Banks play a critical role in the financial system, providing everything from commercial loans to wealth management and payment processing services. But worries about an economic slowdown and potential credit deterioration have kept sentiment in check, and over the past six months, the banking industry has tumbled by 7.1%. This drawdown is a far cry from the S&P 500’s 3.3% ascent.

While some banks have strong balance sheets and diversified revenue streams that enable them to thrive in any environment, the odds aren’t great for the ones we’re analyzing today. Taking that into account, here are three bank stocks we’re swiping left on.

First Bancorp (FBNC)

Market Cap: $2.01 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 Does FBNC Worry Us?

1. Sales tumbled by 5% annually over the last two years, showing market trends are working against its favor during this cycle
2. Concessions to defend its market share have ramped up over the last two years as its net interest margin decreased by 28.3 basis points (100 basis points = 1 percentage point)
3. Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 14.3% annually, worse than its revenue

First Bancorp’s stock price of $48.36 implies a valuation ratio of 1.3x forward P/B. To fully understand why you should be careful with FBNC, check out our full research report (it’s free).

Franklin BSP Realty Trust (FBRT)

Market Cap: $862.2 million

Operating as a specialized real estate investment trust (REIT) with roots dating back to 2012, Franklin BSP Realty Trust (NYSE: FBRT) originates and manages a diversified portfolio of commercial real estate debt investments secured by properties in the United States and abroad.

Why Is FBRT Not Exciting?

1. Sales tumbled by 3.7% annually over the last two years, showing market trends are working against its favor during this cycle
2. Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
3. Tangible book value per share tumbled by 2.9% annually over the last five years, showing bank sector trends are working against its favor during this cycle

Franklin BSP Realty Trust is trading at $10.48 per share, or 0.7x forward P/B. Read our free research report to see why you should think twice about including FBRT in your portfolio.

U.S. Bancorp (USB)

Market Cap: $68.46 billion

With roots dating back to 1863 and a presence across 26 states primarily in the Midwest and West, U.S. Bancorp (NYSE: USB) is one of America's largest banks providing lending, deposit services, wealth management, payment processing, and merchant services to individuals and businesses.

Why Are We Cautious About USB?

1. Annual net interest income growth of 4.9% over the last five years lagged behind its bank peers as its large revenue base made it difficult to generate incremental demand
2. Inferior net interest margin of 2.7% means it must compensate for lower profitability through increased loan originations
3. Annual tangible book value per share growth of 2% over the last five years lagged behind its bank peers as its large balance sheet made it difficult to generate incremental capital growth

At $44.06 per share, U.S. Bancorp trades at 1.2x forward P/B. Dive into our free research report to see why there are better opportunities than USB.

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