US bank stocks outperform in August with widespread rally

In August, investors bid up nearly the entire US banking sector, including some of the lowest-valued stocks.

The 210 banks in an S&P Global Market Intelligence analysis recorded a median total return of 9.0% during the month, well above the market capitalization-weighted benchmarks of 4.9% for the S&P US BMI Banks index and 2.0% for the S&P 500. JPMorgan Chase & Co., which has the largest market cap in the industry, dragged down the bank index with a 1.7% return.

Only two of the 210 banks traded down in August: Hammond, Louisiana-based First Guaranty Bancshares Inc., which had a return of negative 2.8%; and First Citizens BancShares Inc., which had a return of negative 0.4%. Five banks in the analysis gained more than 20%, highlighted by Live Oak Bancshares Inc.'s 22.4% return.

The median price-to-adjusted tangible book value (TBV) for the 210 banks jumped to 145.4% as of Aug. 29 from 134.7% at the end of July.

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 lowest-valued bank in the analysis by price-to-adjusted TBV for the eighth consecutive month. Its valuation was 53.9% as of Aug. 29 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 per common share from $11.65 per common share at June 30, according to a July 31 filing.

Among major exchange-traded US banks that reported calendar second-quarter earnings through Aug. 1, First Foundation reported the second-largest sequential decline in total deposits at 10.1%. The bank reduced its balance sheet in the second quarter, primarily from the sale of $858 million of commercial real estate loans at a combined average discount of 6%.

First Foundation was the second-best market performer in the analysis with a total return of 22.2%. The No. 2 bank by lowest valuation, Bethesda, Maryland-based Eagle Bancorp Inc., had the third-best return at 21.9%.

The 13th-cheapest bank, Bedminster, New Jersey-based Peapack-Gladstone Financial Corp., reported the second-highest multifamily loan delinquency ratio among institutions with a multifamily loan concentration of 25% or higher as of June 30.

Like many of the other top office lenders, No. 18 OceanFirst Financial Corp. cut its exposure to the sector in the second quarter. The Toms River, New Jersey-based bank reported outstanding office exposure at 10.0% of gross loans held for investment.

M&A activity will affect the list of least expensive banks. The fifth-cheapest bank at the end of August, Seattle-based HomeStreet Inc., completed its sale to Walnut Creek, California-based Mechanics Bank on Sept. 2. The merger of equals between Boston-based banks — No. 17 Beacon Financial Corp., formerly known as Berkshire Hills Bancorp Inc., and No. 14 Brookline Bancorp Inc. — was completed Sept. 1.

Additionally, No. 20 NB Bancorp Inc. announced its agreement to acquire Amesbury, Massachusetts-based Provident Bancorp Inc. on June 5. The Needham, Massachusetts-based bank completed a mutual-to-stock conversion in December 2023, raising $410.0 million in gross proceeds.

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Most expensive banks

The Bancorp Inc. was the highest-valued bank in the analysis for the second month in a row. With its stock surging 20.7% in August, representing the fifth-best monthly return, the bank's price-to-adjusted TBV moved up to 446.4% as of Aug. 29 from 369.8% at July 31. The Bancorp completed an offering of senior notes in August.

The No. 3 bank by highest valuation, Triumph Financial Inc., implemented a reduction in force expected to involve approximately 5% of its workforce. While the Dallas-based bank registered an 8.4% total return last month, its negative 32.3% return year to date through Aug. 29 is the worst in the analysis.

No. 8 JPMorgan and No. 13 Bank of America Corp. flexed their lending power in the second quarter, prompting analysts to increase full-year 2025 loan growth estimates for the banks. Both banks also topped investment banking fee estimates.

Oklahoma City-based BancFirst Corp., ranked as the ninth-most expensive bank, filed a shelf registration statement Aug. 5 for the potential sale of an undisclosed amount of its common stock.