Bank stocks are at a crossroads this year as we may finally see the Federal Reserve lower interest rates more. The Trump administration’s pressures will compound with the recent lower inflation report and the negative stock market performance, and this could impact banking companies significantly.
Despite the Fed’s “higher for longer” rate posture, inverted yield curves have compressed net interest margins while geopolitical tensions freeze cross-border capital flows. The result has been a bifurcated landscape where universal banks like JPMorgan have thrived on diversification, whereas mono-line lenders have buckled under stress.
The yield curve is no longer inverted, but recent tariff-related shocks and general uncertainty in the economy have brought on even more pain. It’s worth looking into the banks that are the worst caught in these crosscurrents if you’re looking to scoop up some value stocks.
A local business owner signing a loan agreement with a banker.
Methodology
For this article, I screened the worst-performing bank stocks year-to-date.
I will also mention the number of hedge fund investors in these stocks. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
15. Southern First Bancshares Inc (NASDAQ:SFST)
Number of Hedge Fund Holders In Q4 2024: 7
Southern First Bancshares Inc (NASDAQ:SFST) is a bank holding company that operates Southern First Bank.
The stock is down significantly so far in 2025 as Southern First Bancshares announced the resignation of its CRO, William M. Aiken III, effective March 31, 2025. Aiken played a critical role in risk management during his tenure.
Moreover, the company reported a rise in non-performing loans to 0.30% as of the end of 2024, compared to 0.11% in the prior year.
SFST stock is down 18.48% year-to-date.
14. ChoiceOne Financial Services Inc (NASDAQ:COFS)
Number of Hedge Fund Holders In Q4 2024: 6
ChoiceOne Financial Services Inc (NASDAQ:COFS) is a bank holding company for ChoiceOne Bank.
The stock is down significantly so far in 2025 due to the company’s 2024 annual report revealing unrealized losses on securities totaling $116.6 million due to fluctuating interest rates.
ChoiceOne finalized its merger with Fentura Financial Inc. on March 1, 2025. While the merger is expected to enhance market presence and operational efficiency, associated costs have increased noninterest expenses significantly.
Nonperforming loans rose to 0.24% in 2024 from 0.14% in 2023.
The consensus price target of $37 implies 29.74% upside.
COFS stock is down 19.35% year-to-date.
13. Eagle Bancorp Inc (NASDAQ:EGBN)
Number of Hedge Fund Holders In Q4 2024: 27
Eagle Bancorp Inc (NASDAQ:EGBN) operates as the bank holding company for EagleBank. It provides commercial and consumer banking services.
The stock is down significantly so far in 2025 as the company’s commercial real estate exposure has caused problems.
In Q4 2024, a $74.9 million office loan moved to non-accrual status following a new appraisal.
This contributed to increased nonperforming loans and higher provisions for credit losses.
Nonperforming assets rose to $211.5 million at the end of December 2024, up $74.3 million from the prior quarter.
Also, its net income of $15.3 million for Q4 2024 is down from $21.8 million in Q3 2024.
The consensus price target of $28.75 implies 38.62% upside.
EGBN stock is down 19.48% year-to-date.
12. FVCBankcorp Inc (NASDAQ:FVCB)
Number of Hedge Fund Holders In Q4 2024:
FVCBankcorp Inc (NASDAQ:FVCB) is a bank holding company for FVCbank. It offers commercial and retail banking services to small and medium-sized businesses in Virginia.
The stock is down significantly so far in 2025 due to a weak Q4 2024 earnings report and market concerns over its asset quality.
2025, FVCBankcorp reported its Q4 2024 financial results. Although net income for the full year increased significantly to $15.1 million ($0.82 per diluted share) from $3.8 million in 2023, the quarter’s results fell short of market expectations.
The company’s net interest margin improvement was overshadowed by concerns over declining classified loans and slower loan growth compared to prior quarters.
FVCB stock is down 20.45% year-to-date.
11. Farmers & Merchants Bancorp Inc (NASDAQ:FMAO)
Number of Hedge Fund Holders In Q4 2024:
Farmers & Merchants Bancorp Inc (NASDAQ:FMAO) is a bank holding company that provides commercial banking services in Northwest Ohio and Northeast Indiana.
The stock is down significantly so far in 2025 due to the company’s interest rate sensitivity and fears about margin pressures.
The company reported its 2024 fourth-quarter results on February 12, 2025. While net income increased significantly year-over-year (up 51.2%), management has noted competition.
The net interest margin improved slightly to 2.84%, but higher funding costs due to elevated interest rates have pressured margins.
There has also been a lack of growth catalysts.
The consensus price target of $24 implies 2.78% upside.
FMAO stock is down 20.54% year-to-date.
10. OP Bancorp (NASDAQ:OPBK)
Number of Hedge Fund Holders In Q4 2024: 11
OP Bancorp (NASDAQ:OPBK) is a holding company for Open Bank, which is a community bank that services small and medium businesses.
The stock is down significantly so far in 2025 due to OP Bancorp missing Q4 2024 earnings and rising credit risks.
OP Bancorp reported Q4 2024 earnings of $0.33 per share and missed expectations by $0.03.
Revenue of $21.35 million also fell short of the $21.6 million estimate by analysts, and credit quality deteriorated as nonperforming loans increased to 0.40% of gross loans from 0.19% in Q3 2024.
The bank has been facing pressure on its net interest margins (NIM), which slightly improved to 2.96% in Q4 2024 but remained below historical levels.
The consensus price target of $18 implies 45% upside.
OPBK stock is down 20.58% year-to-date.
9. Investar Holding Corp (NASDAQ:ISTR)
Number of Hedge Fund Holders In Q4 2024: 6
Investar Holding Corp (NASDAQ:ISTR) is a bank holding company for Investar Bank. It provides commercial and retail banking services.
The stock is down significantly so far in 2025 due to a decline in net interest income. Investar Holding Corporation reported in its SEC Form 10-K filing that net interest income decreased by $4.8 million in fiscal year 2024.
This is mainly due to higher interest expenses on deposits and borrowings. This decline negatively impacted profitability despite overall net income growth.
Although EPS increased by 22% year-over-year, the share price failed to keep pace with earnings growth due to broader investor concerns about the banking industry.
The consensus price target of $20.5 implies 21.63% upside.
ISTR stock is down 23.36% year-to-date.
8. First Foundation Inc (NYSE:FFWM)
Number of Hedge Fund Holders In Q4 2024: 21
First Foundation Inc (NYSE:FFWM) is a financial services company.
The stock is down significantly so far in 2025 as First Foundation reported disappointing Q4 2024 earnings.
The company’s revenue and profitability continued to decline, with analysts cutting their price targets. Piper Sandler reduced its price target from $7.00 to $6.00 and maintained a neutral rating.
Moreover, First Foundation’s revenue dropped significantly in 2024 and fell by 61.90% year-over-year to $96.07 million, while net losses improved but totaled $92.41 million.
The consensus price target of $6.75 implies 43.16% upside.
FFWM stock is down 23.51% year-to-date.
7. HomeStreet Inc (NASDAQ:HMST)
Number of Hedge Fund Holders In Q4 2024: 16
HomeStreet Inc (NASDAQ:HMST) is a financial services company based in Seattle.
The stock is down significantly so far in 2025 after its 2024 annual report revealed a $144.3 million loss for the year. This is an increase from the $27.5 million loss in 2023.
The losses were driven by an $88.8 million loss on the sale of multifamily loans and a $53.3 million valuation allowance for deferred tax assets.
On top of these bad results, HomeStreet announced that it did not distribute dividends in 2024 and has no plans to issue quarterly dividends in 2025.
The consensus price target of $14.33 implies 64.56% upside.
HMST stock is down 23.51% year-to-date.
6. Midland States Bancorp Inc (NASDAQ:MSBI)
Number of Hedge Fund Holders In Q4 2024: 12
Midland States Bancorp Inc (NASDAQ:MSBI) is a financial holding company.
The stock is down significantly so far in 2025 due to it reporting a loss of $54.8 million in Q4 2024 compared to a profit of $16.2 million in the year-ago quarter.
This was due to actions to address credit-quality issues and exit non-core consumer loan portfolios like LendingPoint and Greensky.
These moves led to $102.7 million in net charge-offs and $7.6 million in impairments. Moreover, earnings per share were -$2.52, significantly below analyst expectations of $0.70.
The consensus price target of $23.5 implies 29.58% upside.
MSBI stock is down 24.11% year-to-date.
5. First Internet Bancorp (NASDAQ:INBK)
Number of Hedge Fund Holders In Q4 2024: 12
First Internet Bancorp (NASDAQ:INBK) is the bank holding company for First Internet Bank of Indiana.
The stock is down significantly so far in 2025 as First Internet Bancorp reported disappointing earnings for Q4 2024. The company posted EPS of $0.41, which is significantly lower than the consensus estimate of $0.92.
Plus, the company’s net interest margin has been under pressure due to rising funding costs and competitive lending rates.
The consensus price target of $41.75 implies 58.68% upside.
INBK stock is down 26.48% year-to-date.
4. Live Oak Bancshares Inc (NYSE:LOB)
Number of Hedge Fund Holders In Q4 2024: 12
Live Oak Bancshares Inc (NYSE:LOB) is the bank holding company for Live Oak Banking Company.
The stock is down significantly so far in 2025 due to weak Q4 2024 results. Live Oak Bancshares reported disappointing fourth-quarter 2024 results. Net income fell to $9.9 million, or $0.22 per diluted share.
The increased provision expense for credit losses also weighed heavily on its earnings. It is up 87.5% year-over-year to $44.9 million. Also, interest expenses increased by over 27% for full-year 2024 due to higher deposit costs amid rising interest rates.
The consensus price target of $44.75 implies 62.11% upside.
LOB stock is down 29.57% year-to-date.
3. loanDepot Inc (NYSE:LDI)
Number of Hedge Fund Holders In Q4 2024: 15
loanDepot Inc (NYSE:LDI) is a nonbank mortgage lender.
The stock is down significantly so far in 2025 as loanDepot reported a quarterly loss of $0.26 per share. This missed analysts’ expectations of a $0.02 loss.
Revenue came in at $257.46 million, well below the consensus estimate of $310.08 million.
Plus, the company has been struggling with declining loan origination volumes and higher costs related to volume reductions.
The consensus price target of $2.6 implies 90.48% upside.
LDI stock is down 33.09% year-to-date.
2. Triumph Financial Inc (NASDAQ:TFIN)
Number of Hedge Fund Holders In Q4 2024: 14
Triumph Financial Inc (NASDAQ:TFIN) is a diversified financial holding company.
The stock is down significantly so far in 2025 because Triumph Financial reported disappointing fourth-quarter 2024 earnings, with a profit of $0.13 per share, falling short of the Zacks Consensus Estimate of $0.26 by 50%.
The company attributed the weak performance to higher-than-expected credit costs. It warned that first-quarter 2025 earnings would be even lower and that new initiatives would not generate material revenue in the first half of 2025.
Furthermore, it was announced that Triumph Financial was under investigation for potential securities law violations related to its earnings miss and financial disclosures.
The consensus price target of $79 implies 32.16% upside.
TFIN stock is down 34.11% year-to-date.
1. LendingClub Corp (NYSE:LC)
Number of Hedge Fund Holders In Q4 2024: 26
LendingClub Corp (NYSE:LC) is a digital marketplace bank.
The stock is down significantly so far in 2025 due to LendingClub reporting mixed Q4 2024 results. Loan originations grew 13% year-over-year to $1.85 billion and this was a deceleration from prior quarters.
Revenue rose 17% to $217.2 million, but the company issued soft guidance for Q1 2025 with projected loan originations of $1.8 billion to $1.9 billion. LendingClub’s loan origination growth has slowed significantly compared to previous quarters.
The consensus price target of $16 implies 54% upside.
LC stock is down 35.52% year-to-date.
While we acknowledge the potential of LC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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