Banks play a critical role in the financial system, providing everything from commercial loans to wealth management and payment processing services. Still, investors are uneasy as banks face challenges from credit quality concerns and potential regulatory changes. These doubts have caused the industry to lag recently as banking stocks have collectively shed 10.1% over the past six months. This drawdown was disheartening since the S&P 500 held its ground.

Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. On that note, here is one resilient bank stock at the top of our wish list and two we’re swiping left on.

Two BankStocks to Sell:

Cathay General Bancorp (CATY)

Market Cap: $3.14 billion

Founded in 1962 with its first branch in Los Angeles' Chinatown, Cathay General Bancorp (NASDAQ: CATY) operates Cathay Bank, providing commercial banking services to businesses and individuals with a strong presence in Asian-American communities.

Why Does CATY Fall Short?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.7% annually over the last two years
2. Muted 5.4% annual net interest income growth over the last four years shows its demand lagged behind its bank peers
3. Net interest margin shrank by 59.7 basis points (100 basis points = 1 percentage point) over the last two years, suggesting the yields on its loan book are decreasing or the market is becoming more competitive

At $44.78 per share, Cathay General Bancorp trades at 1x forward P/B. Check out our free in-depth research report to learn more about why CATY doesn’t pass our bar.

Berkshire Hills Bancorp (BHLB)

Market Cap: $1.16 billion

Founded in 1846 as a community financial institution in Massachusetts, Berkshire Hills Bancorp (NYSE: BHLB) is a regional bank holding company that provides commercial banking, retail banking, wealth management, and lending services through branches across the Northeast.

Why Does BHLB Worry Us?

1. 3.7% annual net interest income growth over the last four years was slower than its bank peers
2. Tangible book value per share is projected to decrease by 14.8% over the next 12 months as capital generation weakens
3. Low return on equity reflects management’s struggle to allocate funds effectively

Berkshire Hills Bancorp’s stock price of $25.31 implies a valuation ratio of 0.9x forward P/B. If you’re considering BHLB for your portfolio, see our FREE research report to learn more.

One Bank Stock to Watch:

SouthState (SSB)

Market Cap: $9.03 billion

With roots dating back to the Great Depression era of 1933, SouthState (NYSE: SSB) is a financial holding company that provides banking services, wealth management, and correspondent banking services across six southeastern states.

Why Do We Like SSB?

1. Annual net interest income growth of 13.9% over the past four years was outstanding, reflecting market share gains this cycle
2. Market share is on track to rise over the next 12 months as its 37.9% projected net interest income growth implies demand will accelerate from its four-year trend
3. Anticipated 4.8 percentage point rise in its efficiency ratio suggests its expenses will increase as a percentage of revenue

SouthState is trading at $89.02 per share, or 1x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

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