Banks serve as the backbone of the economy, facilitating lending, deposits, and financial services that keep businesses and consumers moving forward. Still, investors are uneasy as banks face challenges from credit quality concerns and potential regulatory changes. These doubts have certainly contributed to banking stocks’ recent underperformance - over the past six months, the industry’s 8.2% gain has fallen behind the S&P 500’s 13.1% rise.

A cautious approach is imperative when dabbling in banks as many are sensitive to interest rate changes and economic cycles. On that note, here are three bank stocks we’re steering clear of.

Origin Bancorp (OBK)

Market Cap: $1.69 billion

Founded in 1912 during the early boom days of Louisiana banking, Origin Bancorp (NYSE: OBK) is a financial holding company that provides personalized banking services to businesses, municipalities, and individuals across Texas, Louisiana, and Mississippi.

Why Is OBK Not Exciting?

1. Sales trends were unexciting over the last five years as its 8.7% annual growth was below the typical banking company
2. Performance over the past five years shows its incremental sales were less profitable, as its 1.5% annual earnings per share growth trailed its revenue gains
3. Estimated tangible book value per share growth of 8.7% for the next 12 months implies profitability will slow from its two-year trend

Origin Bancorp’s stock price of $54.69 implies a valuation ratio of 1.3x forward P/B. Check out our free in-depth research report to learn more about why OBK doesn’t pass our bar.

OceanFirst Financial (OCFC)

Market Cap: $1.92 billion

Tracing its roots back to 1902 when it began serving coastal New Jersey communities, OceanFirst Financial (NASDAQ: OCFC) operates as a regional bank holding company that provides commercial and consumer banking services primarily in New Jersey and surrounding metropolitan areas.

Why Do We Steer Clear of OCFC?

1. Annual net interest income growth of 5.9% over the last five years was below our standards for the banking sector
2. Day-to-day expenses have swelled relative to revenue over the last five years as its efficiency ratio increased by 20.5 percentage points
3. Products and services are facing significant credit quality challenges during this cycle as tangible book value per share has declined by 4.5% annually over the last two years

OceanFirst Financial is trading at $19.49 per share, or 0.8x forward P/B. Read our free research report to see why you should think twice about including OCFC in your portfolio.

KeyCorp (KEY)

Market Cap: $24.53 billion

Tracing its roots back to 1849 during the California Gold Rush era, KeyCorp (NYSE: KEY) operates KeyBank, a full-service regional bank providing retail and commercial banking, wealth management, and investment services across 15 states.

Why Does KEY Worry Us?

1. Net interest income trends were unexciting over the last five years as its 3.8% annual growth was below the typical banking firm
2. Earnings per share fell by 5.9% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Tangible book value per share was flat over the last five years, indicating it’s failed to build equity value this cycle

At $23 per share, KeyCorp trades at 1.4x forward P/B. If you’re considering KEY for your portfolio, see our FREE research report to learn more.

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