3 Regional Bank Stocks That Could Benefit From Higher Interest Rates

Interest rates just took another step higher, and that move is quietly reshaping where money is made and lost across markets. Some large U.S. banks and life insurers can see higher policy rates feed into loan pricing and investment income, while others face tougher funding costs and credit risks. This article breaks down three stocks from the screener most exposed to the latest Fed hike and explains how that backdrop could affect them, for better or worse.

The three stocks covered below are only a sample from this theme. The full screen pulled up 29 more large U.S. banks and life insurers with equally interesting rate exposure that are not discussed here.

Identify your own highest-conviction ideas by going straight to the U.S. Large-Cap Banks and Life Insurers Benefiting from Higher Interest Rates screener.

CVB Financial fits into this higher-rate banks theme because it runs a straightforward deposit and lending franchise where policy moves quickly filter through to what it earns on loans versus what it pays on funding.

CVB Financial Corp. is a California based bank holding company serving small and mid sized businesses and households through Citizens Business Bank, earning its roughly US$572 million of revenue from traditional banking and related services in the U.S., and carrying a market value around US$4 billion.

“Growth in noninterest-bearing core deposits, bolstered by ongoing business formation in California’s Inland Empire and Central Valley, positions CVB Financial to maintain low funding costs and support stable net interest margins and earnings growth as these markets expand.”

What happens if one unseen pressure quietly shifts the balance between rich loan yields and the true cost of keeping those deposits?

If that pressure has your attention, read the full narrative for CVB Financial to see how CVB Financial’s deposit mix, loan book and rate sensitivity interact.

Five Star Bancorp sits squarely in this higher-rate banks theme, with a focused Northern California franchise that leans on business lending and relationship deposits to potentially widen the gap between what it earns on loans and what it pays on funding.

Five Star Bancorp runs a Northern California focused banking operation serving small and mid sized businesses, professionals, and households, generating about US$168 million of banking revenue in the U.S., and carrying a market cap of roughly US$1.1b.

That mix of real economy clients and interest sensitive assets makes Five Star Bancorp a useful second test case for how this new Fed tightening step might filter through regional banks that rely on net interest income rather than trading or fee engines.

“Strategic expansion into high growth Bay Area and Walnut Creek markets, accompanied by new business development hires, is increasing core deposit and loan growth opportunities, directly supporting sustainable top line revenue and potential market share gains.”

What ultimately matters now is how that new funding and lending footprint reacts if one key assumption about where deposit pricing settles proves wrong.

If that assumption proves fragile, read the full narrative for Five Star Bancorp to see whether Five Star Bancorp’s deposit engine is quietly masking risk or accelerating its edge.

ServisFirst Bancshares is a pure play on higher U.S. policy rates, since its commercial and personal banking earnings hinge on the gap between what it charges on loans and pays on deposits, with about US$585 million from business and personal financial services and a market value near US$4.5b.

ServisFirst Bancshares gives you a clean way to focus on higher rate exposure, because its lending and deposit engine is tightly wired into policy moves and recent Fed signals have pushed that link back into the spotlight for regional banks.

“Recent strategic bond portfolio restructuring, with reinvestment at much higher yields, sets up for continued net interest margin expansion over coming quarters, especially as legacy, lower-yielding assets mature or reprice, directly benefitting net interest income and future earnings.”

What could really shift the story for ServisFirst is how one unresolved pressure point plays out in the cost of funding versus loan pricing.

If that funding pressure is what you are watching, the full narrative for ServisFirst Bancshares shows how ServisFirst Bancshares’ rate play could accelerate or quietly stall.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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