Banks use their capital and expertise to help businesses grow while offering consumers essential financial products like mortgages and credit cards. 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 3.6% gain has fallen behind the S&P 500’s 6.2% rise.

Investors should tread carefully as many of these banks are also cyclical, and any misstep can have you catching a falling knife. Keeping that in mind, here are three bank stocks we’re passing on.

NBT Bancorp (NBTB)

Market Cap: $2.30 billion

Tracing its roots back to 1856 when it first opened its doors in Norwich, New York, NBT Bancorp (NASDAQ: NBTB) is a community-oriented financial institution providing banking, wealth management, and insurance services to individuals and businesses across the northeastern United States.

Why Does NBTB Worry Us?

1. Muted 8.5% annual revenue growth over the last five years shows its demand lagged behind its banking peers
2. Net interest income trends were unexciting over the last five years as its 9.4% annual growth was below the typical banking firm
3. Incremental sales over the last five years were less profitable as its 4.3% annual earnings per share growth lagged its revenue gains

At $43.94 per share, NBT Bancorp trades at 1.1x forward P/B. Dive into our free research report to see why there are better opportunities than NBTB.

First Bancorp (FBNC)

Market Cap: $2.44 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 Do We Think Twice About FBNC?

1. 2% annual revenue growth over the last two years was slower than its banking peers
2. Weak unit economics are reflected in its net interest margin of 3.1%, one of the worst among bank companies
3. Incremental sales over the last two years were less profitable as its earnings per share were flat while its revenue grew

First Bancorp is trading at $58.86 per share, or 1.5x forward P/B. Check out our free in-depth research report to learn more about why FBNC doesn’t pass our bar.

Camden National Bank (CAC)

Market Cap: $792.9 million

Rooted in Maine's coastal communities since 1875, Camden National (NASDAQ: CAC) is a regional bank holding company that provides banking, wealth management, and financial services to consumers and businesses throughout Maine and New Hampshire.

Why Does CAC Fall Short?

1. 8.3% annual net interest income growth over the last five years was slower than its banking peers
2. Performance over the past five years shows its incremental sales were less profitable, as its 1.7% annual earnings per share growth trailed its revenue gains
3. Flat tangible book value per share over the last five years suggest it must find different ways to enhance shareholder value during this cycle

Camden National Bank’s stock price of $46.72 implies a valuation ratio of 1x forward P/B. To fully understand why you should be careful with CAC, check out our full research report (it’s free).

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