There’s one key thing investors should be thinking about now. When interest rates are low, it’s a harder environment for many banks to make money. That should be top of mind when considering bank stocks.
You see, financial institutions (FIs) make most of their money on the spread between the interest rate they can borrow at and the interest rate they charge customers.
When rates are low, the spread narrows. And that means banks have less ability to make money on their loans. Plus, their huge cash reserves in U.S. Treasury notes doesn’t yield like it used to.
Now, this time around, the Federal Reserve has pumped money into the system to help banks. And the stimulus packages Congress passed have kept money flowing and kept FIs busy helping small businesses — they get a cut of every loan they shepherd through the Paycheck Protection Program for example.
Let me be clear, though: This doesn’t mean I’m a fan of the major bank stocks. I’m an ex-banking analyst and corporate accountant who got very familiar with the “creative accounting” practices at big banks. And, anyway, the big bank stocks are value plays. I only recommend growth stocks in my services like, well, Growth Investor.
So, now that I’m about to highlight seven of the best bank stocks to cash in on right now, you’ll see that most are regional banks. Further, they have been busy making government-backed loans and have strong positions in their service areas.
- Merchants Bancorp (NASDAQ:MBIN)
- Glacier Bancorp (NASDAQ:GBCI)
- Landmark Bancorp (NASDAQ:LARK)
- Eagle Bancorp Montana (NASDAQ:EBMT)
- German American Bancorp (NASDAQ:GABC)
- Stock Yards Bancorp (NASDAQ:SYBT)
- United Bancorp (NASDAQ:UBCP)
Bank Stocks: Merchants Bancorp (MBIN)
This regional bank operates out of Indiana and Illinois and has some interesting side businesses.
First, it finances and services multi-family housing and healthcare facilities. These are two strong areas of growth in the long term.
Also, it provides warehouse financing in the mortgage markets. As you have seen on numerous television ads, there are a large swath of non-bank finance companies that now offer mortgages and other financing tools.
Because they aren’t regulated like FIs, they can compete on rates and stay profitable at lower margins.
But these finance companies still have to buy the loans from an FI, and that’s where the warehouse market comes in. MBIN is a big player in this market, which will certainly grow.
MBIN is off 6.5% in the past year, but it has a solid 2% dividend and room to grow.
Glacier Bancorp (GBCI)
This regional bank has $15 billion in assets and operates in eight states — Montana, Idaho, Utah, Washington, Wyoming, Colorado, Arizona and Nevada.
While that is a lot of real estate, many of those states are relatively lightly populated, so it services many communities without much competition from big national banks.
It services 121 communities with 192 branches, so it’s well represented across its service area.
And much of its service area hasn’t been hammered by the pandemic, which means day-to-day life hasn’t been transformed as it has in larger cities and towns.
The stock off nearly 2% in the past year, but should see some solid growth from PPP loan activity and a return to more normal economic conditions. And in the meantime, you receive a solid 3% dividend. Gains plus income is a recipe for success — something I always like to see when I pick compelling growth plays for Growth Investor.
Landmark Bancorp (LARK)
The next of my bank stocks is Landmark Bancorp. This small FI is based in Kansas and operates 29 locations in 23 communities across Kansas.
It only has a $116 million market capitalization, so this one is more a play on how community banks are faring in this “new normal.”
Once again, these are the banks that were burning the midnight oil helping their community businesses, including farmers, get their PPP and CARES Act funding in order. And that was helpful to the bank since it was getting a commission on every loan it processed.
There’s an upcoming second phase to this process that borrowers will need to complete soon so that they don’t get stuck having to pay back the entire loan — and this phase will help business as well.
Also, deposits are up around the nation, so more money in deposits also helps its Treasury management division.
The stock is up 18% in the past 12 months and it has a 3.1% dividend.
Eagle Bancorp Montana (EBMT)
This community FI serves the state of Montana with 24 branches. It has about $1 billion in assets and services the consumer, business and agricultural communities.
Its $116 billion market cap puts it in the same league as LARK, but the one key difference is the Bakken Shale runs through parts of eastern Wyoming. That’s a mixed blessing these days with prices still below the level where shale producers can make a profit.
At Growth Investor, I’m largely staying away from direct energy plays. But a weak dollar drives oil prices up, and the U.S. is getting back to work. If the shale producers also can get back to work, this could be a boon for the bank.
The stock is up nearly 7% in the past year and has a 2.2% dividend. That’s a far better return for your cash than a CD.
German American Bancorp (GABC)
Founded in 1910, this regional bank was formed to service the large number of German immigrants that settled in Indiana and Kentucky.
Today it has $4.4 billion in assets and serves both states with 72 offices, in 20 southern counties in Indiana and six in Kentucky.
GABC is a bit larger than LARK and EBMT, with a market cap of $741 million. It has a service area that includes Louisville, which sits just below the Indiana state line. This gives the bank some big city exposure, as well as deep roots in the agricultural community.
GABC also has an insurance division, which is a good source of reliable revenue and helps the bank put cash reserves to work.
The stock has treaded water over the past year but its 2.4% dividend should help investors keep their cash earning while they wait for the economy to restart.
Stock Yards Bancorp (SYBT)
Founded in 1904 in Louisville, Kentucky, SYBT operates as a holding company for Stock Yards Bank & Trust. The bank services the metropolitan areas of Louisville, Indianapolis and Cincinnati.
Remember, back in the day, these were vibrant cities with significant amounts of trade that moved goods all over the country. Cincinnati still is headquarters for major S&P 500 businesses like Proctor & Gamble (NYSE:PG), Kroger (NYSE:KR) and Cintas (NASDAQ:CTAS), as well as others.
While these three cities might not come to mind when you think of economic engines, they are very powerful forces in the Midwest. That’s why it has one of the top wealth management groups in the nation. Niche opportunities with a solid, dominant business model tend to grab my attention as Strong Buys for Growth Investor.
The stock is off 1% in the past 12 months, but it has an attractive 3.1% dividend.
United Bancorp (UBCP)
At a market cap of a mere $56 million, this is the smallest company on this list of bank stocks. It simply has the smallest footprint.
But that isn’t necessarily bad. For fiscal 2019, net income was up 59% after the acquisition of a small community FI. Earnings hit a record high.
Instead of taking this windfall and running with it, UBCP became more cautious on its lending. This held the bank in good stead when the lockdowns hit.
UBCP operates 19 offices in small towns in Ohio and has a loan production office in Wheeling, West Virginia. It’s a conservatively run operation, but as its recent acquisition shows, it isn’t scared to grow when the numbers work.
This is a good philosophy for a community FI these days.
UBCP is off 2% in the past year, but it has a reliable 5% dividend, which makes this a tempting stock in any market.
That being said, if you want a stock with strong momentum as well as a reliable dividend, you’ve got to target one of the huge megatrends picking up steam.
One I’m particularly excited about now is a major upgrade across the telecom industry, across the world.
The 5G Buildout Is an Incredible Opportunity for Investors Right Now
Within two years, most cell phones will be 5G enabled and be able to wirelessly handle television streaming. With 5G, we’ll have cable modem speeds on any device; no need to plug in. That’s a big deal for rural areas … the very same areas that are also key to President Donald Trump’s reelection. So, by pushing 5G over the goal line, Trump will deliver a big win for his base — and strike a blow against Chinese rivals like Huawei Technologies.
But big picture, 5G is about much more than trade wars and faster downloads. Because 5G is 100 times faster than 4G, it’ll allow your wireless internet devices to work in real time. That advancement is a game changer for tech companies.
With the 5G infrastructure market set to grow at an annual rate of 67% over the next 10 years, the entire market will go from $780 million to nearly $48 billion. This buildout is where I see opportunity with 5G stocks now.
Cable companies can do their best to fight back with fiber optics … but they can’t compete with the convenience of a smartphone, once it’s got ultra-fast 5G. That’s how my 5G technology play will capture more market share from the broadband cable companies.
The stock I’m targeting is enjoying an influx of big money on Wall Street, and it has good fundamentals, too — making it a “Strong Buy” in my Portfolio Grader system now.
When you do, you’ll see how to claim a free copy of my investment report, The King of 5G “Turbo Button” Technology, which has full details on this company — and what makes it such a great buy now.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.