Banks serve as the backbone of the economy, facilitating lending, deposits, and financial services that keep businesses and consumers moving forward. Still, investors are uneasy as banks face challenges from credit quality concerns and potential regulatory changes. These doubts have certainly contributed to banking stocks’ recent underperformance - over the past six months, the industry’s 8.2% gain has fallen behind the S&P 500’s 18.4% rise.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. With that said, here is one resilient bank stock at the top of our wish list and two that may face trouble.
Two Bank Stocks to Sell:
Preferred Bank (PFBC)
Market Cap: $1.25 billion
Founded in 1991 with a focus on serving the Pacific Rim community in Southern California, Preferred Bank (NASDAQ:PFBC) is a commercial bank that provides banking products and services to small and mid-sized businesses, entrepreneurs, real estate developers, and high net worth individuals.
Why Are We Hesitant About PFBC?
- 9.1% annual net interest income growth over the last five years was slower than its banking peers
- Estimated net interest income growth of 1.5% for the next 12 months implies demand will slow from its five-year trend
- Net interest margin shrank by 44 basis points (100 basis points = 1 percentage point) over the last two years, suggesting the profitability of its loan book is decreasing or the market is becoming more competitive
Preferred Bank’s stock price of $105.77 implies a valuation ratio of 1.5x forward P/B. Check out our free in-depth research report to learn more about why PFBC doesn’t pass our bar.
First Bancorp (FBNC)
Market Cap: $2.57 billion
Founded during the Great Depression in 1934 and originally known as Montgomery Bancorp, First Bancorp (NASDAQ:FBNC) is a community-oriented commercial bank providing a wide range of financial services to businesses and individuals in North and South Carolina.
Why Are We Wary of FBNC?
- Sales trends were unexciting over the last five years as its 9.8% annual growth was below the typical banking company
- Incremental sales over the last five years were less profitable as its 4.4% annual earnings per share growth lagged its revenue gains
- Below-average return on equity indicates management struggled to find compelling investment opportunities
At $62.23 per share, First Bancorp trades at 1.4x forward P/B. Read our free research report to see why you should think twice about including FBNC in your portfolio.
One Bank Stock to Watch:
Amalgamated Financial (AMAL)
Market Cap: $1.39 billion
Founded in 1923 by labor unions seeking a financial institution aligned with worker values, Amalgamated Financial (NASDAQGM:AMAL) operates a values-oriented bank that provides commercial banking, trust services, and investment management to socially responsible organizations and individuals.
Why Are We Positive on AMAL?
- Unique value proposition resonates with borrowers, as seen in its above-market 12.9% annual net interest income growth over the last five years
- Share repurchases over the last five years enabled its annual earnings per share growth of 17.3% to outpace its revenue gains
- Impressive 10% annual tangible book value per share growth over the last five years indicates it’s building equity value this cycle
Amalgamated Financial is trading at $46.18 per share, or 1.6x forward P/B. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.