Banks use their capital and expertise to help businesses grow while offering consumers essential financial products like mortgages and credit cards. 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 9.4% return has trailed the S&P 500 by 3.7 percentage points.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. With that said, here is one resilient bank stock at the top of our wish list and two we’re passing on.
Two Bank Stocks to Sell:
PennyMac Mortgage Investment Trust (PMT)
Market Cap: $1.11 billion
Operating as a real estate investment trust since 2009 to maintain tax advantages, PennyMac Mortgage Investment Trust (NYSE:PMT) is a specialty finance company that invests in mortgage-related assets and operates a correspondent lending business.
Why Are We Out on PMT?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 21.6% annually over the last five years
- Earnings per share have dipped by 9% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Products and services are facing significant credit quality challenges during this cycle as tangible book value per share has declined by 5.2% annually over the last five years
PennyMac Mortgage Investment Trust’s stock price of $12.87 implies a valuation ratio of 0.8x forward P/B. Check out our free in-depth research report to learn more about why PMT doesn’t pass our bar.
Arbor Realty Trust (ABR)
Market Cap: $1.66 billion
With roots dating back to 2003 and a focus on the stability of multifamily housing, Arbor Realty Trust (NYSE:ABR) is a specialized lender that provides financing solutions for multifamily and commercial real estate while also originating and servicing government-backed mortgage loans.
Why Do We Pass on ABR?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 14.8% annually over the last two years
- Sales were less profitable over the last two years as its earnings per share fell by 26% annually, worse than its revenue declines
- Loan losses and capital returns have eroded its tangible book value per share this cycle as its tangible book value per share declined by 4% annually over the last two years
At $8.99 per share, Arbor Realty Trust trades at 0.7x forward P/B. To fully understand why you should be careful with ABR, check out our full research report (it’s free for active Edge members).
One Bank Stock to Watch:
1st Source (SRCE)
Market Cap: $1.51 billion
Tracing its roots back to 1863 during the Civil War era, 1st Source Corporation (NASDAQ:SRCE) is a regional bank holding company that provides commercial, consumer, specialty finance, and wealth management services across Indiana, Michigan, and Florida.
Why Does SRCE Stand Out?
- Net interest margin expanded by 48.7 basis points (100 basis points = 1 percentage point) over the last two years, providing additional flexibility for investments
- Performance over the past five years was boosted by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Annual tangible book value per share growth of 8.7% over the last five years was superb and indicates its capital strength increased during this cycle
1st Source is trading at $63.29 per share, or 1.2x forward P/B. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out 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 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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