Banks serve as the backbone of the economy, facilitating lending, deposits, and financial services that keep businesses and consumers moving forward. But worries about an economic slowdown and potential credit deterioration have kept sentiment in check, and over the past six months, the banking industry’s 4.5% return has trailed the S&P 500 by 7.4 percentage points.

Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Taking that into account, here is one bank stock poised to generate sustainable market-beating returns and two that may face trouble.

Two Bank Stocks to Sell:

Stellar Bancorp (STEL)

Market Cap: $1.54 billion

Created through strategic mergers to serve the growing Texas business community, Stellar Bancorp (NYSE: STEL) is a Texas bank holding company that provides commercial banking services primarily to small and medium-sized businesses and professionals.

Why Does STEL Fall Short?

1. Sales tumbled by 5.7% annually over the last two years, showing market trends are working against its favor during this cycle
2. Net interest margin shrank by 36 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
3. Products and services are facing significant credit quality challenges during this cycle as tangible book value per share has declined by 3.3% annually over the last five years

Stellar Bancorp’s stock price of $30.13 implies a valuation ratio of 0.9x forward P/B. To fully understand why you should be careful with STEL, check out our full research report (it’s free for active Edge members).

First Interstate BancSystem (FIBK)

Market Cap: $3.15 billion

Tracing its roots back to 1971 and still guided by founding family principles, First Interstate BancSystem (NASDAQ: FIBK) operates a network of community banks across 14 western and midwestern states, offering comprehensive banking services to individuals, businesses, and government entities.

Why Do We Think FIBK Will Underperform?

1. Annual sales declines of 3.1% for the past two years show its products and services struggled to connect with the market during this cycle
2. Forecasted net interest income decline of 1.4% for the upcoming 12 months implies demand will fall off a cliff
3. Muted 1.3% annual tangible book value per share growth over the last five years shows its capital generation lagged behind its banking peers

First Interstate BancSystem is trading at $30.60 per share, or 0.9x forward P/B. Check out our free in-depth research report to learn more about why FIBK doesn’t pass our bar.

One Bank Stock to Buy:

Cadence Bank (CADE)

Market Cap: $6.97 billion

With roots dating back to 1885 and a strategic focus on middle-market commercial lending, Cadence Bancorporation (NYSE: CADE) is a bank holding company that provides commercial banking, retail banking, and wealth management services to middle-market businesses and individuals.

Why Should You Buy CADE?

1. Market share has increased this cycle as its 17.4% annual net interest income growth over the last five years was exceptional
2. Net interest margin jumped by 34 basis points (100 basis points = 1 percentage point) over the last two years, giving the firm more resources to pursue growth initiatives
3. Earnings growth has massively outpaced its peers over the last two years as its EPS has compounded at 5.3% annually

At $37.08 per share, Cadence Bank trades at 1.2x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.

High-Quality Stocks for All Market Conditions

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.