade off directly in the DCF valuation analysis for First Bancorp and see what could upset the balance next.

Mid Penn Bancorp (MPB)

Mid Penn Bancorp is a long established regional bank holding company based in Harrisburg, Pennsylvania, that fits the screener’s focus on U.S. banks with solid profitability and meaningful exposure to net interest income as short term rates move. Through Mid Penn Bank it provides a full suite of deposit accounts, loans, wealth and insurance services to individuals, businesses and institutions in Pennsylvania and New Jersey, generating about $264 million from its core banking and financial services in the U.S. The stock carries a market value of roughly $930 million.

Mid Penn Bancorp gives you a pure play on traditional lending at a time when Kevin Warsh’s hawkish tone and higher short term rate odds keep net interest income in the spotlight. Earnings and revenue growth expectations are strong, recent quarterly results show net interest income supporting profitability, and the bank is returning cash through both dividends and buybacks. At the same time, ROE is only in the mid single digits and the dividend record is uneven, so investors need to weigh growth and income appeal against questions on earnings quality and payout reliability. For anyone tracking higher rate beneficiaries, that mix makes Mid Penn Bancorp a story worth studying in more detail.

Mid Penn Bancorp’s story of solid profitability with mid single digit ROE and uneven dividends raises a sharper question. How does the full earnings and payout profile stack up in the analysis report for Mid Penn Bancorp?

HBT Financial (HBT)

HBT Financial is a regional bank holding company that runs Heartland Bank and Trust, serving consumers, businesses and local governments across Illinois and Eastern Iowa. It fits the U.S. Financials screener as a traditional lender whose profitability is closely linked to the spread between what it pays on deposits and earns on loans, with essentially all of its roughly $266 million in revenue coming from community banking in the U.S. The stock is valued at about $1.3b, putting it squarely in the mid cap regional bank bracket.

HBT Financial gives you a focused play on Midwestern community banking at a time when Kevin Warsh’s hawkish tone has put short term rates back in the spotlight. Forecasts point to faster earnings and revenue growth tied to that rate sensitivity, and recent deal activity in Illinois and higher net interest income underline how the bank is trying to scale that model. At the same time, ROE is still in the low double digits, shareholders were diluted over the past year and the stock trades on a richer multiple than many peers. As a result, the bar for future execution is higher. For investors who want to understand whether the growth, dividend increases and acquisition story justify that premium, HBT Financial is worth a closer look.

HBT Financial’s growth story, richer multiple and recent deal activity may be telling only half the story. Run through the analyst forecasts for HBT Financial and see what might be quietly reshaping expectations next.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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