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 caused the industry to lag recently as banking stocks have collectively shed 2.3% over the past six months. This drawdown is a stark contrast from the S&P 500’s 13.5% gain.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. Taking that into account, here is one bank stock poised to generate sustainable market-beating returns and two we’re passing on.
Two Bank Stocks to Sell:
Merchants Bancorp (MBIN)
Market Cap: $2.25 billion
With a strategic focus on low-risk, government-backed lending programs, Merchants Bancorp (NASDAQCM:MBIN) is an Indiana-based bank holding company specializing in multi-family mortgage banking, mortgage warehousing, and traditional banking services.
Why Do We Think Twice About MBIN?
- Annual revenue growth of 5.6% over the last two years was below our standards for the banking sector
- Operational productivity has decreased over the last five years as its efficiency ratio worsened by 16.6 percentage points
- Low tier one capital ratio of 9.4% indicates the company may struggle to maintain adequate liquidity during periods of economic stress
At $49.04 per share, Merchants Bancorp trades at 1x forward P/B. Dive into our free research report to see why there are better opportunities than MBIN.
German American Bancorp (GABC)
Market Cap: $1.83 billion
Founded in 1910 during a wave of community banking expansion in the Midwest, German American Bancorp (NASDAQ: GABC) is a financial holding company that provides banking, wealth management, and insurance services across southern Indiana and Kentucky.
Why Does GABC Worry Us?
- Efficiency ratio is projected to stay flat over the coming year, suggesting its fixed cost leverage is currently maxed out
- Performance over the past five years shows its incremental sales were less profitable, as its 4.9% annual earnings per share growth trailed its revenue gains
- 1.9% annual tangible book value per share growth over the last five years was slower than its banking peers
German American Bancorp’s stock price of $48.83 implies a valuation ratio of 1.4x forward P/B. If you’re considering GABC for your portfolio, see our FREE research report to learn more.
One Bank Stock to Buy:
ServisFirst Bancshares (SFBS)
Market Cap: $4.23 billion
Founded in 2005 with a focus on serving underserved mid-sized businesses, ServisFirst Bancshares (NYSE: SFBS) is a bank holding company that provides commercial banking services to businesses and professionals through its subsidiary ServisFirst Bank.
Why Should You Buy SFBS?
- Annual revenue growth of 19.5% over the last two years was superb and indicates its market share increased during this cycle
- Net interest margin grew by 71.1 basis points (100 basis points = 1 percentage point) over the last two years, giving the firm more chips to play with
- Additional sales over the last two years increased its profitability as the 25.7% annual growth in its earnings per share outpaced its revenue
ServisFirst Bancshares is trading at $38.74 per share, or 2x forward P/B. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
