Banks play a critical role in the financial system, providing everything from commercial loans to wealth management and payment processing services. Market leaders have certainly capitalized on rising interest rates and strong loan demand to boost profitability, helping fuel a 14.1% gain for the banking industry over the past six months - 10.6 percentage points higher than the S&P 500.

Nevertheless, investors should tread carefully as many banks are cyclical due to their exposure to credit risk and regulatory changes. Taking that into account, here is one bank stock boasting a durable advantage and two best left ignored.

Two Bank Stocks to Sell:

Pinnacle Financial Partners (PNFP)

Market Cap: $14.08 billion

Founded in 2000 with a focus on delivering big-bank capabilities with community bank personalization, Pinnacle Financial Partners (NASDAQ: PNFP) is a Tennessee-based financial holding company that provides banking, investment, trust, mortgage, and insurance services to businesses and individuals.

Why Do We Think Twice About PNFP?

1. Weak unit economics are reflected in its net interest margin of 3.2%, one of the worst among bank companies
2. Operational productivity has decreased over the last four years as its efficiency ratio worsened by 7.4 percentage points
3. Estimated tangible book value per share growth of 2.7% for the next 12 months implies profitability will slow from its two-year trend

At $93.57 per share, Pinnacle Financial Partners trades at 0.9x forward P/B. Dive into our free research report to see why there are better opportunities than PNFP.

Origin Bancorp (OBK)

Market Cap: $1.41 billion

Founded in 1912 during the early boom days of Louisiana banking, Origin Bancorp (NYSE: OBK) is a financial holding company that provides personalized banking services to businesses, municipalities, and individuals across Texas, Louisiana, and Mississippi.

Why Are We Hesitant About OBK?

1. Sales trends were unexciting over the last two years as its 7.5% annual growth was below the typical banking company
2. Weak unit economics are reflected in its net interest margin of 3.4%, one of the worst among bank companies
3. Estimated tangible book value per share growth of 7.3% for the next 12 months implies profitability will slow from its two-year trend

Origin Bancorp is trading at $45.37 per share, or 1x forward P/B. Read our free research report to see why you should think twice about including OBK in your portfolio.

One Bank Stock to Watch:

SouthState (SSB)

Market Cap: $9.75 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 Are We Fans of SSB?

1. Annual revenue growth of 24.1% over the last two years was superb and indicates its market share increased during this cycle
2. Impressive 25.4% annual net interest income growth over the last five years indicates it’s winning market share this cycle
3. Efficiency ratio improved by 12.6 percentage points over the last five years as it scaled

SouthState’s stock price of $99.40 implies a valuation ratio of 1x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free.

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