Banks use their capital and expertise to help businesses grow while offering consumers essential financial products like mortgages and credit cards. Furthermore, economic conditions have supported loan growth and fee income, a trend that has enabled the banking industry to return 20.3% over the past six months. At the same time, the S&P 500 was up 6.6%.

Regardless of these results, investors must exercise caution as many banks are sensitive to interest rate fluctuations and economic cycles. On that note, here are three bank stocks we’re swiping left on.

Community Bank (CBU)

Market Cap: $3.50 billion

Tracing its roots back to 1866 in upstate New York, Community Financial System (NYSE: CBU) is a financial holding company that provides banking, employee benefits, wealth management, and insurance services to retail, commercial, and municipal customers.

Why Is CBU Not Exciting?

1. 6.6% annual net interest income growth over the last five years was slower than its banking peers
2. Incremental sales over the last five years were less profitable as its 4.8% annual earnings per share growth lagged its revenue gains
3. Annual tangible book value per share declines of 3% for the past five years show its capital management struggled during this cycle

Community Bank’s stock price of $66.42 implies a valuation ratio of 1.6x forward P/B. To fully understand why you should be careful with CBU, check out our full research report (it’s free).

Banner Bank (BANR)

Market Cap: $2.20 billion

Founded in 1890 in Walla Walla, Washington, and evolving through more than a century of economic cycles, Banner Corporation (NASDAQ: BANR) operates Banner Bank, providing commercial banking services, loans, and financial products to individuals and businesses across Washington, Oregon, California, Idaho, and Utah.

Why Do We Think Twice About BANR?

1. Muted 4.1% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
2. Earnings per share fell by 1.5% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
3. Estimated tangible book value per share growth of 9.7% for the next 12 months implies profitability will slow from its two-year trend

Banner Bank is trading at $64.57 per share, or 1x forward P/B. Check out our free in-depth research report to learn more about why BANR doesn’t pass our bar.

Washington Trust Bancorp (WASH)

Market Cap: $699.5 million

Founded in 1800 and operating as Rhode Island's oldest community bank, Washington Trust Bancorp (NASDAQ: WASH) is a regional bank holding company offering commercial banking, mortgage lending, personal banking, and wealth management services.

Why Is WASH Risky?

1. 3.7% annual net interest income growth over the last five years was slower than its banking peers
2. Weak unit economics are reflected in its net interest margin of 2.2%, one of the worst among bank companies
3. Sales over the last five years were less profitable as its earnings per share fell by 7.8% annually while its revenue was flat

At $36.64 per share, Washington Trust Bancorp trades at 1.2x forward P/B. If you’re considering WASH for your portfolio, see our FREE research report to learn more.

Stocks We Like More

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