3 Bank Stocks Walking a Fine Line

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 9.5% gain has fallen behind the S&P 500’s 13.1% rise.

While some banks have strong balance sheets and diversified revenue streams that enable them to thrive in any environment, the odds aren’t great for the ones we’re analyzing today. Taking that into account, here are three bank stocks best left ignored.

TowneBank (TOWN)

Market Cap: $2.56 billion

Founded in 1998 with a commitment to community-centered banking in the Hampton Roads region, TowneBank (NASDAQ:TOWN) is a community-focused financial institution providing banking, lending, and wealth management services to individuals and businesses in Virginia and North Carolina.

Why Do We Pass on TOWN?

1. 6% annual net interest income growth over the last five years was slower than its banking peers
2. Earnings per share lagged its peers over the last two years as they only grew by 2.6% annually
3. Estimated tangible book value per share decline of 2.9% for the next 12 months implies a challenging profitability environment

At $33.95 per share, TowneBank trades at 1.1x forward P/B. To fully understand why you should be careful with TOWN, check out our full research report (it’s free for active Edge members).

Franklin BSP Realty Trust (FBRT)

Market Cap: $821 million

Operating as a specialized real estate investment trust (REIT) with roots dating back to 2012, Franklin BSP Realty Trust (NYSE:FBRT) originates and manages a diversified portfolio of commercial real estate debt investments secured by properties in the United States and abroad.

Why Should You Sell FBRT?

1. Muted 9.4% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
2. Incremental sales over the last two years were much less profitable as its earnings per share fell by 39.7% annually while its revenue grew
3. Annual tangible book value per share declines of 6.8% for the past five years show its capital management struggled during this cycle

Franklin BSP Realty Trust’s stock price of $10.37 implies a valuation ratio of 0.7x forward P/B. Dive into our free research report to see why there are better opportunities than FBRT.

U.S. Bancorp (USB)

Market Cap: $74.22 billion

With roots dating back to 1863 and a presence across 26 states primarily in the Midwest and West, U.S. Bancorp (NYSE:USB) is one of America's largest banks providing lending, deposit services, wealth management, payment processing, and merchant services to individuals and businesses.

Why Are We Wary of USB?

1. Large revenue base makes it harder to expand quickly, and its annual net interest income growth of 5.2% over the last five years was below our standards for the banking sector
2. Weak unit economics are reflected in its net interest margin of 2.7%, one of the worst among bank companies
3. Sizable asset base leads to capital growth challenges as its 2.5% annual tangible book value per share increases over the last five years fell short of other banking companies

U.S. Bancorp is trading at $49.09 per share, or 1.3x forward P/B. If you’re considering USB for your portfolio, see our FREE research report to learn more.

Stocks We Like More

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 9 Market-Beating Stocks. 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 Tecnoglass (+1,754% 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

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