Banks use their capital and expertise to help businesses grow while offering consumers essential financial products like mortgages and credit cards. Still, investors are uneasy as banks face challenges from credit quality concerns and potential regulatory changes. These doubts have certainly contributed to the industry’s recent underperformance - over the past six months, banking stocks were flat while the S&P 500 was up 5.6%.

While some banks have strong balance sheets and diversified revenue streams that enable them to thrive in any environment, the odds aren’t great for the ones we’re analyzing today. Keeping that in mind, here are three bank stocks we’re swiping left on.

Lake City Bank (LKFN)

Market Cap: $1.49 billion

Dating back to 1872 and deeply rooted in Indiana's communities, Lakeland Financial Corporation (NASDAQ: LKFN) operates Lake City Bank, providing commercial and consumer banking services throughout Northern and Central Indiana.

Why Should You Dump LKFN?

1. 5.2% annual revenue growth over the last five years was slower than its banking peers
2. Net interest income trends were unexciting over the last five years as its 6.3% annual growth was below the typical banking firm
3. Performance over the past five years shows its incremental sales were less profitable, as its 4% annual earnings per share growth trailed its revenue gains

At $58.76 per share, Lake City Bank trades at 1.8x forward P/B. To fully understand why you should be careful with LKFN, check out our full research report (it’s free).

Fulton Financial (FULT)

Market Cap: $3.80 billion

Tracing its roots back to 1882 in the heart of Pennsylvania, Fulton Financial (NASDAQ: FULT) is a financial holding company that provides banking, lending, and wealth management services to consumers and businesses across five Mid-Atlantic states.

Why Does FULT Give Us Pause?

1. Muted 8.7% annual revenue growth over the last five years shows its demand lagged behind its banking peers
2. Efficiency ratio is expected to worsen by 2.6 percentage points over the next year
3. Estimated tangible book value per share growth of 8.4% for the next 12 months implies profitability will slow from its two-year trend

Fulton Financial is trading at $21.10 per share, or 1.1x forward P/B. Read our free research report to see why you should think twice about including FULT in your portfolio.

First Busey (BUSE)

Market Cap: $2.21 billion

Tracing its roots back to 1868 during America's post-Civil War reconstruction era, First Busey (NASDAQ: BUSE) is a bank holding company that provides commercial and retail banking, wealth management, and payment technology solutions across Illinois, Missouri, Florida, and Indiana.

Why Are We Cautious About BUSE?

1. Net interest margin of 3.3% reflects its high servicing and capital costs
2. Annual earnings per share growth of 4.9% underperformed its revenue over the last five years, showing its incremental sales were less profitable
3. Projected tangible book value per share decline of 3.2% for the next 12 months points to tough credit quality challenges ahead

First Busey’s stock price of $25.67 implies a valuation ratio of 0.9x forward P/B. Check out our free in-depth research report to learn more about why BUSE doesn’t pass our bar.

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