US bank stocks tread water in July

Investors shrugged off mostly positive second-quarter earnings reports in the US bank space.

The 210 banks in an S&P Global Market Intelligence analysis had a median total return in July of negative 0.1%, underperforming the S&P 500's 2.2% return. The median price-to-adjusted tangible book value (TBV) for the 210 banks at July 31 was 134.7%, down slightly from 135.1% at the end of June.

Both the best and the worst market performers last month announced an M&A transaction. On the plus side, Dallas-based Veritex Holdings Inc. announced a sale to Huntington Bancshares Inc. July 14, closing out July with a 21.5% gain. In contrast, Pinnacle Financial Partners Inc. recorded the worst monthly return in the analysis at negative 20.4%. On July 24, the Nashville, Tennessee-based bank announced a merger of equals with Columbus, Georgia-based Synovus Financial Corp., which had a negative 8.7% return in July. The market greeted the deal with skepticism, putting both banks in the penalty box.

S&P Global Market Intelligence analyzed US banks trading on the Nasdaq, NYSE or NYSE American with total assets of more than $3 billion. The analysis excludes banks in the mutual holding company ownership structure and other operating subsidiaries.

Adjusted tangible book value is calculated as the sum of tangible common equity, loss reserves and unrealized gain or loss from held-to-maturity securities, tax-adjusted at the 21% corporate rate, less nonperforming assets and loans 90 or more days past due but still accruing interest, divided by common shares outstanding.

Least expensive banks

Dallas-based First Foundation Inc. was the cheapest bank in the analysis by price-to-adjusted TBV for the seventh consecutive month. Its valuation was 44.4% as of July 31 and would have been higher if preferred shares from a capital raise in July 2024 were converted to common stock. Such a conversion would have lowered the bank's basic TBV to $9.34 from $11.65 at June 30, according to a July 31 filing.

Selling $858 million of commercial real estate (CRE) loans at a combined average discount of 6% led to First Foundation recording a $7.7 million second-quarter net loss. The loan sales also drove the company's CRE concentration down to approximately 365% of regulatory capital as of June 30 from 435% at March 31 and helped increase its leverage ratio 17 basis points to 8.29%.

First Foundation still had $476.7 million in CRE loans classified as held for sale at the end of the second quarter.

"As of now, we have a high degree of visibility on executing on an additional securitization before the end of the year, and our expectation is to be fully out of the held-for-sale commercial real estate portfolio by the end of 2025 as we previously communicated," First Foundation CEO Tom Shafer said during a July 31 earnings call." He added, "Material upward move in rates aside, we believe the negative capital and earnings events from the rundown of these commercial real estate loans should mostly be behind us," he added.

The No. 2 bank by lowest valuation, Eagle Bancorp Inc., was the third-weakest market performer in July with a total return of negative 17.4%. The Bethesda, Maryland-based bank reported a net loss of $69.8 million in the second quarter as it grapples with credit deterioration in its office portfolio.

Eagle Bancorp has declared a cash dividend of 16.5 cents per share for the last four quarters. But during a July 24 earnings call, CFO Eric Newell said that the bank is "evaluating a near-term reduction or suspension" to "preserve flexibility."

The third-cheapest bank, First Internet Bancorp, had the second-lowest monthly return in the analysis at negative 18.5%. Its net charge-off (NCO) ratio jumped to 1.30% in the second quarter, up 39 basis points quarter over quarter and 116 basis points year over year. The bulk of the NCOs were in the small business lending category.

First Internet's stock price ranged from $21.09 to $28.51 on an intraday basis during the third quarter through Aug. 1. When asked about stock repurchases during the company's July 24 earnings call, Chairman and CEO David Becker said, "If we stay with the 2-handle on the front, we're not going to buy back. But God forbid, we fall into the teens, that overweighs the capital constraints on my basis. So it's foolish to be at that level for a whole lot of reasons, and we hit the teens, we'll be buying."

Amerant Bancorp Inc., the 20th-least expensive bank, was a top market performer last month, returning 5.9%. The Coral Gables, Florida-based bank disclosed a significant reduction in nonperforming assets in the second quarter.

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Most expensive banks

The Bancorp Inc. became the highest-valued bank in the analysis at the end of July. With its stock surging 10.9% last month, its price-to-adjusted TBV rose about 26 percentage points from June 30 to 369.8%. On July 7, the company disclosed an expanded buyback program.

Abilene, Texas-based First Financial Bankshares Inc. dropped to the No. 2 position by highest valuation. Its price-to-adjusted TBV contracted to 338.7% from 366.1%.

The ninth-most expensive bank, Manitowoc, Wisconsin-based Bank First Corp., announced the acquisition of Beloit, Wisconsin-based Centre 1 Bancorp Inc. on July 18. The deal expands Bank First's branch network in Wisconsin and broadens it into northern Illinois.

Newark, Ohio-based Park National Corp., ranked No. 20, is evaluating merger candidates to vault over the $10 billion asset threshold. Additionally, the company named a new CEO on July 29, with the change effective as of the beginning of 2026.